VMS Co's

How sticky is sticky?

How sticky is sticky?

Great VMSCo’s are often referred to as having ‘sticky’ products. Sticky in the sense that customers don’t want to (or can’t) stop using the product and hence keep paying recurring fees to the vendor. Sticky products keep customer attrition low and recurring revenue streams high, which ultimately leads to greater business value. So what makes a VMSCo product sticky? How sticky can software really be? How can VMSCo’s make their products stickier? Procurement Let’s start with ho

How to Create Shareholder Value in Vertical Market Software Companies

How to Create Shareholder Value in Vertical Market Software Companies

This post may seem a bit controversial if you're an entrepreneur who built your business organically, from the ground up, but when I think about value creation in VMSCo’s, a well known quote from Jim Collin’s book “Good to Great” comes to mind. “When you turn over rocks and look down at the squiggly things underneath, you can either put the rock down, or you can say, ‘My job is to look at the squiggly things,’ even if what you see can scare the hell out of you.” - Fred Purdu

The Top 10 Tips for Vertical Market Software Investing

The Top 10 Tips for Vertical Market Software Investing

1. Don’t over pay. The single most important factor in driving returns in VMSCo investing is seemingly obvious; it’s purchase price. However, it’s amazing how few investors have the discipline to wait for and execute a transaction at a purchase price that gives them a chance at favourable returns. Since VMSCo’s rarely grow rapidly due to the dynamics of their respective vertical market, it’s even more important to minimize the cash outlay (and risk) up front. Good VMSCo’s ar