On acquisitions, pricing and being part of an ecosystem

It is a week on from our launch of Perch 2, the new version of our really little content management system. Other than our payment gateway letting us down (more on that in another post this week) the launch has been a success. Our decision to also launch a new website and new documentation along with the new product added an extra degree of stress but we feel as if we’ve taken a big step forward across the board.

We’ve spent most of the last three months working on Perch 2. Everything we’ve added to Perch 2 and the architectural changes we have made to enable larger sites were driven by customer request. Our “Perchers” are fantastic. They have really got on board with the product, tell other people about it, and give us feedback as to where they want it to go.

We’ve been able to spend the last three months working on Perch 2 because Perch is priced in a viable manner. It is priced at a level that enables us to do very little client work at this point and commit much of our time and energy to making Perch better. We are also able to contract talented designers to help us. Paddy Donnelly of Lefft redesigned the Perch website. Nathan Pitman of Nine Four did some excellent work in reworking the Perch interface. We’ve been working with Laura Kalbag on some as yet unreleased goodness. All of this is funded by Perch sales, we’ve never taken any investment or even loaned money to develop Perch.

While celebrating our launch, helping customers upgrade, getting angry at our PSP, and putting out a dot release to fix a few issues not caught in the beta, I’ve also been reading the reactions to the acquisition of another small software company – the company that developed the Sparrow email client. The product, or in reality the developers behind the product, has been acquired by Google. The end result being that development on this app is now over.

Marco Arment, creator of Instapaper, voices an opinion that I very much agree with saying,

“If you want to keep the software and services around that you enjoy, do what you can to make their businesses successful enough that it’s more attractive to keep running them than to be hired by a big tech company.”

Reading Marco’s post last week, I pondered whether there would be an offer that would make him consider selling his business in a similar deal to that accepted by the Sparrow developers? Faruk Ateş considered the same thing in his post When Selling Out is, In Fact, A Dirty Choice.

The fact is, making a living from selling software is not easy. Sparrow was priced insanely cheaply – a one off $10 for the desktop and $3 for the iPhone version. I don’t know what Google offered but I would bet the Sparrow developers were calculating that offer in numbers of licenses they would need to sell to match that.

A key part of our financial success with Perch stems from the fact that our pricing is per site. We are not charging a subscription yet we still get repeat business, as designers who use Perch buy a license for each site they build. Our sales therefore grow in an exponential manner, we get new customers but we also have existing customers coming back for additional licenses. This coupled with a sane pricing policy means we have developed a sustainable business here. Large companies tend not to come hammering on the door of independent PHP CMS developers, however even if they did we can be confident in the viability of our business as an ongoing commercial success and jumping for quick payout would seem less of an attractive option.

We’re all part of an ecosystem. We make a thing that other people love. It helps them to provide better services to their customers. By them paying enough for it that we can continue to make it better and add features and help people use it, that thing continues. We can also contract other good people and small companies to do design work for us. No-one here is making huge amounts of money, we’re still a tiny little company trying to do good stuff. Just like the developers of many of the products we use and love. However we are running a sustainable business, we’re in it for the long haul.

Remember that ecosystem next time you are griping about the price of software. Remember the ecosystem next time you have a rant on Twitter about a tiny company, perhaps just one individual developer, who is making a thing that you think isn’t living up to your expectations.

I totally understand Laura’s idealism, and viewpoint that we should not just be doing things for the money. However as I approach 40, still not owning a house or having any pension, that is tempered by the fact that there will come a point where I can’t work 7 days a week even if it is on things that I love. Thankfully, in our business we have found a balance. A viable business where we are doing something that we love, helping people make a difference in their own companies through our software. That sweet spot is exactly where I want other small software companies to find themselves. A place where they can create something that they love and other people love, yet be paid for their efforts. Then, if Google, Facebook or whoever does come knocking they can confidently say, no thank you.


Zach Inglis July 23, 2012 Reply

Congrats, by the way!! Hope you’re feeling really awesome.

I totally agree with this post, but one thing I feel overlooked…

I don’t know what Google offered but I would bet the Sparrow developers were calculating that offer in numbers of licenses they would need to sell to match that.
I suspect the musings that they were not as succesfull as they could have been was true. But that’s in part their fault – most of us would have paid more for their app. But most importantly, they already had a payout from their customers. What they got from Google was a bonus to that.

John July 23, 2012 Reply

Lovely. Long may you continue.

Mike Fisher August 3, 2012 Reply

Perch looks like a very very nice piece of work – would mean I wouldn’t have to respond to “Please can you change this sentence” requests whilst also not having to cock about with WordPress. Nice article, too.

Tim Plumb October 22, 2012 Reply

I applaud your ideals and certainly hope that you go from strength to strength. Having worked for a small software company that had two major corporations come knocking looking for an acquisition (the second one the company took) it is really hard to juggle the ‘selling out’ claims against the constant demand to meet payroll and future growth. Continue making a product that you love and can be proud of and you won’t go far wrong.

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