Your Product is Bullshit and you’re Going to Fail if you Don’t Ask Users to Pay

pay

It’s true.

I’m sorry I have to be the one to tell you.

Most people don’t want to hurt your feelings.

They probably say something like, “It’s great that you’re getting a lot of signups! That sounds so cool! Congrats!”

They’re telling you what you want to hear, not what you need to hear.

I’m telling you the truth because I care. I want you to succeed, or at least fail faster.

What they really should ask you is simple:

“Are people paying for it?”

No?

Why not?

There are two kinds of companies:

1. The kind that has to make money by selling a product or service

2. The kind that can put out a free product and make money through ads, acquisitions, IPO’s or some other alternative means

The second one usually refers to media companies and massive networks like Twitter, Facebook, Instagram etc. If you’re the next Twitter, Techcrunch, Facebook or Instagram then kudos.

For the other 99.99999% of you who fall in the first group with the rest of us, if you haven’t asked your users to pay yet, then your startup is completely bullshit until you do.

If you EVER plan on charging for your product you have to ask for money NOW

You might say…

“We’re offering it for free now and we’ll start charging later.”

You’re full of it. You have ZERO idea whether or not people will actually pay for it later unless you ask them to pay for it now.

That means you could be spending all of your time and resourced building something that’s doomed to fail.

You might say…

“We’ll offer a premium version in the future we’re just building an audience by keeping it all free now.”

You’re full of it. You shouldn’t be focusing on building an audience until you know who’s willing to pay and why. You can find that out by asking for money now.

Only after you’ve figured out what you can actually sell should you build an audience or some freemium model around it.

If you believe your product will ever be worth paying for then you HAVE to start asking your users to pay today.

If you ask a user to pay, one of two things will happen

Ask someone to pay and there are only two possible outcomes:

1. They say yes and they pay you. Great, you might have a business…

2. They say no. Good, now you can say “cool, why not?” and learn what it will take to build a product worth paying for.

Worst case scenario, you ask 100 people to pay you and they say “eh” and leave. Oh well. You’re no worse off than you were before.

Did your users tell you that they think it’s worth paying for?

Well that’s just dandy but not enough.

Users telling you they’ll pay does not mean they’ll pay.

Ask them to take their card out and pay you now.

Then if they say no ask more questions. If they say “I just can’t afford it right now” or “I have to think about it”, dig deeper.

How much would you be able to afford?

What are you considering?

What would make this worth paying me right now?

Forcing them to be honest with you is the only way you can be honest with yourself.

You don’t even need a product

That’s right. Ask them to pay before you even have a product.

People don’t pay for products, they pay for what they believe a product to be.

Pretend you’re selling a book at a book store.

A person browsing the book store for an interesting new book will look at the titles and covers and read the blurbs to decide if it’s worth buying. Only after they buy one of the books do they actually get to read the story.

You can do the same thing. People aren’t buying your product, they’re buying the cover and the blurb so build that first.

You can very likely prove product market fit with just a sales page. Because until a user actually uses a product, what you tell them about your product IS your product.

Here’s how we’re experimenting with this now

In the past at Feast we’ve made the mistake of building some products before we really knew if people would be willing to pay for it. People SAID they would but we didn’t ask them for money for preorders. Then when we launched the product the response was lackluster and people weren’t paying.

For our newest product we built our sales page before we built our product and started selling preorders. And people paid! Now, at the very least, we know we have a concept worth paying for and we can build around that foundation.

We also have the advantage of bringing in a paying group of beta users to help us improve the product. Now we’re talking to them, learning from them and building a product around their needs.

It was simple:

1. We posted on facebook and emailed our networks to let them know about the new product. Here’s what I said exactly:

We’re building a new product for Feast.

A 30-day bootcamp that goes beyond teaching you how to cook and actually helps you turn it into a habit.

It’s for busy people who have always wanted to learn how to cook but haven’t made the commitment or “just can’t cook”. With this program, you will. Promise.

Want to be one of the first to try it out? Comment here if you’re interested in joining the discounted beta group and I’ll send you more info.

2. If they commented, I followed up and sent them a link to our sales page. Here’s exactly what I said:

Here’s the bootcamp and all the information about it (link used to be on secret page).

It’s still not public and we’re slowly opening up preorder spots for the beta run. We’re offering it for this small beta group for $50 (it will be closer to $79 when it’s public).

If it sounds cool and you want to get in there, just let me know and I’ll send you next steps.

Hit me up with any questions!

-Spinks

3. They’d respond and say “I’m in!” Then I say “Great! You can send the $50 by paypal to this address”.

That’s it.

And they paid! 56% of the people we messaged have already paid us for our product that we haven’t even finished building yet.

And now we’re working closely with them to learn as much as possible about who they are and how we can make this product perfect for them. We’re building a product for an audience that we know is willing to pay.

Is that percentage skewed because we reached out to people in our network? Of course. But they still paid us for a product. I’ll take that over 1000 free users any day.

If you’re building a premium product, then you should be listening to premium customers, not free users.

