While attending Social Dev Camp last month, I sat in on Rishi Shah’s talk about pricing for Software as a Service (SaaS). Rishi is the CEO of Flying Cart, a service that helps people set up and host their own online stores, and a company that he founded in Chicago before moving it out to San Francisco. In his session, Rishi discussed what's worked best for him, as well as what he's learned by studying several SaaS companies like Chicago-based 37signals, which has been the leader in SaaS pricing using a tiered subscription model. Having made the jump to becoming a fulltime entrepreneur (and also as the voice behind the appropriately titled business blog GettingMoreAwesome.com), Rishi is a great role model for anyone looking to start an online business. He was gracious enough to answer some of my questions after the conference.

Who is a good target client for Flying Cart, and why would they use your service? 

Flying Cart is the easiest way to create an online store. Our target client is someone on Etsy or eBay who wants to branch out and start their own brand. The customers that do the best have products ready to sell and are vocal about it on the blogosphere.

Personally, my favorite customers are the super niche stores. They really dominate because e-tailers like Amazon aren't selling their products, and they show up #1 on Google right after they start a store—sometimes in minutes!

I wrote a blog post about how to win with an online store here.

On the topic of SaaS pricing, what insights have you learned from testing? Has testing and iteration been an important part of your success?

I wouldn't consider myself a success at this point. We are still a very small team. Unfortunately we do very little testing, not because we don't want to, but we just don't have the bandwidth right now. Currently all the testing we do goes to helping customers sell more products.

Here are a few things we have learned about our own pricing model:

  1. Launch with a free model. This way you can iterate on your current product.
  2. If you don't have a free plan, offer a 30-day free trial.
  3. A $12 package will work better than a $14.99 package.
  4. An $11.99 package will work better than a $12 package.
  5. A $9.99 package will work better than an $11.99 package.
  6. Put your highest package on the left so the customer sees it first. By comparison your cheapest package will look even cheaper.

You talked about SaaS products that served as inspirations for your pricing model—can you give a couple examples and what you've learned from them? 

I love SaaS businesses because they keep me in business. I only need to sell once, which makes life a lot easier. I do have to make sure we provide our customers new features, hosting, and fast support, though.

After the first year of running Flying Cart we were making about $2,000 a month, which wasn't much, but it helped pay for our servers, rent, and food. It really went a long way.

I have a book that shows people how to get their first paying customers: It's called 10 Paying Customers in 10 Days and you can download it for free.

Can you speak more about your blog, Getting More Awesome—why do you blog, and how has it impacted your business? 

Getting More Awesome started as notes to myself on how to make my business better. If I saw a good UI, I would post it. If I saw a good way to get more customers, I would post it. Along the way it looked like a few people liked it. I find blogging to be meditative. I really enjoy it.

What pushed you over the edge to quit Accenture and go out on your own?

Accenture was awesome. I was able to save a ton of money while working there to fund Flying Cart. Without that job I probably wouldn't have had the option to fund my company. I have always wanted to start my own company so it was just a matter of having some cash, liking the idea I was working on, and being confident in my team that we could actually start a business that makes money.

Does your move to California indicate that it's a better place to start a business than Chicago? 

Yes. San Francisco is the greatest place to grow a business on the web. Everyone is just obsessed with it out here. You go to random parties and people are talking about business models.

What I love about companies that start in Chicago is that they are all real businesses. They focus on paying customers right away. For example, Chicago has companies like 37signals, BrainTree, and Trunk Club. I'm glad I started my business in Chicago.

Many thanks to Rishi for his insights!   photo source: businessweek.com

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