Open Source and Freeware Vs. Paying the Bills

Editor's Note: This is the first posting in our series of items from guest contributors. Since many of our current CodeSnipers are currently running or considering running their own software shop, I hope you find this perspective helpful. If you are interested in contributing to CodeSnipers, please check out the previous posting.

Nothing is totally free. No matter what you're trying to do, there are always going to be expenses. To continue your projects and create new ones, you need to know how your money flows. If you're not sure how your money is spent in relation to producing your release, you're headed for financial trouble.

If you don't have profit on your radar, you should at least have Cost Recovery in mind. Cost Recovery lies somewhere between making a profit, and continually operating at a loss. The concept is easy enough, but can be hard to manage. If you aren't aware of what your actual costs are, you'll have no idea of what you minimum income needs to be to keep you going.

The easiest way to manage a Cost Recovery is by first doing a cost analysis. It can be as simple as a piece of paper with your expenses listed. Though the more information you give yourself, the better you'll be able to see where you stand.

Start with the basics – the known costs - such as the costs for your website domain name, hosting, and bandwidth expenses. Then move on to the less obvious, such as office supplies, equipment and utilities. You could also include time you spend on administrative duties like answering email.

If you have to estimate, do so within reason. When in doubt track your usage for a few weeks and then update your cost analysis. For major equipment costs, calculate based on how long you think your machines will last and calculate the replacement costs over that time period.

Once you know your expenses, you'll be left with the task of finding ways to cover them. It becomes like a game at this point. Your objective is to find ways to bring in the cash you need to cover your expenses, without the method itself becoming an expense.

If you want a general rule of thumb, try sticking with the 50% rule. The rule says that if you can't keep at least 50% of the gross after you've paid the expenses, you are wasting your time. If your goal is to cover your on going expenses and you are only covering the costs of the fund raiser, then you haven't actually raised any funds.

Good choices that require little out of pocket expense on your part include...

  1. Asking for Donations. No one is going to know you need the cash unless they know about it. Add donation buttons to your website, or as part of a splash screen with your release. Get a plug in for your need for cash in any place you think you can get away with it.
  2. Sell a Perk. Some people are leary about donating if they aren't sure how their money is being used. So sell them something instead. Try access to future releases early, or unlimited updates for a period of time.
  3. Sell Software On-Disk. Now before you have a stroke and write me angry letters about how you only do freeware and the like... Think of your bandwidth expenses. If you are able to get your release out on a CD or DVD, you can realize substantial savings of bandwidth without limiting your distribution. Places like http://portal.on-disk.com allow you to get set up for sales with zero out of pocket expense. You set your prices and they do the rest. All you have to do is wait for your check to come in the mail.
  4. Sell Ad Space. If you've got a website, online forum or anyplace your users come to find you. Sell like minded advertisements. After all, you're already using the space. Why not try getting a few dollars out of it?
  5. Sell Support. There are a lot of users who would be willing to pay you to tell them how things work rather than read your materials. Take advantage of it. After all, who better to tell them how to do things than the people who created it in the first place.

Use your imagination and don't be afraid to try things. Since you know exactly how much money is involved you won't have any surprises. As your initial efforts to raise funds pay off, you'll be able to expand your operations and ensure you will be able to move the project forward for as long as possible.

About the author: Karlie Robinson is the Owner of Webpath Technologies. In business since 1999, Webpath Technologies strives to merge cutting edge technology with basic solutions to meet customer needs in the most cost effective way. Information on current projects can be found by visiting http://webpath.net.