Over the course of the last 2 and a half months we’ve gotten a shitload of stuff done to move business forward.
Right now you should feel we’re reaching a new breaking point: are we going to be able to hustle everything together to actually, really ‘make it work’?
At this point there’s a few things we need to move forward fast:
- Somehow find enough money to build (a first version of) the product
- Some definitely proof that we’re on to something that will convince friends, investors, grandmas and — most importantly — yourself, that you’re really on to something.
- In this regard there’s really 1 ‘proof’ that stands out above anything else: people that are willing to hand over their hard-earned cash to you!
Today we’ll show you how to do exactly that: get money to build your product, by taking customers money before the product actually exists.
Let’s talk about pre-selling!
Stuff to learn
So what is pre-selling?
- Pre-selling means selling something before the product actually exists. This in contrast to selling something that already exists.
- Here’s some examples:
- Pre-selling a housing block in before it’s build
- Books, music and most campaigns on kickstarter
- Tours – where you need a minimum number to cover costs
Why should EVERYONE pre-sell?
There are a couple of reasons to pre-sell. Some are obvious, and others are less so:
- The obvious one: you solve your money problem. Just like any Kickstarter campaign pre-selling allows you to get money from customers, so you can fund your first batch of products.
- This way you don’t have to convince investors. Your customers will essentially become your investors.
- It’s also way better than putting in money yourself. Whenever this can be avoided you should. The main reason is that you are effectively then becoming an angel investor instead of an entrepreneur!
- Fundamentally, pre-selling is also about reducing risk. You’ll validate your concept before you build the product.
- Finally there’s a somewhat less obvious, but equally important concern: pre-selling will allow you to build a product people that are actually willing to pay.
- The unfortunate reality is that most people don’t put their money where their mouth is. Your most vocal prospects — those that have a strong opinion about your product — might now necessarily be the people that will actually pay.
- By charging money you’ll see who’s serious and who’s not. Now you can focus your effort on making something that the real customers want.
The way I see it there are 2 potential outcomes, and both are positive:
- Positive outcome: people are willing to fund you, even though no product exists yet.
- Pre-selling is better in this case, because you can be more confident early on, focus on the real customers, and get money to fund development
- Negative outcome: people are NOT willing to fund you.
- This is kind of a bummer, but it’s definitely better to know this now instead of later. Maybe revise your product or messaging, and give it another shot?
- You’ve just saved yourself the work of developing a product that nobody cares about.
The pre-sell checklist
Below is a quick breakdown of what’s needed for a good pre-selling campaign. I won’t go into too much detail because circumstances might differ, but the overall flow is always the same.
Step 1: Figure out how much money you need
- Pretty self-explanatory. How much money is needed to be able to actually deliver on your promise – to get a product in the hands of customers?
- Don’t forget to also include stuff like shipping costs, if you’re doing a physical product
- Do you need ALL of the money up-front? What if you need $30k to build the product: would it be okay to get $20k in pre-orders, and fund the last $10k another way, based on that proof?
- Your target should be the lowest amount of cash that would still bring you success. Remember that you’re always free to accept more pre-orders after you’ve reached your goal.
- Note that you can take this number from your financial analysis that you did last week (Week10)!
Step 2: Create an ‘offer they can’t refuse’
- For this you need to:
- Pitch your product
- On Kickstarter video is pretty much essential these days, if are really needing validation as much as the money itself.
- Outline exactly what people will get, if they make a pre-order
- The catch
- Now you’ve outlined an awesome deal, so customers will automatically feel that there must be some kind of catch.
- Be fair & honest here, and tell them the catch: the product isn’t ready yet, so they need to be a bit patient.
- This whole thing is exactly like any other sales pitch. Especially in cases where people perceive a risk they really want to see some kind of guarantee.
- Pitch your product
- Expert tip: go over to Kickstarter, and filter for the most successful campaigns. You’ll see exactly what they did to pre-sell their products.
Step 3: Set up the infrastructure
- In order to start taking money you need to set up some infrastructure
- Either go with a platform like Kickstarter, or update your website to tell the story
- Set up some way for people to transfer money to you. Really anything would work at this point, but make it as easy for yourself as possible to collect the money.
- For instance: use a link to a Typeform form, which will accept creditcards. Problem solved!
Step 4: Hustle like there’s no tomorrow
- Well, this should be clear by now, I’ve been talking about hustling since the start of this blog! Be vocal and use every means you can think of to get the money together.
Here’s some extra resources on pre-selling:
Stuff we did
Regular readers of my blog will have seen we always follow up the ‘theory’ with what we actually did on our startup. However, this week we are not ready to pre-sell our website builder product as there have been a few unexpected delays.
I won’t go into all the detail as to how this happened but I’ll say that’s a fact of startup life and, actually, I’m pretty happy to have made it this far keeping to the initial plan!
What’s up next
If you’ve been able to presell, you should be in the following position:
- Concept is validated. This is a MASSIVE milestone that you should definitely celebrate. Well done!
- There’s enough money in the bank to fund your product.
Really there’s only one thing you should do now. Next week we’ll teach you exactly how to build great products.