# Why your side project makes $0

Channel: Marc Lou
Video: https://www.youtube.com/watch?v=y3HV_KdGoZg
Duration: 14 min
Language: English
Words: 2594
Transcript page: https://viewrankai.com/tools/youtube-transcript/y3HV_KdGoZg

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[0:01] I have a little trick When I visit a website I go straight to the pricing section and within seconds I know exactly what the product does and if it's worth my time because pricing is marketing and it can make or break your startup when I studied the journey I was not really sure how to price my product so I followed traditional business advices but none of them really worked and I was stuck at $0 for month I build 24 tiny businesses and try all sorts of unconventional pricing methods and that's how I ended up making a million as a solo developer so in this video I'm

[0:32] going to share the five pricing mistakes I made that kept my startups from growing and we're going to start with the spiciest one subscription yep your software probably don't need a subscription model now everybody is saying that we should Char subscription because that's how we make passive income that's how we earn money when we sleep but they forget one thing people hate subscriptions as a customer when I see $9 per month I know it's not just $9 it's $108 per year and it piles up with my Netflix Spotify and Wi-Fi subscriptions and sometimes I just want to try the product so I have to set up a

[1:07] reminder to cancel the subscription to make sure I'm not charged for a service I don't use subscription raise objections in your customers mind and Confused customers don't buy so it lowers your conversion rate I would argue that it is as hard as selling a $10 a month subscription than it is to sell a $100 one time payment product let's take a quick example okay let's say we have two products one is a sub subcription product that cost $10 a month and that has a 10% turn rate so every month 10% of the customers will turn which means they will cancel the subscriptions and let's say we have a

[1:39] onetime payment product that cost $100 up front and of course no recurring cost after now let's say that instantly we get 100 customers for both of those products after one month you make $11,000 with a subscription product and you will make $10,000 with the one time payment product and um Until the End you'll make zero extra r Vue now for the subscription product on the second month you'll made 900 bucks because you had the 10% turn rate and you'll have another 10% of these 900 bucks so $810 on month three and by the end of the year you would make $7 7,176 and if you wants to make

[2:16] $10,000 as for the onetime payment product you would have have to wait for 4 years until you get the same amount of money so do you want $10,000 right now or $10,000 spread across the next 4 years your probably doesn't need recurring payments a lifetime deal access is a great competitive advantage against all the big software guns like cenly or typ form now it raises the concern of yes but what if people overuse my product and I end up losing money there are two cases first there are the negligible costs cost where it's so cheap that you would have your users to use the product for like 300 days

[2:53] every single day in order to lose money I'm talking about bandwidth I'm talking about emails well actually let me show you a little little example okay so this is the web traffic on all of the products I built and uh that is about 200,000 page views in the last 2 weeks so that's roughly half a million page views a month now if I go to versal for the same billing cycle this is about 266 GB of data transfer that's roughly the bandwidth now if we look at versal pricing I am on the Pro Plan so normally I get one tab included but for this example let's pretend that I'll pay 15

[3:30] cents per gigabyte transferred so we're going to do 15 cents times 266 gabt and we're going to do times 2.5 so we round this to like a month of data that means I would spend 100 bucks a month with Verso one of the most expensive hosting platform out there in order to serve half of a million page views this is definitely negligible let's take another example let's go to my emails I'm sending email for all my mes for people to sign up for reminders and I'm even selling email in some of my products I send around um 150 to 200 emails per day and this is the bill I got from mail gun

[4:10] last month actually 4,800 emails send per month this cost $5 this is absolutely negligible cost and unless my customers would use the product for 300 days every single day I would never lose money on those costs and then there are the more expensive costs so that could be ads for marketing or that could be GPU open AI or database cost for your software in that case you can offer a credit base system for instance you can have an image generation platform where people can create photos of themselves using Ai and you could charge $10 for like 100 photos that way you get rid of the subscription

[4:50] headache from the customer's mind and you're sure that your customer never overuse your product if no one pays for your one-time payment product no one will pay for a subscription but if no one pays for your subscription product maybe some people will pay for one-time payment version of your product so shoot large at first and then refine later you can always add subscription down the road when your product starts to get traction now I'm not saying that subscriptions are useless and should be ignored one of my good friend Dan say that recurring value equal recurring payments usually subscriptions are great for B2B product but remember they come

[5:27] at a cost and it's worth exploring a one- time payment or a credit alternative mistake number two not anchoring your price when you buy a coffee based on where you are in the world or where you buy the coffee you would expect to spend somewhere between $1 to $5 but now when you're buying a software to generate blog articles with AI it's kind of hard to know what it's worth so as a business owner where you have only one pricing plan on your landing page you make your customer thoughtful because they have nothing to compare with that's when the price and core comes comes in a price enor is a

[6:01] marketing strategy that consists in creating an initial price so that customers can compare with the actual price you had in mind and it will make this price more reasonable by comparison let me show you a quick example of how I do price anchoring for all of my products okay first let's start with an example of Zenvo it's a little tool I build for people to avoid paying the stripe invoicing fee of 4% and so in the pricing section I have this price which is the one I wanted to go for $69 um I'm not sure why I wanted to press it that way but that's what I had in mind when I

