Generate early revenues

  • 10 minutes

At this point, you've validated your core business model assumptions with customers. You've built a product or at least a minimal viable product (MVP) that can be monetized. You've also selected a revenue model. Now, you're in a position to start generating revenues.

Ask yourself a crucial question: To whom should I try to sell my product? Keep in mind that your customer might not be the same person as your user, especially if your startup is B2B.

Focus on user happiness

Here's a thought experiment: Think about all possible users for your product and imagine their level of satisfaction with your product on a continuum.

At one end of this continuum are users who find the product useful enough that they're willing to use it and pay for it. They know that it might not be exactly what they need. Because it goes some way toward solving a problem for them, they can see value in it. We can think of this group as your good enough customer.

At the other end of the continuum are users who derive immense value from your product because it's exactly what they need. It solves a painful problem, and does it comprehensively. It delivers value that they haven't been able to unlock in any other way. After they start to use your product, they can't imagine ever doing without it. We can think of this group as your ideal first customer.

It's tempting to take the view that any sale is a good sale. You might think your aim is to capture as many customers as possible and span the entire continuum of satisfaction. Revenue is revenue, right?

Generally, it's best to focus on the ideal first customer. This user is the one for whom your product is a good fit. You want to make them happy with your product before you broaden your reach to a wider group of users. You do so even if you make a small number of sales initially.

The benefit of targeting this group of users first is that they'll be evangelists for your product. They'll recommend it to others in their networks. They'll talk about it on social media. As a result, you'll get great reviews and five-star ratings. Your customer lifetime value (LTV) will be high because these customers are "sticky." They're likely to continue using and paying for your product. Your cost of acquiring new customers will be driven down because referral is the cheapest form of customer acquisition.

In contrast, by trying to target the entire continuum, you'll inevitably pick up customers who won't like your product. It won't comprehensively solve a problem for them. They won't be advocates for your product, and won't bring other customers via referral. You'll get a range of reviews, some of which will be lukewarm or negative. You'll also have to provide ongoing customer support to a growing number of dissatisfied customers. Dealing with this customer segment will drain resources from your team and could negatively affect team morale. Worse, it could create a lasting suboptimal impression of your brand at a time when you're working to complete product development and establish your company as a new entrant in the market.

From a financial perspective, even though you might've generated more upfront revenue, you'll have a lower customer retention rate. You'll also have a lower customer LTV. Ultimately, your cost of customer acquisition will be higher. You'll have to rely on paid channels to reach new customers and counteract the effects of negative reviews by your existing users.

A good rule of thumb in the early days of your startup is to focus on selling only to those users who you believe will love your product. Don't try to sell to a larger number of users who will merely like your product.

Chart that shows the relationship between satisfaction and the number of users.

As you refine your product, add features, and improve the onboarding process, you can broaden your focus to include users who were marginal at the outset.

You can see this approach in practice by studying successful companies. You can observe which customer segment they focused on in the beginning and how they broadened this focus over time.

Example

Let's take Calendly as an example. The company started out focusing on power users who needed to schedule many meetings. At the time, these users relied on sending emails back and forth to find a time that suited all parties. By making scheduling a simpler task for these users, Calendly became an indispensable tool that saved time and reduced frustration for meeting organizers.

These users regularly included a Calendly link in their emails. By demonstrating their reliance on Calendly, they convinced many new users to try the product. This type of practical endorsement contributed to Calendly's viral growth.

Over time, Calendly added features such as payment gateways for paid consultations, SMS notifications, website embeds, custom branding, and polls for multi-person meetings. In parallel, the company broadened its marketing and customer-acquisition efforts to attract a wider group of users. It continued to be mindful of the importance of focusing on user happiness.

Early adopters

Early adopters are willing to use and pay for your product before anyone else will. They'll do so even when it's incomplete, buggy, and unstable. Often, early adopters of your product are also early adopters of many other products. They tend to have an inclination to try new things.

Here are other common attributes of early adopters:

  • They experience customer pain more acutely than anyone else.
  • They're willing to take the risk of trying and paying for a new and unproven product. They'll persist even if it's imperfect.
  • They relish the opportunity to try new products before anyone else.
  • They're happy to give you candid feedback and genuinely want you to succeed.
  • They're likely to have experimented with alternatives. They might've created makeshift solutions themselves, such as a spreadsheet or a database.

Tip

When you conduct customer interviews, ask whether the person will try your product before it launches and give you some feedback. If they say yes, you can tag them as a potential early adopter.

Early adopters aren't the same as ideal target customers. Often there's a significant overlap between these two groups.

