Why does open source software exist and how should I pick between free and premium software?

I made a brief overview of how WordPress works and keeps growing with contributors, what motivates people to keep releasing free plugins, the market economics of Open Source software and more.

If you ever wonder about the value of open source or why free plugins exist, watch this video.

Highlights

00:01:06 – WordPress.com vs WordPress.org
00:02:34 – The Reason WordPress.org exists
00:03:43 – Working on the Core
00:05:20 – Why People Release Premium and Free Plugins
00:04:26 – Premium vs Free Plugins
00:09:10 – When choosing between the two solutions

Transcript

Hey guys! Mario Peshev here from DevriX. Here with me is Mara. Today’s topic is Open Source solutions, Open Source plugins, and their premium counterparts.

Let’s take WordPress as an example. There are a lot of premium WordPress plugins available. A lot of open source and free WordPress plugins available on the WordPress.org repository. So, there is a lot of miscommunication when it comes to deciding on whether you need to get a free plugin, whether you need to take a premium plugin – what’s the difference, what’s the reason to pay for a premium plugin in the first place. Isn’t everything in WordPress is free since WordPress itself is free and so forth?

So, I’d like to kind of discuss that because with the current, with the upcoming release of Gutenberg which is a new kind of a page builder coming into WordPress, content creator for the WordPress platform. And, with a lot of people essentially over 30% of the top 10 million websites are based on top of WordPress, those are the common questions that I would like to kind of answer with a little bit more detail.

WordPress.com vs WordPress.org

So first off, WordPress – when people hear WordPress, it’s the default question: First, what is the WordPress.com software? It’s a proprietary platform owned by a company called Automattic which is founded by one of the two co-founders of the WordPress software. And then, there’s the WordPress software or the free open source solution WordPress.org that the vast majority of people download, set up a random hosting account, attach a domain name to start installing plugins and themes and so on and so on.  These are two different things.

A lot of people do miss the difference between the self-hosted kind of blogging host platform and the WordPress software which is something you can bend and extend as much as you want. WordPress.com is essentially free. You have different premium plans or you need to charge, you need to pay for attaching a premium domain and so forth.

WordPress.org as a software is completely free but you need to pay for hosting, for the domain, for you know, development design, content creation, marketing, whatever other services you don’t want to do yourself. Domain and hosting costs: they may start from as low as you know, 60 bucks per month and you know, professional companies may pay thousands or even tens of thousands of dollars somewhat, not to mention the largest companies paying tens of millions. But that’s another story.

The Reason WordPress Exists

So the WordPress.org as a software is free. The reason it exists: It has started as an open source software back in the day in 2003 as a fork of b2/cafelog – it’s another platform and is being maintained by a group of different contributors trying to build a better kind of blogging/content management software out there. With that, different products emerged, different services and solutions emerged. People became proficient in WordPress using it to sell web development services or such. And that’s kind of how it moved forward.

Now, right now, every major version of WordPress is maintained and kind of supported by hundreds of different contributors who submit core patches for bug fixes for new features, translations and things like that related to the WordPress software. All of those are contributors and some of those are even employed. Well, not all of them kind of have worked but some of those are paid for their work by their company such as most hosting companies or web development companies paying people to essentially contribute time to that software.

Working On The Core

So, we do have 6 people in our company – Me, myself included, with core patches the WordPress software and it’s pretty awesome. It’s really time-consuming and we try to do it whenever we get a chance and larger company like Automattic running WordPress.com have allocated like dozens of people working on that, focused on developing the WordPress software. But, it’s entirely open source. You can do whatever you want with it.

And the same goes for WordPress plugins and extensions and components. So, there are a lot of free WordPress plugins available. Some of them are good, some of them are bad and there are a lot of premium plugins available. Some of them are good, some of them are but it’s really hard to find a difference. And let’s discuss that a little bit further.

Why People Release Premium Plugins

So why do people release premium plugins in the first place? Obviously, to make money out of that. Right? Because you know, if you charge 50 bucks for a plugin for example and you have, I don’t know, 50 sales a month, like 50 purchases a month and this is twenty-five hundred bucks a month which is not too shabby. Because if you have 10 plugins like this, then you have a business model.

Some of the professional premium plugins, they do generate thousands of sales a month which is pretty great because first off, you have first time purchases. Second, you have renewals. Sometimes you have upsells, things like that. So, the market itself is a bit rough. So, if you have again, a 50 bucks plugin – a plugin that costs 50 bucks and you sell a thousand copies a month from it, it’s 50,000 dollars a month or 600,000 business which is again great and it happens for some of the most established plugins there. So that’s for premium plugins.

Why People Release Free Plugins

In terms of free plugins, there are different reasons why people do that.

Number one could be just general passion for the open source community, just being extremely happy for it and just you know, giving back. Making your way of earning money through WordPress and by this, giving back to WordPress by expanding the market ecosystem through free plugins. That’s one thing.

Second thing is portfolio. For freelancers and web agencies and web development company, just having something to show off like, “Hey, I did this. I built this. It has actual adoption, actual people using that.” That’s obviously another thing and that’s also extremely common.

