Education vs. Software: Which Is a Better Business Model?

  • November 15, 2012 by Corbett Barr
  • 23 Comments

Which business model is better for an online startup: selling education or selling software?

Clay Collins ran an online education business that was on track to do 7-figures in annual sales, but this year he switched his entire business model over to selling software.

In this interview with Clay, you’ll find out:

  • Why Clay changed his entire business model despite having so much success selling information products
  • The pros and cons of software vs. education as a business
  • Clay’s tips for getting started as a software development company
  • What Clay thinks is wrong with the way information is marketed and sold today
  • Why being “the expert” can get tiresome
  • And a whole lot more…

And of course, after you watch this I would love to hear your thoughts on selling information vs. selling software in the comments below.


Note: the video above is played via Clay’s LeadPlayer software. LeadPlayer is a WordPress plugin that lets you do a whole lot of interesting things with your YouTube videos (click here to watch the video if you can’t see it in your feed reader or email).

Watch this 90-second video to see LeadPlayer’s two most popular features in action:

Learn more about LeadPlayer (and the company Clay founded called LeadBrite).

Now here’s the thing. Clay makes a lot of really great points in the video above, but there are also a lot of things you might not agree with.

I would love to hear your take on this question in the comments below: which business model is better for a small online business: selling education (information) or selling software?

Tell me what you think and why.

Thanks as always for watching.

Written by . Corbett is cofounder of Fizzle, a place for creative entrepreneurs, writers, makers, coders and artists, all working to support themselves doing what they love independently on the Internet. Follow Corbett on on Twitter.


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Ahmed Safwan@ To Start Blogging November 15, 2012 at 6:39 am

Just as usual. You are rocking us Corbett.

I really liked the interview. I listened to half of it until now.

I think that I will change the idea of selling information. Thanks Clay for the great information.

Keep up the good work Corbett and Clay.

Regards,
Ahmed Safwan
To Start Blogging

Clay (from LeadPlayer) November 15, 2012 at 9:59 am

Thanks for the kind words.

Info products are great if that’s what’s in your heart to do. Seriously. There is absolutely no one right way. It’s not like “software” or “laundry services” or “hardware” is THE WAY. There are a bunch of ways to do entrepreneurship, and I’d encourage you to select the place where you can provide the greatest value for the greatest number of people.

Looks like your blog is off to a great start!.

–Clay

Sheyi | ivblogger.com November 15, 2012 at 7:35 am

IMHO, I guess software (properly built) is the best these days. As per education, its still good but the person releasing the product must be a known figure in that field too.

Sheyi

Clay (from LeadPlayer) November 15, 2012 at 10:01 am

Hi Sheyi! Please listen to the interview again :-) Like I said earlier, info products are great if that’s what’s in your heart to do. It’s not like “software” or “laundry services” or “hardware” is THE WAY or the big opportunity at the moment. (And do you really want to be chasing opportunities?). My suggestion is to build a strong business that will outlive you.

–Clay

Primoz Borovnik November 15, 2012 at 7:41 am

I believe it all depends of what kind of products you’re promoting. In my opinion software products get lower refund rate(my experience).

Clay (from LeadPlayer) November 15, 2012 at 10:02 am

Hehe . . . and concrete gets lower refund rates than software :-)

Primoz Borovnik November 16, 2012 at 9:33 am

Hehe, you got me:)

Cory Miller November 15, 2012 at 8:02 am

Corbett, in answer to your question at the end of the post … we do both. We sell software (WP themes and plugins) and also do training (through WebDesign.com). So I thought I’d throw my two cents in here …

Selling software has been an incredibly awesome and fast growing business — one I truly love. We started with it in 2008. Shipping software, seeing happy customers use it is a blast. But it’s also a people heavy business. We have 5 full-time support people alone, not to mention the developers in our business.

Education or information has been a much slower go for us. Although I highly value knowledge and training, I’ve heard that the advantage software has is “utility” in the mind of the consumer. If I buy software, I can download and use it to do something. If I learn something, I need to apply that. And application and doing the work is always an issue for people. Again, I’m a lifelong learner and love education and what we’re doing … just two different beasts. But it’s also the leanest thing we do and easiest to support and maintain … as we have one full-time person dedicated to it and bring in guest trainers from time to time.

Which is best for small business in my opinion? Most likely starting with software. It’s an easier sale.

Just my two pennies worth. :)

Clay (from LeadPlayer) November 15, 2012 at 4:50 pm

Corey! Thanks for sharing. Love what you’re doing at iThemes. Interestingly, we found that support took a lot more time with the info product business. We sold high-end information, along with coaching calls, forums, etc. So support wasn’t just about making sure folks could access the materials, it was also about supporting our customers with various aspects of execution.

–Clay

Alex B. (@DreamJobGuy) November 15, 2012 at 8:37 am

I don’t think there is any wrong answer here.. I think it comes down to what fits best in your business model, and what you’re most passionate about!