If you offer your beta version free, your feedback will be biased because what a free user wants may be very different from what a paying user wants.

Of course even if you validate and sell preorders, you might still fail. We’ve validated previous products in this manner, but later found it difficult to reach our sales goals on an ongoing basis for a number of reasons.

But at the most fundamental level, the only way to know that you have a product worth paying for is by asking users to pay for it.

Until you do, you’re only fooling yourself.

 

This post is part of the startup edition series.

Startup Edition is a curated gathering of bloggers in the startup community, sharing their wisdom and response to a single question each week.

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23 comments
Pompeysie
Pompeysie

Nice article. Straight to the point. No BS! A couple of points/thoughts:

1. The point you touch on about using your own network is important. I often refer to this as the Grandma Effect. You tell your Granny that you are doing X and, regardless of what it is, she'll tell you it is brilliant idea and that you are very clever (and give you some cake, if you are my Grandma!). Beware of asking friends and family about new ideas. Always ask your prospective target customer segment first. Running a Google Ad (as suggested by Ryan Jones) is a great way of doing this but running Google Ads correctly is also an art, so be careful!

2. I think you can go out to your potential market with an idea and get some validation without asking for cold hard cash. Agreed, there is no stronger indication that a person is interested in your innovation than them handing over their hard-earned pay but you can get some lower level validation, particularly to test your problem assumptions, without a financial transaction. Asking for feedback, for an email, for an indication that your idea is solving a problem for someone, can be really useful early on in the development of a new idea. This is particularly important if you don't have any previous experience or reputation to leverage with potential customers. If you are a complete newb without any evidence of a track record then people are really unlikely to give you any money. By developing a relationship with potential customers through mutual respect for an idea, without the need for them to incur financial risk, you can build trust with a market of early adopters, test your problem and solution, and then move on to the spiky question of money later. All of this can happen rapidly and at little cost.

Best

Simon

Saul Annett
Saul Annett

Great article. Comes as no surprise... I see a lot of startups who don't get out of the building and ask for anything, let alone money! Many great ideas go to waste this way, really frustrating!  

Like you mentioned, a lot of start-ups don't have the benefit of an existing following or sample to experiment with, so they need to get out and find one. Although many are brilliant at building products or ideas, they often lack the confidence at putting it, or themselves, out there... so they simply never 'get out of the building', at least not quickly enough!

Hard fact is, the majority fail, so you're better off failing quickly and getting onto the next idea. 

Fabrice Herpain
Fabrice Herpain

A great post!

Entrepreneurs (and clearly many in the startup funding community) are willing to take a leap of faith that if you have a sufficiently large user base, you will be able to convert enough of them to paying customers - somehow. So the thinking is that it is harder nowadays to amass a huge following of faithful customers than it is to come up with a business model that can generate revenue. It's a classic case of perception vs reality. You are perceived to be successful because you are grabbing lots of users (and there is no question that it is an accomplishment to do so). Reality is you may be far away from converting them to paying customers. But as always perception trumps reality, and our current business and cultural mindset supports that perception.

You also need to caveat that in most entrepreneur circles, acquisition or IPO is the end game. You won't raise much money if you don't make that your priority. That can open up an escape pod for the entrepreneur (and VC) of amassing a sufficient user base to be of interest to somebody else that will take on the responsibility of monetizing your customer base (or will buy you out to stop hemorrhaging paying customers to your free solution).

desduvauchelle
desduvauchelle

I think many paths lead to Rome...and it depends on what you are set out to do. 

Success can be measured in many different ways. I would be more than happy to be bought out by the bigs (Google, Dropbox,...) like Mailbox app did or many others. It's often faster cash than building a B2C or B2B model. It's great experience and great for your reputation. Or maybe you just want to make the world just a better place (Wikipedia, amongst others...).

Having said that, I do agree with what the article says. 

RyanJones1
RyanJones1

Good post. It's a generalization but as you pointed out, one that applies to 99.9999% of companies. You mentioned you 'posted on facebook and emailed our networks' - that proves that a fraction of your Facebook friends and network are willing to pay for the product but seems like a big sampling bias potentially leading to false positives. Why not spend $100 and run a Google ad (or an equivalent, low commitment marketing channel appropriate for your market/product) to validate the broader market's willingness to pay and even collect a bit of data on customer acquisition cost while you're at it (arguable as important as understanding whether or not the user is willing to pay for the product)?  Either way, your point is a good one. 

darnocks
darnocks

Good post but not always true. It depends on what growth strategy you have. 

Trello.com is a great counter example. They only set up a paid plan 1.5 years after launching, they have an awesome product and they have strong investor backing.

rufusdenne
rufusdenne

Really interesting article. I have found myself guilty of giving false feedback to friends when they've asked for advice on ideas - next time I will send them here! Interestingly, the model of 'get the money upfront' has been working for Kickstarter projects for a number of years, so it's unusual that it's not considered a more normal way of building a startup.

RishabhGupta
RishabhGupta

@DavidSpinks Awesome Post! Money Actually Matters if you're running a business. Thanks for sharing!

