Michelle Rodger: There can be such a thing as a free lunch

Published on Saturday 24 April 2010 14:30

WHO should pay for your products and services? When will they pay? And how much? All basic questions that must be answered by businesses. But what if the answers were "no one", "never" and "nothing"?

Have you considered "free" as a business model yet? You might not remember but I predicted in my New Year column that earning money in a different way would become an exciting trend.

Since then, I've come across myriad examples of businesses making money by giving away their products, services or expertise.

A free business model is when you don't charge directly for a product, service or content, but monetise other things that make those products, services or content much more valuable.

There have always been people who are happy to share their knowledge and experiences, whether via mentoring or talking to start-up businesses.

But the advent of social media such as Twitter and the concept of online crowd sourcing means knowledge sharing has become a new paradigm for entrepreneurs to explore. Post a question? Get an answer, get dozens of answers, with links to websites and information sources to support the answer.

The concept of free as a business model was highlighted by the editor of Wired magazine, Chris Anderson, in a book called – funnily enough – Free. There are a number of exciting global examples of how free can work successfully – although not necessarily profitably – just look at Wikipedia, Twitter and Google.

But small companies can learn from the global big boys, and there are some amazing examples coming to the fore in Scotland.

What about giving a whole day's free work, by everyone in the company? Or giving away 1,000 free burritos in a day. Or giving your product/service absolutely free?

Tex Mex restaurant Illegal Jack's in Edinburgh hit the social media headlines last week when it launched Jack's Free Burrito Day. Organised by manager Iga Gralewska, the newly opened restaurant gave away 1,000 burritos and within hours it was a trending topic on Twitter.

Of course those kinds of offers are not sustainable, says Gralewska, but it's a great way of introducing yourself and letting people try out a relatively new food.

Free has long been considered a bad word in the world of design. Bad, according to Gary Ennis, because the industry associates it with speculative design work and the concept of undervaluing your creative efforts and expertise.

But the founder of Glasgow-based NSDesign insists free isn't always bad, indeed it provides a real lead into more lucrative paid work. Ennis and his team regularly do free workshops and seminars and for the past two years have dedicated an entire day to working for free. The first attempt, in 2008, generated thousands of pounds in income for the company, and made the decision to repeat the process again in December 2009 a no-brainer.

Part of it is about educating people about what the firm does, says Ennis, and explaining why customers want to use its services more. "It's no different to what we do on a regular basis, albeit highly focused into one day of this and nothing else. And it's free."

Some might argue it's a tactic rather than a business model. But the experience of Kevin O'Neil and his online video business proves demonstrably otherwise.

Moviecom.tv is the brainchild of O'Neil. It's like YouTube for business and is not only free, but profitable. Generating just shy of 1m turnover in the beta phase of the business, Moviecom.tv proved the concept of online TV in the business community. Last year when O'Neil switched the model to free, the number of clients jumped from 64 to more than 300 in six months. Revenue streams now come from advertising and the gathering of scale.

You'd think selling something for free would be an easy sell. Not so. The challenge is that businessmen and women are naturally suspicious of anything branded as free, so it's not always the easiest route to growth.

"There has been such negative energy in the Scottish market, companies and our peer groups are conditioned to think there's got to be a catch and believe you get nothing for free in this world," explains O'Neil.

It's been his biggest challenge to date, but more recently, with the explosion of social media, viral loops and online communities, it's getting easier.

"Companies are finally beginning to warm to the idea that you can be generating profit from other avenues, rather than direct sales or services," he says.

Free business models may take longer to develop, says O'Neil, but he believes commitment, creativity and confidence can unlock vast profit

Could your business survive and indeed thrive in a free economy? Is it for you? Perhaps not, but I suggest you don't knock it until you've tried it.