I’ve either founded or co-founded 3 companies and worked at 3 other early stage startups. I’ve made a bunch of mistakes along the way, most of which I learn from, some of which I tend to repeat. One mistake that I’ve made in the past that I see many company founders and CEO’s make repeatedly is an overly conservative approach to spending cash in the early launch stages of a company. Understandably, most CEO’s feel the pressure of longevity and realize, most likely on a daily basis, how much cash is left in the bank, how much they’ll need to hit their next goals, and why just hanging on for a little bit longer will add more value to the company.
Company founders and CEO’s should only have one goal in mind when they’re launching their product or service: Sell to as many of the ‘right’ customers as possible, as quickly as possible. There are 3 reasons why a company needs to move incredibly fast to find their customers:
- Product-Market Fit: You need to determine if your target market actually finds value in your product. If they don’t, you’re product either needs work or your may be going after the wrong type of customer.
- Identify and Fix Funnel Leaks: The sales process is never fully optimized out of the gate. The faster you can get leads into the funnel, the faster you can determine where customers are falling off, why they may not be converting, and where they need help in the process.
- Build the referral engine: Nothing beats having your customers share the value of your company with others. This word-of-mouth is invaluable and could help sustain the company for years to come. The faster you can find these ‘first’ customers, the quicker you can start driving leads into your funnel without spending additional cash.
What does this mean? Unless you’ve managed to build tremendous buzz around your company prior to launch (i.e. thought leadership, social channels, launchrock), you’re fortunate enough to have already crowdsourced demand (i.e. kickstarter ), or you’ve hit the PR jackpot (i.e. your best friend is an editor at the New York times), you’re going to have to spend cold, hard cash to find your customers.
But where do you spend that cash, how much cash should you spend and how many customers do you need? All good questions and truly can only be answered by company insiders. My rule of thumb is to allocate at least $10K to test a marketing channel. Since $10K could comprise a large part of a bootstrapped founders budget (if they even have it), I’d focus primarily on those proven marketing channels in which potential customers are already showing intent. Typically, you’ll find these channels via Search (i.e. Google Adwords, Bing, Yahoo) and the Social platforms that have deep targeting capabilities (i.e. facebook, twitter, linkedin).
My recommendation (based on my past mistakes of course): Don’t be afraid to spend cash right out of the gate. By spending early, you’ll get a much quicker read on where you stand, will know where to make customer experience improvements, and will have an initial customer base that will bring tremendous value down the road.
Thought, comments, criticisms? Please comment below.