HeatherReyhan
HeatherReyhan

Great article David. 

I agree with your logic. I think too many people in the valley (and everywhere) get the mentality of "just getting a lot of users," while completely forgetting about monetization. People think of startups more of a community than a business. I do agree that the community approach (as discussed with Nadia) is nice because it works on the concept of developing a tribe of solid loyal customers, but I think you can't really test their loyalty unless you know their willingness to pay.

I really enjoyed this. I think there is too much of a blind cookie-cutter mentality toward user acquisition that can easily neglect to consider ROI. 

I also liked your bookstore/pre-selling a book approach. 

Keep on rocking.

-Heather

Noah
Noah

Nice article. 

DavidSpinks
DavidSpinks moderator

@Pompeysie thanks for the thoughtful response!

1. To respond to your first point, totally agree that it can be bias. I don't think it's bias to the extent of your grandma. In the end, you'd be surprised how even your friends aren't ready to just whip out their credit card for you. If people are paying, even if they're in your network, that's a really good next step. The problem with google analytics is it's hard to nail down the right audience right away and things can get expensive quickly.


2. On your second point, I actually disagree here and feel like this is the very problem that I hoped to address with this post. It doesn't matter if you don't have a reputation, people aren't paying for who you are or for what your product actually is. They're paying for what you tell them the product is. And you can convey trust in other ways on a sales page. If you just ask for an email and feedback, you'll be no closer to truly knowing whether or not people are willing to pay for the product.

Asking for money is indeed a spiky question, but it's the only one that will give you the only answer you need at the early stages of building a startup.

DavidSpinks
DavidSpinks moderator

@Saul Annett spot on. Since you know that most of your ideas are probably going to fail, you should accept that fact and figure out how you can validate or invalidate as many as possible until you find one that clicks. You can do that by asking people to pay.

DavidSpinks
DavidSpinks moderator

@Fabrice Herpain of course, raising money and shooting for an IPO or acquisition is certainly another way to do it. I think you're spot on about the perception vs reality point. I think that IPO'ing or getting acquired is MUCH harder than perceived.

DavidSpinks
DavidSpinks moderator

@RyanJones1 That's what we're doing now, testing with a broader market. I'll let you know how it goes (=

Joshua Dance
Joshua Dance

@darnocks Trello is not a normal product or company. Fog Creek has an established business and tons of revenue via FogBugz and Stackoverflow.com. And Joel is something of a famous programmer. They can release a free product because the have other products making them money. Most do not have this luxury. 

DavidSpinks
DavidSpinks moderator

@darnocks fair. There are always exceptions. 

While Trello seems to have done a good job of it, I'd be skeptical of any company that told me, "we're going to get 100 million users and THEN monetize". Trello could have easily gotten to that point and then realized that there was no market for a premium version of their product. They're charging now, is working well? I don't know. Seems like it but we never really know. 

So yes, it's a good exception to the rule but not an example I'd follow.

UserAbility
UserAbility

@darnocks yes, always true. 

Trello is not an example - it's a loss leader into Fog Creek Software's entire collection of services and goods. An internal tool the released to be recognized. They started charging for their main products the second they opened for business. That's why they are a business.

"In 2005, a team of four summer interns built the first version of Fog Creek Copilot from start to finish. By the end of the summer it had paying customers." http://www.fogcreek.com/about/

DavidSpinks
DavidSpinks moderator

@rufusdenne I think it's because people also see companies like facebook and twitter succeed and apply that mentality to their own products. The problem is, they're probably not building a product for hundreds of millions of users and they probably need to sell a product (not eyeballs) in order to succeed.

DavidSpinks
DavidSpinks moderator

@HeatherReyhan Thanks heather. It does seem to be a mentality prevalent in the valley, along with the routine of raising money before truly validating. Hopefully that will change.

darnocks
darnocks

@UserAbility @darnocks @DavidSpinks  I still not think this is always true. I agree with this article to a great extent in thinking that a tool/solution should solve a pain big enough that users would pay for it BUT I still think there are many counter examples.

Am I naïve in citing any.do , evernote, youtube (at the start), mailbox app, Skype, Spotify, instagram, Whatsapp, LinkedIn, Feedly, WeChat, pocket, Asana (money came from bigger companies), .... all these companies have a model that starts free and then added a premium. Opening you tool for free in the beginning is a great way to perfect it. Users pay in user feedback and in the larger metrics you receive in the early stages of growth.

It all depends on your exit strategy. Getting bought by a larger company can be your exit strategy.


DavidSpinks
DavidSpinks moderator

@darnocks @UserAbility

In the post, I clarify that there are different kinds of companies and that this article does not apply to the kind that can put out a free product and make money through ads, acquisitions, IPO’s or some other alternative means.

I am specifically talking about companies that aim to sell a product.

I'm also not saying that a company shouldn't build a massive free customer base. If they can do that great. My recommendation is to validate that there is a demand for the premium version BEFORE doing that so that you know you're putting your time into building a free audience that will pay down the line. Otherwise you could waste a lot of time and money building a free audience that never had any chance of paying.

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