216: How to Make Your First $1k as an Entrepreneur
Subscribe: Apple Podcasts | RSS
In this episode, Steli and Hiten talk about how you can generate your first thousand dollars in revenue. Steli and Hiten talk about the importance of doing the math to reach your $1000 goal. Do you charge less and try to reach several customers? Or, do you charge more and aim for fewer customers? Either way, setting your price point will help inform the steps you take to achieve that goal. Also be sure to share your plan with Steli and Hiten and they’ll be happy to give you their two cents.
Time Stamped Show Notes:
- 00:04 – Today’s episode is about how to generate your first thousand dollars in revenue with your startup
- 00:36 – Steli and Hiten have an ebook: 0 to a Thousand Customers and Beyond
- 01:42 – To earn your first thousand dollars, do the math
- 02:12 – Know how much can you charge and do the math that will help you get the price point to reach your goal
- 03:16 – You can either get a customer to pay you a thousand dollars or get 50 people to pay you $20 for a product or service and this takes two different approaches
- 04:26 – Deciding the price point or the mass appeal is going to restrict your game plan and your customer acquisition channels
- 05:01 – Setting the thousand dollars as a goal is attainable and once you get there, you can do it again
- 05:50 – Hiten thinks setting the timeline is NOT as important as setting the revenue goal
- 06:18 – Set a goal for how many customers you can get in a week
- 07:45 – The mechanisms to get money from your customers:
- 10:15 – Figure out the payment process as you go along
- 10:38 – It is not a customer when you don’t get money from them and they are different from users
- 11:40 – Start with one customer at a time and worry about giving discounts in the future
- 12:06 – Don’t solve or worry about future problems right now when you are just trying to achieve your thousand dollars
- 13:01 – Get excited about charging the money and receive the validation
- 13:32 – Charging for your product is the biggest validation for your product
- 14:03 – If you are an entrepreneur, put a plan together and share it with Hiten and Steli to get advice
- 14:33 – End of today’s episode
3 Key Points:
- To get your first thousand dollars, do the math—Charge a thousand from one customer or break up the revenue goal by a number of customers.
- Getting paid is the biggest validation you can get for your product or service.
- Focus on getting your first thousand dollars, worry about everything else later.
Hi, everyone, this is Steli Efti.
And this is Hiten Shah.
In today’s episode of the startup chat we’re going to talk about how to make or generate your first $1,000 in revenue with your startup, all right. This kind of fits nicely into the first little eBook that we’ll put together, 0 to 1,000 Customers & Beyond, and some of the prior episodes that we’ve done on how to get your first ten customers, how to get your first 100 customers and all that, and we know that people really appreciate a lot of that, so I wanted to talk with you specifically reframe the conversation, see what kind of differences it will make in the tactics and the advice that we give on generating your first money. Right, so and I think that this will be equally important for the venture backed startups or the startups that have bigger teams that want to do huge things, but maybe the people that are self-funded or maybe the solo founders out there that are listening to us, and I know there are a lot of them out there, maybe they will even lean in a little bit more and think, “Yeah, I’m about to start my first startup or I’m about to start my side project, and I just want to hit that first milestone on generating my first $1,000 in revenue. How do I think about that? How do I go about it? How quickly do I try to do that? What’s the mind frame?” What would you say? What would be some advice that you’d give to somebody that tells you, “Hey, I want to get started and I want to earn a $1,000 in revenue as quickly possible?”
Do math. Right?
Tell me more.
Like $50 times 20 equals a $1,000, right, so it’s math. $10 times a 100 equals a $1,000. A $100 times 10 equals a $1,000. Often times people just don’t do the math, they’re like, “I want to make money, I want to make money.” Okay, cool, you want to make money. How are you going to make that money? Right? The best way to make that money and think about money is to think about money and think about the math. It’s like, “How much are you going to charge and what is it for?” Right, “How much can you charge?” Then just doing math as to like getting to the $1,000. I actually like to obviously think about the math, I’m not saying you shouldn’t think about the product, software, whatever it is you’re building first, but like the math is really useful to help you have a price point that’s acceptable, that’ll get you to the goal, if your goal is a very tangible goal that has to do with money like that.
