You don’t have your product ready yet. In fact, all you have is a sketch. You don’t have an organization yet, and only a few close friends even know about the idea. You have no paperwork, no web site, no nothing.
Well, where do you think every successful corporation started! You’re doing great so far!
Now let’s go sell it.
Wait, you say. I can’t. I have to build it first. How can I sell it if I don’t have something to return in exchange for cash?
That’s simple. You’ll be straight with everyone from the start. You’ll tell people you want them to buy even though the product is still “in development” (a phrase vague enough that it can mean as little as “I’ve been pouring it over in my head”). Then just say something to the effect of “If that’s a problem, we can stop now, or I can still sketch out the idea for you in case you have any feedback or you know someone who might buy this while it’s still in development? Is that fair?”
Here in 2020, some people use Kickstarter or Indiegogo to launch an idea. These great sites can help you in three ways. One, you can test the market at minimal cost. Two, you can start to build brand awareness. And three, you can raise some much needed money.
Run your Kickstarter concurrent with your efforts to sell five, not instead of.
People tend to get caught up on the “thing.” Oh, the app isn’t finalized yet, they might say. I would say you shouldn’t have even started coding it until 5 people gave you money for it.
Trust me, you don’t need the “thing” just yet. You need the money.
See, the money validates your idea, your organization, your “thing.”
Here’s all you need:
Step one. Go register your new entity with your state. Here in Colorado, that’s the Secretary of State’s office. Choose for-profit or non-profit, most often it will be for-profit, and most often, an LLC will do great. File and legally form your entity.
Step two. Go on-line and find a legal agreement from a similar entity in your state. For example, if you’re forming a chamber of commerce in Colorado, go to the site of the Commerce City Chamber of Commerce and download our membership agreement, or whatever we call it. I founded the damn organization, you have my permission, and even if you didn’t, this isn’t stealing, just do it. If it still feels too much like plagiarism to you, find two or three similar documents and blend them into a new word document. That’s called market research.
Use the Find & Replace command in a word processor to change out the old group name to your name. Be sure to swap out any specific language they have to make it fit your own. And simply delete anything you don’t like. Maybe it references an annual golf tournament and you don’t want to do a golf tournament. Delete. When in doubt, leave it out.
Pro Tip – Have an attorney review it. It could save you a ton in the long run. For now, if you’re broke, run with this, and vow to hire an attorney once your business is doing what businesses are set up to do, and that’s accept incoming payments.
Step three. Price your offering. This part is hard. The tendency is to go low. “The existing chamber down the street charges $300 for their base membership.” That’s the kind of statement people will make. How do you respond?
A couple things here. One, if you’re starting a membership association, your base membership pricing will be KEY because 65-85% of your first year members will choose this level. Get it right. Don’t charge $5 in annual dues, you’ll get the wrong people. And nowhere near enough money.
The $300 example above is what we faced with the Commerce City Chamber. Brighton is a beautiful community just north of us. Tremendous people. A fabulous community with a historic downtown core around which they had built, at that time, a town of nearly 50,000, roughly our size. The community, the business environment, was very comparable to our situation. Brighton’s Chamber had been around for over 50 years, boasted hundreds of members, 2.5 employees, all kinds of printed materials and a lengthy schedule of upcoming events. We had none of that. Their base level was $300. Where would you have priced us?
We went with $250, and we put a one-time, $100 Registration Fee on top of it. It worked. I’ll get to that story later. The key is, you have to get your pricing right. And it’s easier to miss high, reprice and do a mea culpa, than to get it too low to start.
PRO Tip: A Registration Fee is a great way to get a little more money out of people at the height of their excitement – when they first join. And it can work in your favor when they get a renewal notice in 11 months for a lower amount.
OK, you’re registered, so you have a legal entity. You don’t need a bank account yet, but kudos for you if you set one up, you’re thinking ahead, good sign. If you’re waiting for your first check to fund it, that’s even better, that’s the right mindset. Your first customer check can cover any fees the bank will charge your business to establish the account. We want to get in the frame of mind that the org pays all these charges, not you.
You have a sales agreement, something official looking your client will have to sign when they write you a check, or, my personal favorite, pull out a wad of cash and start counting out the amount of money you asked them for. “Twenty, forty, sixty, eighty, one. Twenty, forty, sixty, eighty, two….” Set those prices right, I’m telling you!
And you have a price sheet.
Time to sell.
This is the point at which most people will balk, hesitate, delay, and make excuses.
