Sell Before You Build to Get $1,000 in Recurring Revenue

September 30, 2013

4:00 pm

Many startups aim to be billion-dollar companies, yet they die away without having made a single dollar. Everyone’s so eager to be the next Apple, Google, or Facebook – companies that are worth billions and billions of dollars – that they forget to make their first $1,000.

That first $1,000 can be your toughest, but it’s also your most important. It’s so important that Gary Chou, an instructor in Entrepreneurial Design and ex-general manager at Union Square Ventures, teaches his students how to start a company not with business plans and spreadsheets but with the simple, profound challenge to create a $1,000 startup.

My company iDoneThis recently hit $1,000 in recurring revenue, and it was absolutely critical in giving us what Chou calls a sense of “self-sufficiency,” that feeling that we can exist as a company of independent creators without needing to rely on investment capital or normal jobs to survive.

Here’s the most important lesson that I learned on how to get to $1,000 in recurring revenue as fast as possible: sell before you build.

A Common Trap You Must Avoid 

I’ve observed so many talented people fall into the same trap. In fact, they fall into the trap because of their copious talents. Creators like to create. They often stay in their comfort zones, doing what they’re good at, and they never venture out to sell until it’s too late. What happens is that a creator will build and build, and then when the product is ready to go, it will launch to a few press hits – and then crickets.

Eventually, you start reaching out to people to start selling your product. And here’s the worst part: when you finally get your potential customer on the phone, you find out that you’ve built the wrong product.

The Correct Order of Operations

Paul Buchheit, creator of Gmail and partner at premiere Silicon Valley startup incubator Y Combinator, advises his startups on the opposite order of operations, one that might feel extremely unnatural: sell before you build.

For us, this meant going out and getting customers to pay us for a product based on an idea that we hadn’t fully built yet. We’d put effort into building interest through our freemium product for individuals to track their progress, so we knew we were onto something. When we announced a beta for the product, we got 1,000 people for the wait list. We added some of those customers to the beta, and they helped us refine the product.

When it came time to launch iDoneThis for teams, we had something that we knew people wanted. Plus, we also had built an audience of thousands of people who were open to our product announcement. What was important to us was that these weren’t just random tech enthusiasts, like you might find on TechCrunch; they were individuals with a genuine, qualified interest in what we ended up building.

With that, we got to $1,000 in recurring revenue our first month after launch, and we didn’t have to do any customer acquisition post-launch to make it happen. We’d already done the work up front.

Undoubtedly, it’s terrifying to step outside of your comfort zone and sell before you build. But as renowned startup investor Paul Graham put it in a seminal article on how to start a company from scratch, “It would be a little frightening to be solving users’ problems in a way that wasn’t yet automatic, but less frightening than the far more common case of having something automatic that doesn’t yet solve anyone’s problems.”

Be brave and avoid the biggest pitfall of all: building something that no one wants and having to start over. Sell before you build to create a $1,000 startup, and who knows? That could be your first thousand on the way to a billion.

Guest author Walter Chen is cofounder of iDoneThis, an easy way to celebrate your accomplishments with your team at work, every day. He writes about management and productivity at the iDoneThis blog and he tweets at @smalter.

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