How much to charge a big business? | Hacker News Reader

How much to charge a big business?

10 pointsjonlegend12 comments

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.

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.

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?

Edit: What we do in a nutshell: we are enabling businesses to better connect with their customers.

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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!

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.

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

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).

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.

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

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

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

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.

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!

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.

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.

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