“But I don’t have a product yet to sell! I have to develop it first.” Or “Thanksgiving is only 11 days away and people are already leaving on vacation so I’ll start in 2 weeks.” Wrong, wrong, wrong.
No excuses. We need to do some market research. You will simply tell your prospective client “I don’t have this product/org yet. I still have to develop/build it. Would you still be willing to buy this product/membership today, if it fixes/solves ___________?”
Some people reading this will object: “But you don’t understand, we’re going to be raising all our money on-line,” they might say. “We don’t need to sell.” I don’t know all your specifics, and raising money on-line is one of the greatest business categories going these days. But you DO need to sell. Trust me on this one. What do you think your site will be doing? On-line asks tend to be lower amounts, so this will be even easier for you than others. But you still need to get belly-to-belly with a bunch of people and sell five.
Here’s why this exercise is so valuable. Let’s say you’ve got an idea for an app. Great! Look around, people love their stupid f*$king cell “phones.” (Technically they’re computers that kinda suck as phones. But I digress.)
The old you was thinking you had to spend 3-9 months coding up this app before you have to leave the house, walk out of your comfort zone, and talk to people.
No, no, no! Don’t waste 15 minutes coding this thing yet. You may think it’s a great idea. So what. We need other people to think it’s a good idea. Here’s NOT how we know it’s a good idea.
YOU (on your lunch break with another corporate drone from your office): “I’m thinking about making an app that connects banana lovers with fresh bananas.”
DRONE 2: “That’s a great idea! You should do that!” Goes back to eating.
That is 0% validation of your idea. You would need to keep the dialogue going.
YOU: “Would you pay $10 a month for such an app?”
Now we’re getting somewhere. I have no idea what your co-worker would say to such a flimsy idea. Actually, I take that back, I know exactly what they’re most likely to say. If you have the greatest idea in the world, you’re still going to hear “no” more than anything else.
And that’s great!
Hearing a no is validation! Stick with me here. Let’s pick up the scenario above:
DRONE 2 (squirming slightly because you put him on the spot and he actually has to make a decision, something he rarely does): “Uh, I don’t know.” (Notice the “know” in I don’t know sounds exactly like “no”? That’s “no” coincidence.) “I usually just go to the grocery store when I want a banana.”
BAM! NOW we’re getting somewhere. A few more questions will lead to even more discovery of their banana buying process.
This no doesn’t mean your app idea is stupid. Far from it. We’ve barely asked one person. You’re still at zero, you need to sell this thing 5 times, remember? If you sell 5 talking to 20 or fewer people, you probably have a hit. And you’ll learn a lot from the other 15 people.
Many will go 0 for 10 with the first 10 presentations. Don’t get discouraged!! You’re making real progress, and it’s not costing you any money! The key is asking those no’s a few follow-up questions like “Is there anything we could add to the product that makes it good enough for you to buy it?” This is the gold you’re seeking to mine while selling five.
The money you collect from the five sales – which might take over 50 presentations – is just icing on the cake!
I know, it sounds like it’s gonna be painful. So let’s put it in perspective. Instead, you get to work in your basement designing your whatever. You spent 4 months with no income, but you were very comfortable, never talking to anyone outside your comfort zone. You designed it up, whatever the hell it is, and, feeling very proud, you made two or three calls to one or two manufacturing plants in China. After some delay and internal struggle – you still don’t talk to anyone, as you don’t think you can, because, after all, you don’t have any product to sell yet do you? – you finally pick a factory. They charge you thousands, which ends up being over half your life savings. But 6 weeks later, a bunch of boxes arrive on your doorstep. Wow, you are at the top of the mountain! You’ve never been so proud!!
You rip open a box, grab your product, take a picture, and post it to Facebook. “My widget is now available!”
Quickly, your excitement fades. You get a few attaboys. There are some likes, but you feel like there should be way more. Some fellow you’ve never met posted “Cool, I’ll buy one” and you get a momentary lift. You haven’t yet realized you’ll waste 5 to 30 minutes 4 or 5 times before giving up trying to find him to complete that sale. You’ll slowly learn, not all “I’ll take it”s turn into cash. Unfortunately.
You will quickly realize you need cash. Your garage will be full of widgets. Now what? Did you take the time to come up with a marketing plan!?!?
Now let’s deep dive a run of sales meetings that goes as bad as it can, an 0 for 10. It took over 100 phone calls, but you were focused on week one, and every day you made sure to book two appointments. You even ran one that first week of power dialing.