Third one is upsells. Some of the free plugins, they have paid extensions or paid add-ons or they have like a premium version. For example, Yoast is the most popular SEO plugin out there with over 1 million installations of the plugin on live websites and they do have a premium version that supports a bunch of other things and it costs, I think 75 euro a year or something like that. So that’s another way to do that. Like, the free version is great. It has a really wide adoption so even if say, 2 percent of the people – it’s a low number, but even if 2% of the people purchase that, 2% out of 1 million are 30,000 by 75 a year and then you can do the math and you can see how the business operates. On top of that, they can also upsell services to that.

How Yoast Works

I’m going to take again, Yoast as an example. I’m by no chance affiliated by Yoast. They’re great guys though and I’ve bought the premium version. So, Yoast, for example, they do offer SEO reviews, professional SEO reviews. Some of my clients have taken those and they’re pretty comprehensive and cover a wide set of potential things that you may want to improve on your WordPress website. So, that’s another thing that you can do.

Obviously, freelancers web development companies, when they have such plugin, what they can’t do is they can say, “Hey, you know, we can extend that for you. We can take that as a basis and build upon it and then possibly either extract that as some sort of an extension or an add-on or a premium plugin, working with a premium plugin or bundling it into the free core in order to again increase adoption.

All of that of course, that kind of exposure leads to some sort of a popularity. You know, if you have a plugin that has tens of thousands of installations on live websites, it’s obviously something that helps with marketing. You can be more prominent when attending WordPress conferences. You can feature that on your own website. It builds some sort of credibility. It makes you appear as more professional because your code works on tons of different environments and services and so on.

Premium vs Free Plugins

So, as you can see they’re kind of different opportunities. The thing with premium plugins is for the most part with a premium plugin, you get guaranteed support. For the most part, of course, if that’s within the terms of services, but that’s expected.

With the free plugin, the most challenging thing that’s kind of pushing people away from free plugins as developers is the backlash from customers is pretty horrible. You know I’ve had free plugins. Someone installs that and just rate it 1 out of 5. “This a crappy plugin and it doesn’t work” and yada yada yada. Then it turns out the plugin runs on 2000 websites and that’s the only client that can’t really make it work right.

So, it means it’s something with their hosting or the way they install a plugin or their theme or whatever it is. But, it’s pretty common to have customers asking for free stuff be extremely demanding while not even paying for support in the first place. With premium plugins, you can at least expect some sort of support. And with free plugins, you know, best case scenario, you can work with some sort of developer or the plugin owner or the plugin founder, whatever it is and kind of ask them for additions.

When Comparing The Two Solutions

But when you compare solutions, when you pick solutions, you know, you can’t… sometimes a free plugin can do, sometimes a premium plugin can do. More often than not you require custom development and custom implementation for something. And some of the generic multipurpose plugins that do a lot cannot be sketched since they are made for high adoption which means all sorts of different businesses. They include tons of options and they become heavy and bloated and insecure and unstable and so forth.

So yeah, that’s pretty much how the ecosystem works. That’s extremely common in every single open source community. So whenever you’re building something, whenever you’re in need of plugin or a theme, consider that. Think about it. Talk with a technical consultant and take the right decision.

Instead of doubling down on marketing and sales, never neglect your existing customer base.

A happy customer is your best investment to date. After successfully closing a deal, the best you can do is discovering ongoing opportunities to grow their business.

That’s what helped us grow to 45 folks at DevriX and generate 95% of our revenue through different recurring revenue plans.

My Top 5 looks like this:

1. Retainers
2. Maintenance and support plans
3. Tackling seasonal verticals and balancing high and low seasons
4. Repetitive batches of work, i.e. initiatives applicable to everyone
5. Productizing services

Going through each of these in the video. What’s your favorite recurring revenue technique?

Highlights

00:01:08 – What we do at Devrix
00:02:51 – What you can do with most clients
00:04:01 – Different Seasons, Different Offers
00:05:34 – How you can leverage trends
00:06:54 – Mix it up!

Transcript

Hey guys! Mario Peshev from DevriX here. Today’s question is, “how to maintain your clientele or how to take your existing customers and make them returning customers, repeat customers or even ongoing customers?”

Question: How to Maintain Your Clientele?

Now it’s a very common question especially among freelancers, startups, starting businesses, entrepreneurs, and people who don’t really have existing customers already or just have a couple of clients and want to really scale to dozens, hundreds, thousands, depending on the type of industry.

And, if you think about it, almost all tutorials out there and books and video courses are actually related to lead generation and sales and things like that for new customers. While statistics show that your existing customers are your best clients simply because they already trust you, you’ve done some job for them, they are happy, they’ve probably given you review, a testimonial, and they would most likely be willing to work with you again in the long run.

Different Techniques for Specific Customers

Now, this is not necessarily the case for every single type of business and every single type of client, which is why there are different techniques that you can apply as a service-oriented professional to those specific customers.

Technique #1 Retainers

Now, number one – technique number one is retainers.

Retainers is what we do at DevriX for a living. It accounts for about 95 percent of our revenue right now and it means that we are signing long-term contracts with our customers on a kind of month to month basis for a prolonged period of time. So our clients have been with us for over three years.

