Most small business owners love a good deal — and free software can seem like the best deal of all. Who wouldn’t want to save money on tools that promise to help you run, market, or grow your business?
But there’s a famous saying that every business owner should take seriously: “If you’re not paying for the product, you are the product.”
It sounds a bit cynical, but it’s worth unpacking. Because behind many “free” tools and apps are business models that rely on something more valuable than cash — your data, your time, and your attention.
What the saying really means
When you use a service without paying for it, the company has to make money in other ways. Usually, that means collecting data about you and using it for advertising or analytics.
Facebook is the most well-known example. It doesn’t charge users, but it generates almost all of its revenue from ads targeted using the vast amount of data people share on the platform.
This same model is now common across all kinds of digital tools — from email platforms to mobile apps. They may be “free”, but you’re often trading access for insight into your habits, preferences, and even your customers’ information.
So before you sign up for that new free CRM or social media scheduler, it’s worth asking: “”if I’m not paying for it, what am I giving instead?”
Why free software can be great for small businesses
Let’s be fair — free software has real benefits, especially when you’re just starting out or running on a tight budget.
- It saves money: You can try out new tools without paying upfront, which helps you experiment and find what works before committing to a subscription.
- It lowers the barriers to entry: Free tools let you test marketing campaigns, set up websites, and manage customers quickly — all without waiting for budget approvals.
- It keeps you agile: Free cloud-based services are often easy to set up and don’t require expensive infrastructure, so you can move fast.
- It encourages innovation: Many free platforms are built by large tech companies or open-source communities, giving you access to powerful technology that would otherwise be out of reach.
In short, free tools can help small businesses punch above their weight — if used wisely.
But there’s no such thing as a free lunch
Of course, free software also comes with a few strings attached. Here are the key risks to watch out for.
You might lose control of your data
Many free platforms make money from user data — by selling insights, sharing it with partners, or using it to target ads. That can create privacy risks, especially if you handle customer information.
It might cost you later
Free versions often come with limits — like capped storage, restricted features, or watermarks — designed to push you towards paid upgrades. Migrating your data later can be costly and time-consuming.
There’s usually no guaranteed support
When something breaks, you might only have access to community forums rather than real customer service. That’s fine for side tools, but risky for anything business-critical.
Reliability isn’t always guaranteed
Free services can change terms, introduce fees, or shut down entirely with little notice. Google has famously discontinued several free products, leaving businesses scrambling for replacements.
It can affect your brand and compliance
If a free tool suffers a data breach or doesn’t comply with privacy laws, your business could be held responsible — not the vendor.
As economist Timothy Taylor wrote, this model works because companies aren’t really selling your attention — they’re “selling access to you”.
Finding the right balance
So, should small businesses avoid free software altogether? Not necessarily. The key is to use it with a clear understanding of the trade-offs.
Here are a few different approaches:
The cautious adopter: You use free tools but read the fine print carefully, back up your data, and plan an exit strategy in case the service changes.
The hybrid user: You start with free tools to get going but shift to paid plans once the business grows or data security becomes more important.
The selective spender: You’ll pay for anything that affects your reputation or operations — like invoicing, customer data, or security — and use free options for less critical tasks.
The privacy-first operator: You avoid free tools that rely on ads or tracking and instead choose transparent, open-source alternatives where you can see exactly what’s happening under the hood.
Technology writer Ramez Naam points out that even when you do pay for software, you can still be part of the product if your data is used for profiling or marketing . The key is transparency — knowing what you’re getting and what you’re giving in return.
How to choose wisely
When you’re evaluating a free tool for your business, ask yourself:
- Who pays for it? If you’re not, how does the company make money?
- What happens to my data? Can you export or delete it easily?
- Is it secure? Does it comply with Australian privacy standards and use encryption?
- What’s my backup plan? If the service shuts down or adds fees, how easily can you switch?
- Is it critical or nice-to-have? Use paid, trusted software for anything central to your business — like customer management or finance — and keep free tools for experimentation or minor tasks.
Being smart about free software doesn’t mean avoiding it — it means going in with eyes open.
The takeaway
The saying “If you don’t pay for the product, you are the product” isn’t a scare tactic — it’s a reminder to look beyond the “free” label and understand what’s really being exchanged.
Free software can absolutely help small businesses grow, innovate, and stay competitive. But it’s only truly valuable when you know the trade-offs and make informed decisions about how — and where — to use it.
In the end, paying with money is often simpler than paying with your data, your time, or your peace of mind.