All the best,
-Alex

Clay (from LeadPlayer) November 15, 2012 at 10:02 am

Exactly! :-)

Josh November 15, 2012 at 2:39 pm

I have 1 question (and I know the answer will be conjecture).

Do you think you could have had a successful launch as a “software company” without your “teaching company” to build an audience, mailing list, and bank roll?

I understand that it certainly made it a MORE successful launch, but could you have gotten the WIN without it?

Thanks! Great interview!

Josh

Clay (from LeadPlayer) November 15, 2012 at 4:45 pm

Josh! Great question.

The teaching company didn’t build the audience. Our blog did. So a teaching company wasn’t required.

Also, the capital that we invested could have come from any source. Capital is a commodity in a lot of ways.

So I don’t think the teaching business was by any means required.

I’m not a huge fan of stepping stones . . . so I’d say if you want to do something, then just go and do it.

I hope this was helpful.

Warm regards,
Clay

Steve November 16, 2012 at 5:05 am

Around the 11 minute mark where Clay is talking about software being sold well by features as opposed to “marketing” was interesting to me.
In Marketing 101 we were looking at “types” of marketing management orientations.

Production Concept: people want available and highly affordable products; therefore we will concentrate on production and distribution efficiency.

Product Concept: Consumers want products with the most quality, performance and features; therefore we will concentrate on making continuous improvements.

Selling Concept: (the ‘bad’ one). Consumers won’t buy enough of our products unless we do large scale selling and promotions. Often practised especially by companies selling unsought goods (stuff you don’t wake up on a Saturday morning and think about buying, such as insurance). Too much focus on sales transactions than long term relationships. Focus on selling what the company makes rather than what the market wants.

Marketing Concept: The other way around to the selling concept. We start with determining the needs and wants of the target (niche) market and we deliver the desired satisfaction more effectively and efficiently than competitors.

So I think Clay was really relating software (at least from his perspective) as allowing you to have a “product concept” of markets, rather than (or at least more so) than a marketing concept (or the terrible “selling” concept). i.e. essentially you get to concentrate on making the product better and better over time, rather than worrying (so much) about the other stuff all the time.

I liked the sound of it, but there are still some cautions (not surprising, coming from a marketing text). I’m going to quote some bits, because I can’t say it any better.

“Some manufacturer’s believe that if they can build a better mousetrap (mobile phone, web application – my comment) the world will beat a path to their door. But they are often rudely shocked. Buyers may well be looking for a better solution to a mouse problem, but not necessarily a better mousetrap. The solution might be an electronic deterrent, an exterminating service, or something that works better than a mousetrap. Furthermore, a better mousetrap will not sell unless the manufacturer designs, packages and prices it attractively, places it in convenient distribution channels, brings it to the attention of people who need it, and convinces buyers that it is a better product.

The product concept can lead to ‘marketing myopia’. For instance, railway managers once thought that users wanted trains rather than transportation and overlooked the growing challenge of airlines, buses, trucks, and cars.”

So anyway – great interview and lots of food for thought. These are just the thoughts that went through my mind, particularly in relation to what was being talked about around the 11 minute mark.

Of course, Clay’s company obviously has a strong ‘marketing concept’ of knowing needs and wants of the target market and looking to deliver the ‘satisfactions’ better than competitors. Obviously in that market, with that need/desire…software (as the product) provides the solution. Sometimes, an e-book would be a better solution. Other times, a ‘done for you service’ would be the best solution. It all depends.
Off the top of my head – take weight loss for example. In some sub market: (perhaps the body builder going from 12% to 5% body fat) software may well be the best ‘satisfaction’. Keeping track of calories, micro as well as macro nutrients, carb cycling, work out stats are all key – so software here makes sense (don’t forget the iphone app!) In another sub market:(perhaps busy professionals with a good bit of weight to lose and no time or inclination to exercise) software might be as useless as the pedometer that’s now in the bottom of a draw somewhere. Here, the ready meal delivered (done for you service) may well be the best satisfaction. Finally, for a person who has a particular condition and needs to lose weight (perhaps diabetes, or they’ve just had gastric surgery), they might be more focused on ‘education’ – so perhaps an ebook, course and/or online community might provide the best satisfaction.

I’ll shut up now! Great interview – thanks guys!

Steve November 16, 2012 at 3:09 pm

I have a couple other thoughts to add.
The question was: “which business model is better for a small online business: selling education (information) or selling software?”

Depends on a mixture of skills, expertise, budget, passions, opportunities, business goals. i.e. It can’t be answered, except at the individual level.

BUT.

When you say small online businesses, I’m going to take that as meaning the typical solo entrepreneur, wanting to start a business online, probably not a lot of spare capital etc.
Within that group – I’m going to go ahead and say software *generally* is not going to be the best option.

But education / information products are not the only thing on the other side of the coin.
You might have a craft/trade and therefore you want to be creating a physical product (clothes, gift/home wares, woodwork, guitars, artwork)…and want to sell online to reach people in your niche all over the world. Not me, but there are many like that.

