

How much to charge a big business? - jonlegend

My partner and I are having trouble determining pricing models for big businesses.  We've gotten in touch with businesses that have expressed early interest and have annual revenues of ~10+ billion.<p>Does anyone on HN have big business customers or have any valuable experience behind dealing with them?  We  don't know how much to charge or how often to charge (monthly, annually, etc) we just have a good product that they have expressed slight interest in.<p>What are reasonable prices to charge these large entities? I know it depends on what service is being provided, but what is a good ballpark number for these large customers?<p>Edit: What we do in a nutshell: we are enabling businesses to better connect with their customers.
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jayzee
Pricing Strategies: 1\. Cost plus: What it cost you plus profit margin. Bad
idea in software

2\. Multiple of annual demonstrated savings for client: How many people save
how many hours per year? How much do they get paid? If you connect customers
to the client what does this mean to the bottom-line of your client? Repeat
purchases? You need to be able to justify the price with an ROI calculation.

3\. Delight: Hard to measure. Are customers so excited by the new connection
that they talk about it? Does it become a part of marketing?

From your terse description it looks like you are doing something that is
'marketing.' Marketing is very hard to measure and while people may be willing
to test new things out, to get repeat customers you will need to be able to
demonstrate measurable value.

Other factors: 1\. If this is your first client don't sweat optimizing the
price. You can charges others more later. A reasonable price will allow you to
get the deal done quicker and get a satisfied customer who will recommend you
to others 2\. Remember to ensure that the contract stipulates that the price
cannot be disclosed to others

best of luck!

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mattgratt
Find out what the signing authority of the interested executive is. If you're
charging $1 mil +, in many companies that needs CEO/CFO level approval. That's
hard to get, especially with a new technology product that the executive may
not have time to understand.

If you're selling to a marketing director or someone of that nature, think
around $100K.

Signing Authority is life in the complex sale.

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notahacker
More importantly at this stage: is the interested executive thinking it'll be
a neat solution to a little problem of theirs, or is it someone with ties to
senior decision makers considering it to be something that could make a big
difference across multiple divisions of the business? If it's the former then
you're quite possibly looking at more like $1-10k. If it's the latter then set
your sights higher but expect it to take a long time.

The bad news is that just because a company makes $10bn in revenue doesn't
mean your product is necessarily worth any more to them than it is to a
company generating <£1 million, especially if it's only loosely linked to
revenue or closely substituted for by alternatives. Where big companies do pay
more it's usually because the scale of the solution being offered is much
bigger.

Are there logical units/brackets related to your product offering (per
licensed user, per store, per product, per client, per purchase, per click, %
revenue generated)? If so, what sort of bracket or average number of users
does a smaller client use, and how much do you charge them for it? If it's
easy to charge directly per unit, do that. If it isn't, you'll have to gauge
expected usage (by asking the client) and give yourself scope to renegotiate
at the end of the billing period (preferably six months to a year) if they
underestimate. They'll also expect a volume discount compared with smaller
companies in lower brackets, but how much they get really ought to depend on
two things: (i) marginal costs to you - how much does each additional
user/product etc cost to you in terms of support time, computer resources,
transaction fees etc. (ii) marginal benefit to them - will they get the
additional value from having it for every salesperson/customer/product or is
it something where the benefit is automatically companywide and most extra
licenses/options are just a nice-to-have

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brk
There is no 'ballpark' price, it's mostly dependent on how valuable your
product is to them. How much time or money does it save them? What are the
alternatives (in terms of other software or non-action, etc.)

On top of that, what are YOUR costs to host and support the software? And, if
you haven't considered that larger businesses often require significant hand-
holding in terms of support and training, you need to factor that in also.

The only thing I can really say is that getting large businesses to pay can be
a PITA, especially at first. You might want to understand how/when they pay
new vendors (I've dealt with some large Corp that process new vendors once per
quarter. Come in on the 2nd week of the quarter and its going to be a while
before you get paid at first).

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Tycho
Maybe you could charge them something reasonable (not much different from
small business charges), and reap the benefits of increased word-of-
mouth/client-roster, but offer them the option of an exclusive (N-year)
licence for an outlandish guaranteed amount. You could discern a lot by how
they try to negotiate the exclusive position. Although I suppose that whole
exclusivity thing is more relevant to wholesaler-retailer type relationships.

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eb0la
Warning!

Before you figure out (yet) how much to charge. Patent your business first!

Before you sell _anything_ to a big corporation, you should hava a patent
ready for your product.

Why? because without a patent your product is a commodity and will be treated
as such by the procurement dept. at the big corporation.

In my country (Spain) we don't have software patents, and this is what
happens:

\- The first year you sell the product to the big corporation. You're happy
and rejoice.

\- The next year, before you're about to renew the licensing agreement, the
procurement departament asks several competing companies (mostly big
contractors) for a "similar" product (where "similar" means, cheaper, with
more or less the same functionality). Nobody has it, so you get the contract.

\- The third year, one (or two) big contractors bid against you with a
competing product and you have to lower your price to keep the contract.

\- The fourth year, you cannot compete in price against the big contractors
because they sell the "competing" product as a turnkey project... at the low
per-hour rates big companies pay.

Hope this helps. Cheers

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catlike
Are you taking out their garbage every night, or are you enabling them to be a
better business?

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jonlegend
Enabling them to become a better and more effective business. It has to do
with better connecting them with their customers.

~~~
catlike
do you feel that you need time to work out the kinks for a large customer or
are you ready to deploy? I think if you have kinks use the first 10B business
as a chance to iron out your product to make getting the next (100) 10B
businesses easier.

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xd
If there are similar products to yours out there, base your pricing around
them to begin with. Even if your product does things better than product X be
sure to charge around the same price. If your sales take off review the
pricing model around every year or so but be sure to include your customers in
the decision process!

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ScottBurson
Would it make sense to try selling to some medium-sized businesses first to
work the kinks out of your process? There are a lot more $100M businesses than
$10G businesses.

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tzm
Try to model your pricing strategy based on the financial value of your
software for each firm. Make a case that can be sold to c-level execs.