I love that, because I think that that actually limits the options or it channels or it buckets your options really neatly, and I find that too many times, especially on day one, founders are overwhelmed by everything they could imagine doing, but once you use math and you bucket this, well if you decide that the most likely outcome right now for you to make a $1,000 is just to get one customer that pays you a $1,000, then you know, all right, “What I’m doing is probably going to be consulting, what I’m doing is probably going to be some of kind of a services gig, and then trying to find that one customer where I’m going to do something more involved and more hands-on and charge a $1,000 for that.” “Maybe it’s a two week project, maybe it’s a month project,” but whatever it is, it’s a very different task and will require different actions and a different game plan than if you arrive at the conclusion that, “You know what, I built this, whatever, Chrome extension, I built this WordPress plugin, or built whatever, some kind of a tool, the I think has mass appeal, and I can’t charge somebody a $1,000 for this.” Maybe you can, maybe you just customize it for them or whatever, but you maybe think, “Well, you know what, I could probably and easily charge 50 people 20 bucks for it,” and that kind of opens up a different world of getting 50 customers is a different type, with to pay 20 bucks is a different type of approach. In one, in the one example you probably going to do a lot of kind of person to person sales and try to find that one client that wants to pay you a 1,000 bucks to get something really valuable from you on a very personal level. On the other extreme maybe where you do a 50 or even a 100 customers each $10, you’re going to have to do more mass marketing stuff, you’re not going to be able to probably acquire all these 100 customers one by one, by going to door to door and shaking people’s hands, or at least it’s probably not going to be the fastest way to get there. I think that deciding what the price point and what the mass appeal is and what the math is going to be to get you to a 1,000 is going to restrict the game plan and the customer acquisition channels and options that you have to go after these people, right. Now, when it comes to the, to making some money, one thing that I love is that idea that if you can make $1, but this applies to a $1,000 as well, if you can make 1,000 bucks you probably can make 10,000, and if you can make 10,000, you’re very likely can do a 100,000. The beauty of taking a goal that doesn’t seem that crazy, like a $1,000 it doesn’t seem like this moon shot type of a goal, but the great thing about setting a 1,000 bucks I think as a goal as an entrepreneurs first is because it is pretty obtainable, it is something you should be able to get to in a reasonable amount of time, and once you get there it is a first level validation that you should be able to 10 X that and 10 X that again, right. What do you think about timelines? “Making the first $1,000 in revenue for my company?” Obviously the type of channel, the type of customer, the type of price point I choose, all influences this, but just as a general rule, what do you think is a reasonable timeline that people should set themselves to get to a $1,000 in their business? We know it’s as fast as fucking possible, but what do you think is a timeline that’s acceptable and what is a timeline that is problematic if people set it for themselves? Or is such a, is there such a thing?
Yeah. It’s a really good question. I don’t really like setting these timelines, I’d rather set the revenue goal and say, “I want to get to that,” and then start actually doing the work to get there, and then figuring out how long it’s going to take as you learn. Because look, if you’re selling something for a $100 and you want 10 customers, it’s not going to happen overnight usually, and you have to do all these things like make a product or set up a page, and have a billing thing, and things like that, so there’s a bunch of steps to that. To me it’s like more about, “How can I set a goal that’s more like can I get one customer a day?” Or, “Can I get one a week?” Right, and then getting, as you get better and better you start basically just getting better at your estimates and knowing how long something’s going to take. Because I think it can put a lot, I mean in my opinion, it could put a lot of pressure if you set a dollar goal and just trying to hit it and then you won’t get there necessarily. I’d rather take it a little bit probably softer and easier.
All right, that’s fair. The only thing that I’ll add to that is that if you set the goal to maybe a 1,000 bucks in your business and you think a two to three year timeline seems reasonable, I don’t necessarily have an issue with it, but I would then highly discourage you from thinking of it as it more than a hobby or a side project, at least until it does that revenue or even more. Right, because that to me, a two year timeline would be very, too slow for it to be a real, considered to have a chance to be like your full-time gig at some point. Let’s talk about some more of the things that maybe for us seem super simple, but maybe for a lot of our listeners and the people that are at the very beginning have never charged a $1,000 to a customer, which is most humans on this planet have not charged a $1,000 to somebody else or a collection of humans, right, directly.
One of the biggest road blocks sometimes seem to be like the things that seem the most, the simplest at least to more experienced entrepreneurs like us, which is the question, “How do, what is the mechanism of which I get the money from them to me? Do I go and setup an online page with payment processing and all that type of stuff? Do I incorporate, get a bank account and then tell them to send me a check at a PO Box? What’s the best mechanism for me even to ask for money? Do I have to have invoicing software?” Like people will ask that question and that question might make people what I would call fuck around for a few weeks trying to research and figure out the best choices versus talking to customers. If somebody asked, if somebody said, “Hey, I want to go and I want to make my first rev-, I want to generate my first revenue with customers, but what’s holding me back right this second is that I’m not sure how the mechanism of charging, how to even do that?” What’s your typical advice on this?
You mean like the actual billing and stuff like that?
Yeah, how do, do I ask them to give me the cash, do I tell them to send me-
Yeah, I like using Stripe and making it really easy to get the money if you’re building software and even just to go the other way, like I think Square is pretty cool if you can do it in person and just get someone to swipe their credit card. I like Stripe and I like just plugging it in pretty fast, even like with a button on a page and it just starts running. It really depends what your business is though, right, as to what system you use. Like if you’re selling eCommerce, and I know I’m going pretty wide, but if you’re selling eCommerce, you would just use something like Shopify, right?