Someone else might have a skill they can apply, they know how to do something that not everyone can. Maybe they could come up with educational content. Or maybe they could turn what they know how to do into a ‘done for you’ service.

Thinking in that way has helped me in recent times to be able to see many opportunities available online. Sometimes educational (courses, ebooks etc)…..sometimes done for you service.

And there are other ideas too. You might be a real “socially gifted” person. So the other side of the coin for you could simply be starting some sort of “community” in that target market. Maybe it’s a forum, social group, members site. Maybe it’s just a podcast show that generates a community. You’re not the expert (educational products) and you’re not doing software or physical proucts. You facilitate community well. That can be gold!

Finally, think outside the square. Think about other people – even just the people you know, let alone finding other people online.

With the physical product creation:
You might know someone and help them get online as a partner in their business – and then do that again with someone else. That’s now your business.

With the educational product area:
Thinking outside the square, I’ve realised there are courses in several things that I could create, by partnering with every day people in my own (offline) circle. Real niche stuff. These people know how to do something and would never dream of creating a product out of what they know. If I can be that person, a product is born.

Service based:
There are services that I don’t necessarily want to provide (or perhaps can’t)…but I have at least one opportunity on my ideas list that involves creating a content based site and providing *lead generation* for someone else who provides a particular service. There’s no reason why affiliate marketing has to be digital downloads only! Oops! Make that 2 ideas. I forgot about another in another market.

I’m going to finish all this back to where we started….
Software:
Don’t forget there are lots of geeks about (my engineer brother for example) who know all the ins and outs of particular software etc. Sometimes those types would be great at making something but not getting it online, doing the marketing etc. If you’ve got that type of person in your life (perhaps even a friend of a friend)…you could get something going.

So, there’s lots of options to cover everyone!

But to the direct question itself, and with all the caveats yes – *generally* an educational product such as a course or ebook is going to be much easier and cheaper to actually put together than a software product – and so it is an ideal place to start looking at your ideas. Just don’t *only* look there!

Darlene November 16, 2012 at 1:44 pm

I think the answer is: it depends, and Clay even said that.

Me as an “expert” in photography, having NO background in coding or software would not have the first clue where to start building a software and he’s suggesting that I shouldn’t anyway.

But someone with coding experience and knowledge might be better suited to software than education.

In my field, teaching photography to beginners, I’m really not sure how I’d even add something in the field of software to be even remotely interesting to the market. Adobe pretty much has that covered. Why reinvent a wheel that works great. I also enjoy the teaching.

So I think it’s an individual thing. My husband with IT background might have other options.

Darlene November 16, 2012 at 1:47 pm

Clay, if you’re reading this can you answer a question about Lead Player?

I think David Siteman Garland is using it correct? I can tell because it has the same lack of controls that I see on the one above. To watch the video I actually went over to YouTube to be able to get controls to: see it bigger, change the volume. My earbuds don’t have volume control (no speakers at work) and it was like you guys are yellilng (same as DSG interviews but I’ve actually stopped watching his because it is just annoying I have no volume control and I can’t sit and hold my earbuds away from my head as I work).

So my question is, is that an option you set when you set up the player? To allow volume control and view full size to show?

Clay (from LeadPlayer) November 16, 2012 at 2:51 pm

Hi Darlene, do know how to turn down your system audio? Almost every keyboard has controls that allow you to turn down your audio. It’s very easy and takes seconds.

Very warm regards,
Clay

Halina Goldstein November 16, 2012 at 1:44 pm

Two of the people I admire the most in the entire online marketing space – big minds, big hearts – in one interview. Great!

I’ve been a fan of Clay’s work for a couple of years now and have been very curious about this shift. Really interesting and inspiring to learn about it.

And by the way, folks: LeadPlayer ROCKS! It’s super easy, it’s fun and inspiring and it creates results. My subsciption rates via LeadPlayer have been about 3 x the rates from my sidebar optin-box. And that was just using other people’s videos.

John Bardos - JetSetCitizen November 18, 2012 at 9:11 pm

In my view, selling information is a ‘job’ that requires lots of grinding to keep a steady flow of income. Selling software is a ‘business’ that can scale, be sold, or be self-running at a certain size.

Also, when you buy software you know what to expect. It will solve this problem for you and it only costs this much money. The value of an info product can only come from what you do with those ideas. Ideas are worthless unless acted upon.

Chris Langille December 8, 2012 at 2:00 pm

This article was right on time for me. I’m in the beginning stages of starting a education-based online business if I could only find a Thesis designer who is taking work right now.

I really think that education is a better model personally. The overhead cost is usually a lot less, and I feel like it has a longer shelf life than a “product” does.

Glad I found this site!

Will December 13, 2012 at 10:10 am

Loved the interview and particularly the hard-won wisdom provided by Clay. Thank you both!

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