Hi there -
Here is this week’s “1 principle, 2 strategies, and 3 actionable tactics” for running lean…
1 Universal Principle
“Start charging on Day One.”
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Many founders wait to define/build their product, understand their cost structure, and then set and test pricing with customers.
This is backward.
Pricing should determine your product and not the other way around.
2 Underlying Strategies at Play
I. There is no business in your business model without revenue.
Revenue is the difference between a hobby and a business. If you want to build a viable business, start with a viable pricing model from Day One.
Your pricing model determines your market.
II. Your pricing model determines founder/business-model fit.
Here are six ways to build a $1m ARR product around a tool like Lean Canvas:
- Write a book and sell 100,000 ebooks per year for $10
- Build a SaaS product and charge 10,000 entrepreneurs $100/yr ($9/mo)
- Sell an online course for $1,000 to 1,000 students/year
- Sell a mastermind coaching program to 100 people/year for $10,000
- Build an innovation platform and charge $10,000/yr to 100 enterprises
- Offer private consulting to 10 big clients per year for $100,000
Some of these ideas are more feasible than others. Others are more fitting to the kind of company you want to build. Finding fit here is what I call Founder/Business-Model Fit.
Not all business models have founder-fit.
3 Actionable Tactics
I. Offer money-back guarantees
Anchor price to value to attract early customers with a big promise, but be willing to put your money where your mouth is.
II. Time-limited trials and pilots
Charging on day one is not the same as collecting money on day one. As it is not always practical to collect money upfront or offer money-back guarantees, offering a time-limited trial or pilot is perfectly acceptable provided you discuss and secure commitment from the customer on your pricing model. Payment terms in this case is “Cash on Value Delivery”.
III. Hand-pick your first early adopters
Your first batch of customers make or break your product. Don’t leave this to change. Ideal early adopters are in just as much a rush as you are to derive value from your product, which makes everything else easier. Look for a critical event or deadline in the not-too-distant future driving their need to act now.