A Fool’s Bargain: Building Software for Free (or, An Idea Ain’t Worth Squat)

I received this email the other day:

I’m looking for a software developer to build a simulator program.

Payment would be made from revenues after the product is available and producing revenues. The estimated market for this product is 100 million users with a target price of $50 per unit. After all your development costs have been covered from revenues, we would then share the proprietary rights to the product and net revenues on a 50/50 basis.

Are you interested in continuing?

My reply:

Thanks for your email.

I have one question for you: in this type of arrangement, you would be marketing and selling the product. Do you have experience marketing and selling software on the internet, and if so could you pass along links to previous successes?

I’ve developed and sold a lot of products on the web, and have learned that coming up with the idea and developing the software are two of the easier steps in the process (even though development is time intensive). Getting people to come and buy your product without spending a zillion dollars on advertising is the real challenge in this game.

If you have proven experience marketing software I would be interested in hearing more about your idea. Or, if you have a marketing plan of the steps you would take to market the product, I would be interested in seeing it. If not, you are going to have a difficult time finding a good developer to spend hundreds of hours working on a product that may never sell. Every one of the good developers I know have tens if not hundreds of ideas for software products…it’s not a lack of ideas, but a lack of time that keeps us from building and marketing them ourselves.

I look forward to hearing from you,

Rob

And you know what? He was quite cordial in his reply (an excerpt):

I don’t have any marketing experience and realize I’ll need help in that area after the product is available. Your other comments are right on.

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Wrap Up
If you’ve never launched a product you have no way of knowing that it takes three legs to make this stool stand: the idea, the market, and the execution.

Finding a market you can afford to market to and executing the idea (including the marketing) are insanely hard.

Finding an idea is the easiest part.

This is why there are websites and blogs all over the place where people share their startup ideas with the world.

[tags]software, software consulting, product development[/tags]

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13 comments ↓

#1 Jason Veenker on 02.21.08 at 2:50 pm

The one thing I learned in b-school: marketing is the key. Take for example Britney Spears – talented, musical genuis, or exceptional at hiring marketing/publicity managers?

Thanks for the insight. You continue to show the brains of small business development, and I believe it is absolutely encouraging to those who may follow in those footsteps.

#2 Jerry Weinstock on 02.21.08 at 3:59 pm

Rob,

I agree with 98% of your sentiments.

Here is the 2% and the ‘other side of the coin’.

Does the programmer have any experience writing a ‘best seller’ mass market application?

Don’t programmers also need to partner with individuals with the time, energy, and funds to execute on the sales and marketing plan? Clearly, this individual should have a plan and supporting budget to generate revenue. If not then the programmer should go no further, if so then the programmer should assess the risks and opportunities.

My sense however, is that this type of inquiry is foolish and naive. The business side of the equation shouldn’t expect 100% sweat equity payment, they need to have some financial resources to fund in part some of the development and then share in the downstream opportunity.

At the end of the day, both parties need to be believe in each other and believe in the plan when their is based at least on part on results.

#3 Rob on 02.21.08 at 4:21 pm

@Jerry – I should have mentioned this in the post: if he had emailed back with proof of his ability to market software I would have instantly engaged in discussions about how we could partner.

A developer needs a marketer as much as the other way around. The point of my post was that he had no marketing experience but was asking me to put in hundreds of hours for free on the hope that he would be able to market it.

#4 Chris Nunciato on 02.22.08 at 11:54 am

A few weeks back, the wife and I were checking property-management companies, thinking about renting out our house. When I learned their monthly service fees are often directly related to how much rent I’m charging, I was appalled. What difference did it make how much rent I charged? The service they’d be providing would be (or should be) identical regardless of what I’d be earning (or, in our case, losing). Right?

Offers like the one you mention come along all too often, and drive me absolutely nuts, because subtextually, they say at least two things: one, I don’t think I should bear the risk of implementing my grand idea (which, by the way, will surely make us both rich and is basically risk-free, anyway; only a fool would bypass this amazing offer), and two, I don’t recognize your services as inherently valuable. Both are downright insulting. Who’d ever think of asking his plumber to forego his fees in exchange for a percentage of the savings from some newly installed water-saving feature?

If an idea inspired me, and made me want to take some of the responsibilities of making it successful, I’d absolutely consider an exchange for some ownership. But insinuating that professionals of any kind are just sitting around waiting to absorb risk of the world’s “idea people” is just loony.

