[molsongolden]

My favorite part of this article was the first half of the summary:

"If you want happiness and fulfillment from a small company, strive for B"

$10,000/mo revenue with only 10 customers to keep happy vs. 1000 customers to service? Yes, please.

Company B could have just as much potential for growth as company A. Sure A has the potential to have more brand evangelists bringing in new customers but B has more time to devote to totally babying their 10 customers and making sure they will be likely to recommend the product/service to others in their industry. Company B only needs 1 referral to make another $1,000 per month whereas company A would need 100 referrals.

Also think about upselling down the road, if a company can afford $1,000/mo for your base product they will probably be willing and able to pay for upgrades that will make their work easier or more efficient.

I'm not arguing that B is better than A, but I think that B could have just as much growth with less stress.

[mseebach]

On the other hand you need just one cost-cutting round or one unforgivable support foul-up to lose 10% of your revenue overnight. Model A likely won't see that kind of volatility.

[MicahWedemeyer]

As someone who runs a type A business, gives C+ customer service, and has a significant amount of unplanned downtime (ie. "oh shit, the server is down"), I can back this up 100%. We lose some customers due to my bungling, but it's never enough to shake the foundations of the business.

[modoc]

I disagree. People who are paying $5/month have a much lower threshold before they leave than an enterprise paying $20,000/month. Also larger more expensive services tend to end up with more business integration and the cost of moving to another service is typically substantial.

[wensing]

+1.

Also, consider setting a price that cuts out the vast majority of demanding cheapskates but keeps it salient for the rest. $200 is a good starting place. You can also achieve this by charging for the entire year up front instead of monthly billing.

[mseebach]

They do, but in $20,000 there are 4,000 individual lower thresholds. It's much, much less likely that any one event will cause all of them to quit - all other things being equal, which they never are, so with a grain of salt and all that.