A lot of founders come to me and say, ” I need to fundraise!” When I stop and ask them why, they say, “Because I need to money to build more product!” So then I proceed to ask them, “Will building more product definitely get you more paying customers? And how many will it get you?” Silence.
When to Build and When to Walk
If you cannot quantify the number of new customers you will close by creating a new product or feature, there is really no point to building it. Too often people hear from potential customers that they don’t have XYZ feature. They might hear this a couple times and think that they should go build the feature, but that’s exactly the wrong thing to do, because it just drives up costs. Your cost of creating the feature and maintaining it goes up.
If you really think that customers will absolutely not purchase your product without a certain feature in it, then why not round them all up and get them to pre-pay to have it built? Put a price on the product, and see how people react.
This is a tactic one of the startups I’m advising took recently. A potential customer of the founder told her that they wanted XYZ feature. Her startup team just didn’t have the bandwidth to make it happen, but it was a pretty prominent customer whom she knew had deep pockets. She also knew that if she built XYZ feature that other customers she had talked to before would come back. Instead of saying no to building the feature, she figured out the cost of building it, then told the customer how much they would need to pay to build the feature. The customer happily obliged, and the feature then went into production. There was of course some back and forth negotiation, but throughout the process it was evident that the customer really needed the feature, and was willing to pay for it.
Focus on creating value.
Why We Jump to Building
Its easy to want to build, because it gives you a sense of accomplishment. You’ve created something that is tangible. Whats harder to do is to convey the value of the product you’ve already built, and find new markets to sell to because it requires you to think creatively. But often times this is absolutely necessary, especially if you are limited on funds. If you’ve got a product that has been selling regularly, and you know you don’t have the means to make more product, focus on finding new markets and new marketing angles.
At some point you have to stop building, and a good time is when you know you have a customer base that is consistent.