Do you really need that custom software?

Over the last 3 months I’ve spoken to at least 8-10 people who were ready to pump a decent sum of money into custom web apps for their brand new or infant business – for me, this is almost always a bad idea…here’s my reasoning:

Version 0.1, Shorcuts and Versioning

With the explosion of cloud apps software has never been cheaper, easier and more accessible than it is today. We almost always recommend clients start small or with a basic version of their big vision, road test it to validate their idea to confirm whether its worth going big BEFORE pumping more money into the idea.

Here’s some shortcuts we regularly recommend to clients that may save you big $$$:

• save $1000-2000 on a merchant facility and use Paypal to take credit cards on your website and Paypal Here (Google it) to take credit cards in person. Most people don’t know that Paypal accepts credit cards without your customer needing a Paypal account. Broadly speaking, if you’re doing less than $25,000/year of credit card payments Paypal is generally a cheaper option that a fully fledged merchant facility anyway
• tried a manual system? Not everything needs to be automated, manual systems can work quite well particularly when starting out and can be a great way to streamline a system before automating it through software.
• want to charge a monthly or recurring subscription for an online service? Take a look at Ning.com which is a fully fledged social network platform that allows you to charge a monthly or recurring fee for access
• have you considered Wordpress instead of building that custom piece of software? Wordpress has over 19,000 software plugins or apps, most of which are free that add all sorts of extra functionality to Wordpress. Read my post on why Wordpress is our Preferred CMS if you want more info
• need a intranet solution? You don’t need an expensive solution, Google Apps (which is free for upto 10 user accounts) is a fantastic low cost or free intranet solution that doesn’t require a huge spend. (sidenote, be wary of Sharepoint consultants who will happily charge you anywhere in the range of $10,000-$100,000 for a basic company intranet)
• need a CRM? Try CapsuleCRM.com or Pipelinedeals.com for a small monthly fee you get a powerful CRM without all the bloat more expensive apps like Salesforce have
• want to start an online store but don’t have the $$$ to pay a web developer or want to validate that you have a good idea before investing big $$$ – checkout Shopify.com or Volusion.com, two fantastic DIY ecommerce platforms

In the video below entitled version 0.1, Derek Sivers, the founder of CD Baby (one of the first music stores on the web – pre iTunes) calls this start small approaching “versioning”. The video is well worth a watch if you’re considering pumping a lot of funds into custom software.

Derek Sivers. Uncommon Sense. 6-of-8. Version 0.1 from Derek Sivers on Vimeo.

Custom software + New business = alarm bells for me

3 reasons why a custom software approach rings alarm bells for me:

1) Creating custom built software is not the key to a successful business. If your business needs the custom software to be successful your business plan is likely very shaky (with the exception here being a software startup or some type of software company who’s job it is to build software)

2) There will always be somebody willing to take the $2k, $5k, $10 or $50k you have to spend and build the app for you…see point 1, this does not mean the business will be a success, often this is actually the path to failure.

3) Once you actually road test the business and have some momentum your business plan is going to change rapidly. This means your expensive custom software is likely no longer going to be a good fit and that means you will need more $$$ so it can be adapted to how the business looks in 6 months time.

My $300,000 custom software mistake

When I ran my online store, which at its peak was doing mid seven figure revenues, we pumped somewhere in the range of $250-300,000 into building a custom ecommerce platform.

Custom software is the icing, not the cake
Our custom ecommerce platform was the icing on top, it may have given us a 2-5% advantage but certainly not $300000 worth of advantage.

At the time we strongly believed that our ecommerce platform was our competitive advantage. Looking back I realise how stupid this was and if you ask me today whether I’d have the $300k or the custom software, I’d take the $300k and run the site on Wordpress, Volusion or some other off the shelf solution which would cost me at most a couple of hundred dollars a month instead.

Before spending big on custom software I’d strongly recommend you work out your version 0.1, see if there is an off the shelf alternative or whether a manual system will work short term and whatever you do, try and avoid that spend on custom software for as long as humanly possible, you’ll probably find that you really didn’t need custom software after all.