We work with them on kind of semi-implementation, semi-consulting basis with some support included in order to make sure that they have, they kind of hit goals on a month to month basis with new features, new expectations and kind of reviews, reports, optimization, everything that we can actually deliver as a business. So that’s kind of our preferred approach. This is the best thing that we kind of came up as the best practice. But of course, there are pros and cons.

The pros: It’s kind of high revenue operation. It could be scaled easily if you have kind of a larger number of clients but at the same time, you can scale it as easily simply because it accounts for a larger number of followers. Meaning that you can’t really work with hundreds or thousands of clients if you want to, you need to work with a limited number of customers because you need to pay more attention.

You need to spend more time – there is a lot more consultancy and other things involved in that process and not every specific customer is happy to do an ongoing basis thing unless tied to an ROI thing. Meaning that you can ensure that emergencies are being taken care of and you can also provide some additional value. From a marketing sales commercial rate optimization, experts’ perspective or anything else that helps them scale and may make more money as a result. So that’s kind of the first thing.

Technique #2 Maintenance

The second thing is maintenance.

And, of course, maintenance means that you can potentially work with a customer, you can do something for them, and at the same time you can tell them, “hey, if you can pay me X dollars a month, I’m going to do ABC for you.” Now, that’s not necessarily ideal but sometimes it’s a pretty cool deal especially if you kind of package it in some form of a bundle, like for example, say you’re not paying and making sure that their hosting is in place and they are then taking care of ABC. There are actually external services that you manage like their ads, or their SEO, or their Content Marketing or something like that.

So, you can really package a great deal. And throughout this deal, you can work with a bunch of different clients, doing one of the projects and at the same time making sure that maintenance is being taken care of as well. So again, that’s kind of the second tip. It’s something that you can do with most of your clients. It’s cheaper to retain or it’s something that’s kind of less urgent for the most part so most of the time you can do it in your own spare time. So again, there are some pros from picking these packages or this type of service offering as well.

Technique #3 Seasonality

Number three is seasonality.

Now some forms of businesses do really well throughout certain seasons. So, you as a specific kind of expert in your industry, you can try to tap into different seasons for different types of industries and nag your clients to kind of repeat ongoing campaigns or something like that throughout those specific seasons.

And if you’re smart and you can do it early enough prior to the holiday itself in order to take on a longer period of time before a holiday instead of having tons of overlap over the course of several days or just a couple weeks. Meaning that like, for example, we have two or three months before Christmas we can start in preparation with some plans now. Do the work by the end of say, I don’t know, September, October, November and have plenty of time before the actual holiday arrives so that we can take on other emergencies. Or, you can just plan your work upfront. And then, you can do the same thing for those clients on Christmas and you can kind of mix it in with Black Friday or Thanksgiving or Easter or on the Fourth of July, things like that. That sort of seasonality.

Or if you work with businesses that happen to be busy throughout the winter season, try to find something during the summer season so that you can take advantage of say, February through the end of April or even May to do some campaigns for them. So this way, you’re kind of distributing responsibility and allocating budget across the entire year instead of sticking to a specific, very limited, narrow kind of time interval.

Technique #4 One-Off Activities

Number four is just doing regular one-off activities.

That works well for specific types of plans like if you do SEO or if you do designs, if you do UX, some other things or ad ops, you have certain trends and most of your clients can potentially leverage those trends. Meaning that without actually imposing competition, you can more or less apply the same type of work for different clients. Like, if there’s a new trend for SEO or your performance optimization or migrations or a new tool that you’ve adopted or something else, you can slowly create batches of migrations and deployments and optimization procedures for all of your clients.

So if you actually plan your business model in a similar way, you can come up with a new idea every month or every other month for those specific customers and it works pretty well because again, if you have 10 customers and each of those batches takes say, 20 hours of your work, this means that closing eight of your customers is 160 hours of work for those customers even if you do it over the course of two months. It’s still about 80 hours a month or kind of working half-time applying those batches, those integrations for those clients. Do you know what I’m saying?

Technique #5 Productized Service

And also number five is trying to do some form of a mix between these by doing something like a productized service.

Like, you can build a platform or you can hire someone to build a platform for reporting or custom dashboards or you can integrate something like, I don’t know, newsletters and so on that comes with the latest referrals or you can actually record courses and other things that you don’t necessarily have to do as a service but you can productize your knowledge in a certain way.

Again, through courses, through software, through some form of a reseller approach, through hosting or anything else that helps you deliver value on an ongoing basis without having to spend a ton of time for every single iteration. So again, you can sell that as a separate thing. You can sell it in addition to your maintenance packages. You can sell it in an upsell to your one-off product but regardless, this is something else that you can do.

So those are more or less the five things that you can apply as a strategy for maintaining and continuously working with your clientele.

You can do retainers. You can focus on maintenance packages. You can do the seasonality thing and take leverage of those seasons. You can do your own seasons through different iterations with regular one-off activities or you can productize your service. If you have any other ideas, definitely let me know in the comments. I’m happy to get back to you.