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I'm working in a side-project in my spare time.

When it becomes finished I was thinking to offer as a service for an ammount between 70€-90€ month / client . The only expenses are the hosting (low cost), salary (I'm the only worker), and taxes.

The problem is:

  • I'm working solo (no salesman) in this project.
  • In my country for a recover of the freelance taxes I've calculate that I need 6-7 clients. So If I have 7 clients I don't have any money but worse, if I have 3 clients I'm losing money.

I was thinking about, should I offer my product free (no money but no taxes) until I have enought clients to have beneffits? Another idea?

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3 Answers

up vote 6 down vote accepted

Offering your product for free has the undesired effect of detracting value to it in the minds of the users.

You could start offering a free beta for a limited time though. Just remember that only a small percentage of your free users will convert to paying users.

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Limited betas have the added bonus of being like an exclusive club, which can attract beta junkies. – Sold Out Activist Aug 30 '11 at 11:43
up vote 4 down vote

Only offer the product free if there is a "network effect" such that it is worth more to your customers if more people are using the product. Even then, don't expect to transition many customers from free to paid. ("What? You want to start charging for what we used to get for free?")

As @Elli and @danmaz74 have suggested, find a legitimate reason if you think giving away your product will help with marketing.

E.g.

  • Free while in Beta
  • Free for first N months of use (we know you'll be so impressed you will want to pay $$$ later).
  • Free during September for non-profit groups
  • Free for poets during the month of September, to mark T. S. Eliot's birthday.
  • Free for left-handers, because we recognize how difficult it is to live in a world of right-handers.

Don't do "Free for the first 100 users". If people still see that it is free after a month or two, they will start to wonder about the number of users.

Free while in beta is probably the best of these, and a free trial period is probably a good idea anyway for an unknown and untried service (assuming there is no significant cost involved in handling a new client).

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+1 Probably I'll try for the "Free while in beta". Handling a new client its supoused to be easy, I'm only a little affraid of the support tasks (like "I don't know how to use this feature") – user674887 Aug 25 '11 at 7:26
Why not tiered approach? ie, offer 1.0 functionality for free. Most 2.0 level features are "extra". Keep adding core features to the "free" level to keep your base, but make it more and more attractive to "upgrade" (based on the wish-list of your most desirable customers). – r00fus Aug 29 '11 at 17:31
up vote 2 down vote

I'm not sure if I understand correctly - you're taxed for being a freelancer, or is that some kind of registration fee (which would be akin to filing to form a corporation)? Tax is usually on income, so it would be quite complex to have negative net revenue because of taxes - if you don't make money, you don't pay money. The registration fees, however, would be a cost of doing business, and therefore factor into your revenue model.

You've computed that your break-even point is somewhere around 6 or 7 customers at the price you've selected. That's not a huge number - unless, of course, your price is not in line with what people pay for your service (about which I have no idea). Also, what are the chances that you'll get referrals through your first clients? Is it possible that they would market your product for you?

Don't give it away - it just makes it increasingly difficult to charge for it later. Trials, however, could help you get an idea of what customers want, how many people are interested (though not all users of the trial version will pay to use it), and how effectively you're able to market it on your own.

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+1 For the referals idea :) – user674887 Aug 25 '11 at 7:18

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