Venn diagram that shows two spheres. One is for early adopters and one is for ideal first customers. The spheres have significant overlap.

Early adopters are the users who are willing to try your product before anyone else. Ideal first customers are the people you most want to try your product before anyone else.

You can combine the attributes of your ideal first customer and early adopters to create a persona. This persona represents the users who are a good fit for your product (ideal first customers) and the users who are likely to try it after your initial go-to-market (early adopters).

Tip

The time that you invest in creating an ideal customer persona helps you to define this target user.

Consider other factors when you decide which users to target first:

  • Is this person well known in their sector or recognized as a thought leader? Would their use of your product influence others to do the same?
  • Would they be willing to provide a customer testimonial or a short video?
  • Do they have a large following on social media?
  • If the customer is a business, is it a trusted brand? Will it confer credibility when listed as a reference customer on your website and in your marketing materials?

Find and convert early customers

If you've done some customer interviews, it's likely you've built a list of prospects who are interested in your product. Even better, if you've had a live landing page and have run experiments such as a mock sale, concierge, or Wizard of Oz, you might have a substantial mailing list. You might also have information that can help you categorize prospects based on their tendency to be an ideal first customer or an early adopter.

Some startups can grow with zero-touch sales, even in the early days. But most startups benefit from having the founders engage directly with early customers and close the first 50 to 100 sales in person.

This approach might seem inefficient and manual, but it's highly beneficial. It allows founders to acquire a deep understanding of their customers' needs. They also hone their ability to communicate the value proposition and address any common objections.

Pursuing a direct sales approach at the outset allows you to describe your company and product on your website and in marketing materials in a way that resonates with your ideal target customer. This true-to-life description improves conversions after you start to automate customer acquisition.

If you don't have a list of potential customers, there are many ways you can find and convert early customers. Here are some examples:

  • Post on Product Hunt and ask everyone you know to upvote your product.
  • Join or create a LinkedIn group for people who represent your target customer. Use it to post relevant content and respond to questions. Establish yourself as a voice of authority and encourage members to try your product. Don't spam the group.
  • Post to relevant communities on Reddit or other social networks that make sense for your product and your target audience.
  • Talk about your product launch, and more generally about the problem space, on Clubhouse and Twitter Spaces.
  • Experiment with different customer-acquisition channels. Try paid ones like search ads and social ads, and unpaid channels like social media and content marketing. By tracking uptake data and conversion metrics, you can identify channels that work, then focus on them.
  • Have a short pre-qualification form on your website for potential customers. Ask a few key questions aimed at identifying whether they fit your ideal-first-customer persona.
  • Email or call people you know and ask them to refer you to five people they think could be a potential customer. Give them a discount code they can pass on to people in their network.
  • Go to relevant conferences and exhibitions either in person or online. Talk to people who represent your target customer. Get a speaking spot if you can.
  • Talk to every customer who signs up or buys your product. Try to understand how they're using the product and whether they're satisfied. Aim to learn more about what customers need, and at the same time minimize churn. If they love your product, ask them to refer you to people in their network who they think would also benefit from it.
  • Incentivize users to share your product with others via an affiliate or referral program.

Tips for founders without a sales background

It's common for founders who haven't worked in a sales role to struggle with establishing a strong sales ethos and sales processes. This situation is especially true in B2B companies that need to engage in some form of direct sales on an ongoing basis.

Often, founders who lack sales experience will lean toward hiring someone to take care of sales early in the life of the company. Generally, this strategy isn't a productive one. Founders have a better understanding of the problem and the product than anyone else. They have more passion for the problem than a salaried sales executive. They're best placed to evangelize their product with customers.

Founders also need to continue learning about what customers need. The best way to learn is to engage directly with them in a sales context.

Here are some tips to help founders overcome a lack of sales experience:

  • To make a sale directly with a customer, you have to ask them for money. If you find this question uncomfortable, recognize it as early as possible. Sales coaching or discussions with other founders who have a strong sales background can help you overcome your reluctance.
  • Be prepared to hear "no" a lot. Be willing to persist with sales calls even if you get a low conversion rate. You shouldn't think of not closing a sale as a failure. It's an opportunity to learn which types of customers are high-quality versus low-quality prospects. It's also a chance to better express your proposition and overcome common objections.
  • Learn about sales pipelines. Create a basic pipeline by using one of the many free or low-cost sales and CRM tools available.
  • Automate and document sales processes and gather any required collateral. Then, when you do start to build a sales team, those employees can quickly get up to speed and be effective.