THE STARTUP CHAT

Steli Efti:

Hi, everyone, this is Steli Efti.

Hiten Shah:

And this is Hiten Shah.

Steli Efti:

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?”

Hiten Shah:

Do math. Right?

Steli Efti:

Tell me more.

Hiten Shah:

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.

Steli Efti:

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?

Hiten Shah:

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.

Steli Efti:

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.

Hiten Shah:

Right. Right.

Steli Efti:

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?

Hiten Shah:

You mean like the actual billing and stuff like that?

Steli Efti:

Yeah, how do, do I ask them to give me the cash, do I tell  them to send me-

Hiten Shah:

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?

Steli Efti:

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?

Hiten Shah:

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.

Steli Efti:

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?

Hiten Shah:

No, that’s about it. I think that’s pretty straightforward, people just get ahead of themselves,  the biggest issue I’ve seen.

Steli Efti:

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.

Hiten Shah:

There you go. Cheers.

Steli Efti:

That’s it from us. Bye-bye.