I have worked with many startups and small businesses since 2005 and the advice I would give to most is to charge your customers as soon as you can.
There are several reasons why I believe you should do this:
- Paying customers will help you find product-market fit faster. They will give you more honest, focused feedback on what’s wrong with your product and if they aren’t using it they will be sure to churn eventually. Many times I have seen customer feedback change drastically when payments have been introduced.
- Money provides focus. There’s a clarity when your idea turns into a business, it forces you to provide value to your paying customers and if you can provide more value, faster your business should grow. Before you have paying customers you will be making decisions based on unknowns and guesses and as much as you know about your industry you will likely be making the wrong assumptions.
- Carrying on from the last point, data allows you to make smarter decisions, you can argue over a layout until you are blue in the face but as soon as you are tracking conversion metrics you can put two ideas to the test and see which one converts more customers.
But what if I’m not ready to charge?
I know there are certain businesses were it is best to build up a user-base first, particularly when the revenue streams are along the lines of sponsorships and advertising, however, when we launched Niice back in 2013 we were able to seek out sponsorships from major companies in the creative industry within the first couple of months and the money we got from those went a long way to fund the early product development.
But I’m in private beta
I’m really starting to believe that drawn-out betas with a free product are harmful to early product development. People put up with a lot for free but feel entitled as soon as they hand over a penny and while this might be frustrating to deal with, it’s very advantageous for you to get your hands dirty and deal with customer complaints in the early stages, it will help you with future sales and let you discover the true pain points of your product.
How do I find my customers?
The hard way. We are doing this with PayHere, finding and reaching out to potential customers via email and doing everything we can to make them successful. You can make pricing agreements with each of them depending on how they are going to use your service.
This is called direct sales, it’s not a new thing and it’s also not something you should ever stop doing, it is where the largest chunk of most SaaS companies revenue comes from.
How much do I charge?
Well, that’s a topic of its own entirely. My stance is to charge your first few customers whatever it takes to get them on board, even as low as the price of a cup of coffee – you will get as much if not more value from them as they will from your service. Once you are seeing customers having success with your product you can start to price based on the value your product provides.
I hope these ramblings prove useful to you. If you are in the early stages of product development reach out to us, we have helped many startups and are always looking to partner with new clients as they grow. And lastly, if you need assistance taking payments, check out PayHere.