[6:32] got started then I needed a price for people to compare with an Anor price and so I created this price here which give you access to very similar feature except that with the more expensive plan you get the unlimited strap accounts feature and you only get one strip account with this plan so this one in comparison looks cheaper and more reasonable let's take another example of Indie page it's a little Linkin bio tool for people to Showcase their projects their portfolio and um I wanted to go with lifetime deals I never wanted to charge any subscription here so this is the price I had in mind from the

[7:06] beginning you pay $45 and you have access the product for a lifetime now again what's the worth of this what is the worth of a linoln bio tool that's why I added this like one year pass plan it has the exact same features but the difference is that after one year the pass is removed and you don't have access to the product which makes the lifetime deal planned reasonable and cheaper in comparison so so try to always have a price anchor to help your customers understand what your product is worth and you can even decline your price in three categories good better and best it usually works pretty well but just avoid

[7:40] having more than three prices because then it becomes a burden in your customers mind now let's talk about mistakes number three this is one of my first startup 150,000 visitors and $6,000 in Revenue unless you're watching this video in 20150 you remember how Facebook started a free app that's free users loved and spread the word so that everybody knows about it and it's going viral and they're starting monetization years down the road with ads grow first monetize later that's a good story but as a soloer the journey is a little different I value Freedom over unicorns I won't raise money so I won't raise a team of

[8:22] marketers and growth hackers I operate with fewer resources so I have to make some tradeoffs and removing fre plans is one of them let me show you the math behind that okay let's start with the goal first and let's say we want to make $33,000 per month and we have a product with a free plan and a Premium plan at $5 per month now as a general rule of Thum 3% of people upgrade from free to plan this is a standard in the software industry that means if you want to make $3,000 you will need 600 premium users which means you would need 20,000 users to sign up for your product because of

[9:01] the 3% conversion rate and to get 20,000 signups on a product we can safely assume you have a 15% conversion rate so 15% of people will create an account and start a free um plan which means you would need 133,000 visitors to get $33,000 a month I don't know how about you but that sounds insane removing free plan is removing pain as a developer I used to struggle to ask for money but here is what happened after I removed free plans from all of my products first I get better users users who are skin in the game they provided their credit card so they're giving me real feedback and I

[9:41] build better products second I got more motivation there's something magical about making money on the internet it's exciting and it helped me focus on the work and third I saved money most of the user base were made of free users so it's only costing something after removing the free user base there is no cost associated with that so consider ditching your free plans and add a pay wall of thres and that way you'll become profitable faster mistake Number Four free trials the problem with free trials is that people don't commit they can use your entire product for free for a couple days and that results in a huge

[10:18] drop in conversion rate after a couple days live got busy they went on a holiday and they don't come back because they didn't commit in first place now you might be wondering yeah but I want people to be able to try the product to know if it's worth it there are three ways to fix that the first one is to look upfront on your landing page usually if your landing page copy is not triggering an emotional reaction and there is not a clear demo of your software that means you going over a little camera and explaining demoing how the software Works customers don't know what they're buying so you can make a

[10:49] better landing page explain clearly what your product does demo all the features and that could remove the need for a free trial second you can offer free credits you let people use your software for a limited number of actions and not a duration for instance you could offer them to generate three images at no cost with your AI software generation tool or they can send 10 emails at no cost but make sure it's tied to an action something that they could perform so that after using your software for a couple of minutes they will face a pay wall and they know exactly what they're paying for you want them to commit when

[11:22] they are right now here on your landing page not days down the road and alternative number three you can still try free trials but reduce the length from 30 days to 7 days and ask for a credit card upfront an email is not a commitment a credit card is and final mistake pricing to chip I see lots of developers getting started who price like $10 to use their product cheap is expensive in the long run the value is what your product is worth its usefulness what's how much time people save with it and perceived value is how much a customer thinks your product is worth and it's influenced by factors

[12:02] like design and especially pricing when you price too cheap you signal that your product does not have value so as a rule of thumb always try to price a little higher than you think it's worth if you charge onetime payments avoid anything below $19 if you're charging subscriptions avoid anything below $5 per month and I noticed a side effect of pricing a little higher is that customers will value the product more and they will get most out of it think about Udi where you can buy this course for like $10 to learn the entire JavaScript world or you can have this like premium $200 course made by a

[12:38] creator that you love this is the course you want to go for because spending $200 on this course will make you value the course more and you will likely get more out of it and if you don't know how to price at all probably someone has already figure it out for you so look at your competitors and try to price in a similar range now this uh these mistakes I made um it's tailored for me and for the tiny 24 businesses I built it's also what I've seen from lots of solo developers building in public on Twitter but it's flexible that means you can come up with your own rules and I hope

[13:12] you prove me wrong and uh before we close this video I want to just mention that I am not affiliated with any of the products that you saw in this video I don't take any sponsorship on this channel and in fact I could not care less about the text tag I use as long as it's helping me move fast and until the next video I hope you just ship it [Music]

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