Jason Fried

June 23, 2021

A static business is a healthy business

If you have a small handful of customers paying you significantly more than most of your customers, you’re no longer a product company — you’re actually a consulting company working for those big payers. You’ll do what they say — often at the detriment of your smaller customers — because the big companies pay the big bucks.

And if you don’t follow their money with your effort, an exodus of just one or two big customers could seriously impact your bottom line. It could put you at major risk. You don't want a customer you can't afford to lose.

So instead we take the other approach — a broad customer base where nearly everyone pays us roughly the same amount per month, all things considered. We don't play favorites. For example, Basecamp is $99/month flat, no matter how many users you have. Have 250 users? Or just 3? It's still just $99/month total.

What's that? It's a picture of our business in a random year — 2017, to be specific. Each dot represents the lifetime $billings of a single Basecamp account.

See how uniform that is? It looks like static. Static is a healthy business. No outliers, no major splotches. If you removed any one dot — or even any 10, 20, or 100 dots — you’d barely notice. You could probably remove 1000 random dots and it would still look the same.

You know what else it looks like? Insulation. Because it is insulation — insulation from risk. Of course we wouldn’t want this to happen, but because our revenue is so equally distributed across a large number of independent customers, if a random 10% of our customers left tomorrow, we’d be a smaller business, but we'd also be predictably ok. We’d never have to cross our fingers and hope that “Customer X that pays us 100x more than the average customer” wasn’t part of that 10%.

If you mapped your customers like this, what would your your chart look like? If you started pulling away your 10 biggest customers, would you see big gaps, or would the holes be swallowed up by the whole? Would it be obvious with a few removed or would you be able to even tell the difference? Are you diversified or dangerously dedicated to a few big bets?

Some special customers, or all special customers? We'll take all.


About Jason Fried

Hey! I'm Jason, the Co-Founder and CEO at 37signals, makers of Basecamp and HEY. Subscribe below to follow my thinking on business, design, product development, and whatever else is on my mind. Thanks for visiting, thanks for reading.