There are many different succesful business models for Free Software and Open Source software. Wikipedia even has a long article devoted to the subject.
I am not going to reproduce that long WikiPedia article here, but rather focus on one of these business models - Selling professional services - with a bit more detail that what is provided by Wikipedia.
The problem for many small software companies is to actually get anyone to look at their amazing software. If the brand is not well not known, or the software not generally acknowledged as "amazing", it may be real hard to get a customer to look at it. If the customer has to pay up-front to have a look, that hurdle is even bigger. Even if it is free, but crippled (free only for thirty days, etc.), many prospective customers will not bother. Their time is valuable, too valuable to spend on crippleware. Also, if your company is small, your customer cannot be sure you survive. If they pay good money for closed source software, and the company behind it implodes, there will be no more support and no more releases. This renders most software useless after some time.
Free software addresses all these concerns:
- They can try it out for free.
- It will not stop working after some trial key expires.
- If your company implodes, they're not left high and dry. Since have the source code, and they get always get somebody else to support and maintain it.
However, so far I've only pointed out the advantages of free software for the customer. You, the author, haven't seen any money yet.
What may happen if you do this, if your software truly is good and generally useful, is that you'll see thousands of downloads. Most of those will indeed use the software for free, and never earn you a penny.
However, you have users (hopefully thousands), and some of these users will want professional services. That this:
- they will be willing to pay you an annual support fee, in return for you supporting them (hot-line for user questions, first priority bug-fixes, etc.)
- they will be willing to pay you for specific customizations that address specific use cases
- they will be willing to pay consulting and custom development, where you adapt and integrate your free software to their specific ICT infrastructure
The business model for professional services is not unique to free software. This is the usually a profitable business model for proprietary software.
However, if you're a small software company, you may never see your software used by anyone if you go the proprietary route. There are too many barriers between you and any users. With free software, you may get thousands of users, and if only a fraction of those sign up for professional services, you still will have a healthy business.