Don’t let anyone overpay you
The moment one customer pays you a lot more than any other customer, you’re no longer a product company, you’re a services/consulting company again.
When we launched the first version of Basecamp in 2004, we decided to build software for small companies just like us. We know how growing from four to six or eight employees is a huge move. We know that it’s during those growth moments you need a system to help you keep everyone on the same page, and help your expanding teams be more self-sufficient. Being roughly the same size as our customers was a product-focused, mission-oriented decision we made then and have stuck to ever since.
But limiting our customers to small companies was also a philosophical — some might say counterintuitive — decision about the kind of business we wanted to run.
We based Basecamp’s original pricing model on charging customers what we’d be comfortable paying ourselves. We offered three monthly price tiers: $19, $39, and $59. (Today the tiers are $29 or $79 monthly, or $3,000 for a year with added personal support) But we also established very clearly from the start that we’d never allow a customer to pay us more than that top-tier price. Not even for a customized version of Basecamp for a massive enterprise company that’s offering to throw $100,000 our way. We would never waver from our mantra: If you’re a big company with special demands, we don’t want your money.
That single decision has probably had the biggest positive impact on our company. And it all started with a simple answer: No.
Why say no to such a windfall? There are two reasons. First, we wanted to build a self-service software company. One that doesn’t rely on a large sales force to move products, that doesn’t need an army of key account managers keeping the whales happy, and that doesn’t require us to offer extensive training for something that’s been specially made for hundreds or thousands of people at the enterprise level. Saying yes to a company that might increase our revenue by 100x would require us to suddenly create staff infrastructure to support that.
But more, at Basecamp we believe there’s strength in numbers. Not large numbers of dollars, but large numbers of customers. We’d much rather have hundreds of thousands of companies paying us a small monthly payment than a few huge accounts covering that same amount. A diverse customer base helps insulate you; a few large accounts can leave you vulnerable to their whims.
Over the years, we have said no to a bunch of companies, institutions and even world leaders we admire. We don’t want to bank all our risk on a small collection of big companies that require customization or special treatment. We don’t want to lose 20 percent of our business if one big account goes away. We don’t want to push the product in the direction someone big prefer at the expense of the small companies we love so much.
Some might wonder, “Why not just do both — sell to small businesses and also have a group of people dedicated to servicing big businesses?” First of all, we believe if you have a large pool of customers all paying you roughly the same amount, and then a small handful of customers paying you 100x that much, you’re no longer a product company — you’re actually a consulting company working for those big payers. You’ll do what they say because they pay. We also don’t want to be a two-headed company with two cultures. Selling to small businesses and selling to enterprises take two very different approaches with two very different kinds of people. We’d rather focus on one — the massive number of companies around the world that have fewer than 100 employees (and most fewer than 20). That’s plenty of sweet spot for us.
This article also appears in the June 2016 issue of Inc. Magazine. Run a small company? Looking to be able to do bigger things with a small crew? Basecamp 3 is our secret weapon, and it can be yours too.
