My previous startup had a sales cycle problem. We sold an enterprise product targeted at agencies and big consumer brands, and — while we could clearly articulate benefits — we could only point to an opaque, fuzzy ROI for the buyer during the sales process. As a result, our sales cycle could stretch for months (including *delightful* hurdles like vendor approval and procurement negotiations that consumer web startups should thank their lucky stars they never have to deal with).
“Never again,” I said to myself, and I set a goal: my next product would have a two week sales cycle. If I couldn’t get a user to convert from free to paid in fourteen days I’d move on and test if retention emails and down-the-road product upgrade notices would entice them back.
I released BuzzFork in beta on July 31st. Today is September 18, and my latest glance at my Stripe dashboard shows it’s profitable (gross and operating; I value my time and personal SG&A across different companies and projects so net could be debatable).
I’m not writing this article to gloat — there are lots of companies deservedly making a lot more money than me. Nor am I offering this as a one-size-fits-all profitability panacea — different business models and different aspirations should have different profitability timelines and monetization approaches. My product is also somewhat narrow — at its core it’s really a growth-hacker SaaS tool, not a mainstream web app (although ironically my teacher Mom uses it and loves it. Go figure). In fact, for me, focusing on monetization has been pretty creativity-limiting in terms of aspirational “mission” or “vision” (less so on the creativity that can be applied to new product features). Is my startup making the world a better place or pushing the boundaries of innovation? Not really, although I do enjoy the fact that its helping some other really amazing startups and small businesses get noticed, natively cut through social media noise and start some great new conversations.
I don’t see myself as the foremost expert on revenue model, new customer acquisition, scalable engineering, or any of a host of other disciplines, so instead I’m writing this with the hope that a few people find this informative and/or inspiring. With that said, here are some lessons and guiding principles that got my startup profitable in six weeks.
1. Develop a razor-sharp, one-sentence benefit statement of how you create value for your users/customers.
I got to hear my old high-school classmate Dustin Dolginow (now at Atlas Ventures) give a great talk earlier this year about strategies for fundraising on Angelist. One of the most insightful things he shared during his talk was that startups are often detail-oriented to a fault—constantly stressing about metrics, features, competitors, user acquisition—often at the risk of value clarity. Customers buy benefits, not features, and being able to say in five or six words “this is how my product makes your life better” has more sales cycle power than product aesthetics (for aesthetics’ sake), “robust” features or that Techcrunch writeup your company got. [To finish the thought one of Dustin’s key lessons was how critical it is for startups on Angelist to focus and iterate on optimizing their tagline and company description paragraph to communicate their core benefit in a way that’s simple, aspirational and non-technical.]
2. Once you have an MVP that delivers benefits consistent with your value statement, test market willingness-to-pay immediately
I really respect tech companies like Quora, Tumblr and Pinterest (or Medium for that matter) that made scaling a community with a wonderful user experience their #1 priority, comfortable knowing once they had that trophy on the shelf monetization could always be tested and turned on. Maybe if I had two million dollars in VC cushion I’d think that way too. I didn’t, so I focused on a product I could sell and in true Mark Suster spirit started charging for my shitty, flawed beta right out the gate to see if people would pay for it. Some of the traffic generation and early customer acquisition tests I ran I’ve documented here.
In terms of hypothesis-testing whether you’ve got something people want to use I’ve found this early feedback loop critical. Moreover, where I found this approach particularly valuable is that it doubles as an incentive for customer outreach conversations. For example, out of my first 100 users, I got about a 10% conversion rate from free trial to paid. However, when I looked through my data I saw at least 40 other users got great results during their free trial but didn’t come back after their trial expired. In response, I wrote all 40 an email. I personalized each one, but my basic template was something like this:
Subject line: Thoughts on BuzzFork?
Hi {{ Name of user }},
Hope you’re having a great day. I noticed you signed up for BuzzFork {{ last week/month }}, your trial period expired and you haven’t chosen to renew.
Did you find BuzzFork easy and helpful to use? Over your 7 day trial period {{ these awesome quantified results happened }} , which would be {{ awesomer monthly quantified run rate results }} if you stayed on with us.
If you don’t think that’s a great value, I’d love to hear why not and how we can make BuzzFork better. Also, as a reminder, you can redeem {{ promotional offer which makes signing up even a better deal }} by {{ deadline for redemption date }}.
Thanks again.
best,
Chris
Not only did this increase my conversion rate, it provided some really insightful price discovery research for me, starting multiple conversations where I’d get feedback like “well I don’t want to pay your $X, but your product feels like it’s worth $Y a month.” Even if you’ve priced your product very mathematically like I did, every early-stage startup founder owes it to him/herself (and their customers) to go through this process. Just because your customer says “I want to pay $Y,” doesn’t mean you should change your $X, particularly if there’s a clear logic and formula to your pricing, but definitely think about what’s psychologically significant about your price point relative to theirs, and if there are strategies that can help your user cross the decision-making chasm.
Also side note: it’s not scalable long-term but seriously, as a general principle, bend over backwards in your first few months on customer service. You’re a startup: you just started, you don’t have credibility and you need to earn it. Reply to every damn tweet, email, Intercom.io message or whatever as fast as you possibly can and really show people you care about their success and experience with your product.
3. Do NOT waste time on any feature that isn’t aligned with delivering your core benefit until you have a positive feedback signal
Brett Martin from Sonar recently captured this excellent truism echoed by a lot of other seasoned entrepreneurs and VCs: “You do not have 20% time. Identify your top three priorities. Throw away numbers two and three.”
Again, broken record style, ask yourself: “what’s the core reason people use my product? what’s the fundamental value or benefit I’m delivering?” It also helps—particularly in the absence of product-market fit data—if you’ve spent some time studying the consumer psychology of purchasing to think about how valuable your “value” really is. Where does your product or service deliver on the emotional hierarchy of your users’ needs?
ONLY work on delivering this until people are using and paying for it at scale. If they’re not, revisit your feedback loop — what does your data say about how the market’s accepting your value proposition? You don’t need a better, more beautiful analytics dashboard, you don’t need elegant linear-gradients throughout your user interface: you need to deliver the goods.
I have a laundry-list roadmap of features and enhancements for BuzzFork that if I ever get through them all will make it a very different, much more full-featured product. That said, right now my data has confirmed people will pay for what my product does today, whereas my data hasn’t confirmed (yet) that people will pay for my future bells and whistles. While I’m gradually testing that out, I’m spending 95% of my product developing focus on delivering the goods.
Keep in mind however, that monetizing immediately means sacrifices. First, by semi-locking yourself into a revenue model, you limit your ability to experiment with other business models and monetization channels. Secondly, I’m finding that prioritizing revenue leads to narrower, return-oriented thinking and shorter, incremental product feature sprints, rather than being patient, thinking big and taking the care to build something amazing over time. Revenue first won’t be right for all startups, it just happened to be right for me this go-around.
Nonetheless, this general framework got my startup profitable in six weeks. Hope you found this helpful, and, if so, happy hustling and hitting the cash register.