Yeah. I mean, so I love Stripe because I think Stripe has a bunch of products out there that make it very easy, even a product out there now that allows you to incorporate really easily, just setup the business and everything and do it very cheap and very fast. We have a common friend that is working on that team. Obviously if you eCommerce, you just use a solution out there that is common. I mean, but what I would highly encourage people is not to spend too much time worrying about that, right. You could use PayPal and you can use Stripe, you can use Shopify, or if it’s a consulting business and you’re like, “Well, I’m not going to send the customer to some page to fill out something,” although you still could, you could just tell them to send you a check to your home, to your address and that’s how it will cut you a check. Even if you’re not incorporated, the amount of companies out there that have gotten million dollar checks from investors or customers and then after the fact that you incorporate really quickly to be able to actually bank that check, there’s a lot of these stories out there. I will just encourage people to make sure that they get that stuff right, but don’t slow down. Do that stuff in parallel while you’re doing customer development, while you’re doing marketing, while you’re trying to acquire customers. Don’t feel like you have to figure out everything on the incorporation and pin and processing side of things before you are now free to go out and try to get some customers to pay you money. Let’s talk a little bit about the fear or the question on, of discounting, refunding, or giving things for free to people. Right, we’ve talked about this before a lot on like you’re not, it’s not a customer until they pay you money, right. I have this all the time, and I’m sure this happens to you as well, Hiten, where people come to me and they’re like, “Well, we have a 150 customers and we’re trying to do this and that and the other,” and then I ask them, “Oh, how much do these customers pay you?” After a long back and forth I realize none of these people pay them any money, like they’re all part of their, quotes-unquote, beta customers or something, or alpha customers. Customers to me is a misused word in that context because they are users, they’re not paying anything so they can’t be customers, at least in my definition. A lot of people are afraid of like, “The product or services is very new and not as proven, so when I charge that first $1,000 do I have to give massive discounts? What happens if the customer is not happy?” “Should I really charge a $1,000 with the first customer or should I get a bunch if users and validate that they’re really happy and validate that they really feel like they received a lot of value before I then start charging customers?” What’s your thinking on that and the advice you give somebody on that?
Yeah. You’re getting ahead of yourself, I would just start one customer at a time, and don’t think too hard about like all these other things that are going to matter in the future. I think it’s one thing, I don’t think we’ve talked about a lot, but worry about the things that matter now, don’t get so caught up in what’s going to happen next. By that you can essentially build a building blocks of the money, right, and stacking it as they say, instead of worrying about all these things that probably don’t matter right now.
Yeah, don’t, with your first $1,000 don’t solve your, don’t solve the problems you’re going to have when you make millions of dollars when you’re trying to get your first $1,000. Right, don’t solve future problems, don’t worry about future problems right now. Right now your number one problem is that there’s nobody that’s paying you money and you need to fix that problem. To validate that you’re onto something, to generate revenue, which is a good habit to cultivate. Like I know our friends from Basecamp kind of always used to preach that, companies need to build the skillset and the habits and the culture of making money, like they need to be, this is the core reason of existence for, this is knowing how to make money, so when you build these massively kind of venture funded companies that don’t make money in the first five, six, seven or even 10 years, you create that culture of tons humans and teams that just don’t know how to make money and don’t know how to think about making money. Get excited about the idea of charging money and returning value in exchange, get excited about the validation and solve the problem that today nobody is paying you money, solve that problem, and worry about all the problems afterwards. I think that as a fail safe, if you’re really concerned about the ethics involved in any of this, just because you charge a 1,000 bucks doesn’t mean you have to spend it. If you’re a little shaky on the value of your service, I would never recommend you to give people the service for free because you lack the confidence. I would highly encourage people to charge for it, put the money aside and give people money back guarantee or something like that, so if they’re truly unhappy you can always hand the money back. Charge the money, getting the customers to put their hands in their pockets and reach out and give you money, is the strongest validation you can have that you’re onto something worth doing. All right, anymore tips that you want to add before we wrap this episode up?
No, that’s about it. I think that’s pretty straightforward, people just get ahead of themselves, the biggest issue I’ve seen.
All right. For everybody that’s listening to us, if you are in business, if you’re an entrepreneur, if you’re running your startup, if you’re doing a side business and you’ve not yet revenue here, a little call to action from Hiten and I, put a plan together right now episode on how to make that money and then snap into action and keep both Hiten and myself in the loop and let us know so we can kick you in the ass or add helpful advice to get you from zero a 1,000 revenue as quickly possible.
There you go. Cheers.
That’s it from us. Bye-bye.