How to charge money for things that don't exist yet
I was talking to a good friend of mine who founded a very successful SaaS (Software as a Service) startup a few years ago and is currently considering a major new direction in their product.
He was asking me about my opinion on this new direction and the sales implications of going after a particular market with a very particular approach. As I was asking more and more questions to dig deeper into the matter, he said one thing that raised an immediate red flag for me.
“We’re getting a lot of interest for this but many potential customer want a key feature that we don’t have yet, so we can’t sell to them today. I think we’re going to build out the product over the next few months, since we know exactly what the market wants, and then start selling!”
Beeeeep! Wrong answer!
The best way to discover if your product has a real market is to SELL FIRST and BUILD SECOND.
I told him what I always tell founders, "You need to charge for the product today."
No matter if it’s ready or not. See here is the thing: getting interest from businesses and getting customers are not the same thing. Not even close.
You want to test interested parties to discover if they are true buyers with real buying intent.
But how do you do that when you know they need these key features that are missing? How can you charge for something that doesn't exist yet?
They might not be able to benefit from the product/features they need right away (since you haven't built it yet), but they can pay upfront in order to receive one of two key benefits:
- A massive discount for pre-ordering your product
- A shortened timeline for the feature/product release if they commit today
The minimum viable pitch
Here’s what you say:
“All right dear interested prospect. It’s clear that once we have feature XYZ, we’re going to be the perfect solution for you. We’re planning to get that feature done and released in six months. The pricing will be around $$$ which would deliver [insert massive value] to your business.
We want to give you the chance to get on the early customer list for this and gain some massive benefits. If you commit to making a deposit today for purchasing this product with feature XYZ in the future, we will give you a lifetime discount of 50% and we will move the development in our roadmap to be finished in three months instead of six.”
The deposit is fully refundable so in case something unexpected happens to your business in the future, you have no risk. Sounds fair enough?”
Most prospects won't bite and that's OK
If they are not interested in this deal, chances are they are not a real early customer anyway.
Their pain is not big enough and their intent to purchase not strong enough to get them excited about these benefits.
But if you can’t close one out of five or 10 prospective customers on this type of early-bird deal, you’re in trouble and might not really be on to something in the first place. You might want to spend a bit more time validating that there is a real demand for this product/feature before spending months and millions in feature development.
This is exactly how we got started
Here’s a little secret: ElasticSales and Close started out like this. We sold our service before we were even able to deliver it, before our company even existed.
You can listen to the whole story in my Pioneers talk (skip to 3:44 in the video, that’s where I start to tell the story of how we charged money for our sales on demand service before it even existed).
Fast track to product/market fit
The hardest (and most important) thing in the early phase of every startup is getting to product/market fit. Don't build and then sell. Do it in reverse. Once you have people that give you real $$$ in order to get the chance to buy your product earlier and for a discount, you know you're really on to something worth building.
It’s a simple strategy that will help you to get to product/market faster and with a lot less pain.