WordPress plugin businesses are incredible.

I’ve seen developers code a plugin over a week, launch on the WordPress Plugin Directory for free, create a premium version, and a few months later, have a thriving business making a sizable income.

These “mini tech startups” amaze me. So I decided to analyze them a bit and see just why they are the perfect business to launch…and then tell you why it may not be that easy.

1. They Are Lean Startups

Eric Ries coined the term “Lean Startup”, borrowed from principles of lean manufacturing.

In short, it is a set of principles whereby a company launches their offering early as a Minimum Viable Product (MVP). As the name describes, it is a first iteration that is just good enough for users to use.

The business is then able to see the markets reaction and keep moving forward, or pivot. Allowing them to iterate and validate ideas as quickly as possible.

The opposite of this would be to spend months, even years, building a product. And when launched, finding that the market just doesn’t want it. WordPress plugin businesses epitomize the concepts of lean startups.

A number of plugins started as an MVP. A developer usually has an idea for a plugin and will offer it for free on the WordPress Plugin Directory. Users start using it and begin offering feedback. The developer then starts improving upon the original plugin. At some point, they decide to launch a paid, premium version, and continue to improve.

Very quickly, these developers are able to get their product to market, validate it, get market feedback, and improve upon it. Sometimes this is all done in a week. Very few other businesses can move that quickly.

2.They Utilize Recurring Revenue

Most plugin developers have learned the importance of recurring revenue.

Take a look at almost any plugin pricing, and you’ll see some form of recurring revenue. It usually comes in monthly or yearly payments for continued support and access to updates.

Recurring revenue is incredibly efficient for two reasons:

1) It makes a user more likely to purchase. $10 a month is much more appealing than $120 one time payment. On top of that, a user can cancel any month. So they are only paying for what they are using.

2) The developer can make much more money. Using the example before, that $10 purchase is more appealing than the $120 one time. However, if that customer stays for 2 years, their lifetime value is $240.

Both parties benefit from this kind of relationship.

3. They Are Easy To Scale

Unlike most businesses, plugin companies are much easier to scale.

Once you have developed the core software, any additional sales have almost no additional costs. Whether you sell only 10 plugins, or 10,000, the cost is basically the same.

As a business like that grows, it usually does require some additional help, such as someone to answer the additional support requests, or take care of the administrative duties, but I’ve seen businesses with huge revenue numbers that have a team of less than 5.

When you scale almost any other business, it has much more costs involved.

4. They Have A Built-in Marketing Platform

Plugin businesses can grow with almost no traditional marketing or advertising, thanks again to the WordPress Plugin Directory.

As I mentioned earlier, most plugins started out free in the directory, or at least offer a free counterpart. For instance, you have WP Migrate DB Pro, and its free version, WP Migrate DB.

In the directory, any WordPress user can easily find your plugin, either through the search in the backend of WordPress, through the Plugin Directory, or just Googling.

As the plugin gets installed more and more, it moves higher on the list, which gets more installs, and move it higher still, and on and on.

But, the really ingenious part here is that within these free plugins, the developers include links to their paid versions. It’s essentially free marketing. And to help entice new customers, the developers will include special discounts. For instance, install WP Migrate DB and you’ll see a link for a 20% off coupon (as of this writing).

It’s not the exact same, but it reminds me of how Hotmail used viral marketing to grow.

5. They Can Expand Beyond WordPress

It’s all good and great to build a WordPress plugin. But it is a limited market: once you reach every WordPress user, there is nowhere to go, but, lots of plugin developers have found a way around this.

They’ve turned what was a WordPress plugin into a SaaS (software as a service) model instead that is platform agnostic.

A great example is OptinMonster. It started out as a WordPress plugin. But then expanded into its own software that can be installed on any website. It went from dominating the WordPress niche, into a much larger market.

These mini tech startups can now continue their high growth paths.

Things To Consider Before Starting A Plugin Business

While I’m hoping it may inspire you to develop your own plugin and build your own plugin empire, there are some accompanying words of caution.

The first step is coming up with a really unique idea. People will only use your plugin if it solves a problem they have. And they will only pay for it if it solves a problem they are willing to pay for. If it’s not, it’s not worth developing.

The next big thing is whether or not you know how to code. You can certainly learn how to code, or partner with a developer who is familiar with coding, or perhaps even hire a development team. But be prepared: no matter which option you choose, it is not an easy process.

And finally, be prepared to put in a lot of time at the beginning. The reason they are easy to scale is because of all the upfront work that is put in. Every developer I talked to told me how much time they spent building and refining their plugin as a free offering. They sometimes went months, some even years, before they saw their first dollar.

Do you think mini tech startups are as awesome as I do? Or do you have a different opinion? Let me know in the comments below. I’d especially like to hear from all the plugin developers out there on their opinion of plugin businesses.

Brandon Yanofsky is a WordPress developer and entrepreneur. You can read more of his WordPress tips and tricks on his site myWPexpert.com, or check out his WordPress maintenance service at WPRadius.com.

The post 5 Reasons To Start A Plugin Business appeared first on Torque.

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