#5 Philippe LACHAISE on 02.24.08 at 9:22 am

What would you say about this middle of the road scenario (whitch happens to be exactly mine) :

A senior developper I have invested à good 5 months of R&D in a product I really believe in (visionnary, foolhardy, who knows ?) and its taking shape nicely.

Alas, I am nor a born marketer and not business person either.

The project is big (nation-wide potential on the web) and I need to offload part of ongoing development on a skilled partner.

No revenue to be expected right now (got ideas, skills and chronical overdraft)

I have a busines plan, intersted pospects (I shoulb be spending more time with) but not in a formalized way.

Would you take a second look at my offer (not actually asking you of course, we’re across the Atlantic from each other 😉 ?

#6 Rob on 02.24.08 at 2:03 pm

@Philippe – Speaking as a developer I would want to hear your idea, see your business plan, and see what you’ve built in your 5 months of work on the project. From there I would evaluate whether (in my opinion) the idea would fly, and then decide whether or not to partner up. But right off the bat it sounds like you’ve spent a lot of time thinking about it and working on it, which shows me you are dedicated to the idea and believe in its success.

The more code you had to demo and the more time you have to give to the marketing effort on an ongoing basis the better off you will be.

BTW – I see people looking for partnerships like this on the SitePoint forums from time to time. You may want to check them out. You could also look at BusinessPartners.com and PartnerUp.com.

Good luck in your search!

#7 Stephane Grenier on 02.24.08 at 2:15 pm

Great article Rob! I would just add one thing, which I now find even more important. Above being able to do it, are they actually going to do it?

By this I mean that I now find execution the most important aspect. Even with great experience most people aren’t willing to put in the time. Execution is the really hard part. And those that do execute often only do so for a few months before dropping out (much like going to the gym).

Therefore as of the last few years one of my newer requirements is that the person has done something in the past for at least 6-12 months. It doesn’t have to be a successful endeavour, they just have to prove to me that they will follow through with it! Most people can’t past a few months, if that.

#8 Joshua Volz on 02.24.08 at 6:16 pm

I tend to agree with Corey above in that marketing is something a developer can learn. If the developer has already branched out enough that they are trying a microISV then they likely are willing to learn and work on marketing. Further, I would say that the people starting microISVs are no longer “developers” because they have already accepted that they are doing more than just writing the code. Thus, this new type of person (entrepreneur?) is capable of learning everything that is required.

It would be the same if a marketer decided they wanted to learn to program and spent the time to do it (admittedly to get to a minimum level of effectiveness is marketing it takes less effort/time than to get to a minimum level of programming proficiency).

#9 noblemaster on 02.24.08 at 7:14 pm

Great article! I get asked to work for free once in a while. I wouldn’t actually mind teaming up, but it always seems such a bad deal: you do all the programming (90% of the work) but we split the earnings among all the team members. If there are 5 people in the team, I would get 20% for doing 90% of the work. The worst part is, no one in the team has a clue in marketing. The idea is usually a rip off of an existing product with not much new added…

#10 Paul on 02.25.08 at 8:32 am

I used to be a partner in a small little technology and design firm. We had an idea and all of the resources to implement it quickly and cheap. Everyone loved the idea that we told about it. We built a website with a shopping cart, sent out media kits, gave out samples, sent out press releases, etc.

We got one $7 order from a lady in Italy 6 months later.

Fortunately, it wasn’t a software product. Otherwise, I’d have hundreds (if not thousands) of hours invested. But it did prove to me that an idea “ain’t worth squat” without a comprehensive plan and serious post-launch effort with constant TLC.

BTW, we’ve decided to ressurect the project and take a different approach this time around.

#11 TV Spy on 02.26.08 at 7:19 pm

Interesting but services like Adsense make it easier to promote such products, of course at cost.

#12 Nico Granelli on 02.29.08 at 10:40 pm

Really nice answer.

I normally just say “No, thank you”

#13 The (Un)Value of Ideas « Outside of the Triangle on 06.11.08 at 6:24 pm

[…] ideas are overrated. And I’m not alone. Rob Walling explains this well at the end of his post A Fool’s Bargain: Building Software for Free (or, An Idea Ain’t Worth Squat): If you’ve never launched a product you have no way of knowing that it takes three legs to […]