mfieldhouse

“… The majority of the revenues for our products come from people who sign up for the paid versions upfront. So we definitely have people upgrading from free to paid, but the majority of people who are on pay started on pay... of course, more people are going to pick the free version and stay on the free version, but if you’re looking to get paying customers, ask for money upfront and you’ll have a lot better shot of getting them.”

- Mixergy Interview @ 6 minutes

Here's a thought experiment for a hypothetical business which would be based in the UK and sell to customers in the UK only. What are the problems that would prevent it from working or being simple.

According to the AA, the average car insurance for 17-22 year olds on Oct 2011 was £2342.

The idea is to create a car insurance business which has a flat rate yearly insurance fee of only £600 for under 23 year olds with 1.4 liter engine car and under.

First year get 500,000 customers at £600 each. That's 300 million. 5% of them make a claim with average cost £5000, that's 25,000 times 5000 which is 125 million. Plus another 10 million for that year for misc fees and total costs are 130 million. You've made 170 million. Close the business down after the first year and go buy your own island somewhere?

If someone could give a US perspective on it, that would be good too.

They have the skills and a good idea of what people are prepared to pay for so why do they continue to build bespoke software instead of creating a startup?