Week 2 will be super busy, as you start driving around town pitching your idea to people while also still working the phones. A pattern begins to emerge. You pull up, check your look in the rear view mirror real quick, wait in the lobby for what seems like a longer time than it should be for a scheduled appointment, you go through your preso, and they say no. You ask a few questions after the no, and some give you feedback, some basically tell you they’re busy and they have to go. You walk back to your car dejected.
At 3 weeks in, all you have to show for it are a bunch of no’s – and a ton of feedback. This feedback is gold. If we continue with the dumb idea above for a banana app, we can all guess why you haven’t sold any – it’s a dumb idea! No one needs it. But you know what? Your friends and loved ones will want to help you. They’ll see you’re serious about this. So they’ll offer up suggestions.
“I don’t eat bananas, but I’ll tell you, when we run out of diapers, wow is that bad! If I could push one button and have diapers here within an hour, I’d pay double for the diapers AND the delivery charge.” Sounds like a possible market niche…
What if multiple people in your first 0 for 10 said something to the effect of “I wouldn’t buy it for just bananas because I wouldn’t use it, but if it could meet all my fresh produce needs, that I could use!” Those types of trends are what you’re looking for. Don’t be afraid to ask about different price points too. You might be surprised what people will pay, often a figure you would’ve thought too high.
PRO Tip: Not everyone is broke like you. Never assume the prospect you’re in front of is broke!
Let’s go sell five.
You have two choices, call people you know, or cold call around. Your choice. I recommend working both avenues.
Most people detest both. I know I did. When I started in life insurance sales, they told me to make a list of 100 people I knew. I did. It took a few hours, it was boring, I didn’t like it. I wasn’t quite sure why they were having me do it. I was so dumb and naive.
Then they told me “Great job. See that phone over there? Use it to call them. Use this script when you call them.”
Man, if I didn’t like making the list, I’m not sure I have words to describe how I felt about calling up everyone I knew at the time and pitching them a product they’d never asked me for. This was 15 years ago. Of course, most of them have long since left my life, not because of the call, not because I don’t like them, not because they don’t like me (at least, I don’t THINK that’s why!), but simply because – life.
I hated calling people I knew and asking them about their finances, their retirement, practically begging them to meet with me. I’m not saying this will be the most fun part. I’m saying this will be one of, if not the, most important action you take to determine if this thing, this idea of yours, will fly or not.
We might as well find out early.
Make a list of people you know. Call them, tell them what you’re doing, ask for their help. A real friend will gladly sit down with you and give you honest feedback, which is what you want. You may have to buy them a cup of coffee and a pastry, that’s the least you can do. Put it under “Marketing” in your budget. It will be your best marketing dollars spent.
Also make a list to cold call. Here’s the good thing about your cold call list. There are literally billions of people you don’t know, so you can really target this list. In the example above, the really dumb idea about a banana app (I was eating a banana, don’t actually use this idea, its preposterous), you might cold call food distributors, grocery stores and someone in the banana business. Imagine! Calling someone in the industry you want to enter and just asking them some simple questions. You’d be surprised what people will offer up just because you ask them, even potential competitors. I would also go to a farmer’s market and ask around. At a good farmer’s market, you could learn a lot about a banana app in just one afternoon.
Go. Sell. Five. Keep asking people. You’re going to get a tremendous number of no’s. Great!! After each one, take one or two minutes to write down what they said. Let me repeat this, this is so important. After each meeting, write down what they said.
Even better, write it as they say it. Research shows people perceive you have a higher IQ when you take notes. You need written notes. Don’t trust this to memory, this is too important.
Another good move is to collect a deposit. “Member organizations are expensive to run. We’re forecasting first year dues at $400.” Pause and watch their face very closely, see if or how they react. “Would you be willing to put down a $100 deposit as startup capital for the organization, and once we officially launch, we’ll come around and collect the remaining $300 from you at your convenience?” Even better “I’ll just run your card for $100 today, and once we launch, we’ll confirm you’re still on board before charging you the remaining balance of $300.”
One hundred dollars is a great price point. Only people who are serious (or really love you) will pony up $100 for your phantom org / product. And what a validation this is! You can tell others, “You know Joan at XYZ? She wrote us a $100 check yesterday.”
A lot of people are too chicken shit to go first on a new org or product like this. (Are you?) Once you start closing a few people, the momentum will create more momentum.
Once you get to 10 no’s, you now have something. With a little luck, you also have a sale or two, which would be great, no doubt. But don’t feel like you HAVE to have a sale at this point. Your lowest close ratio will always be at the beginning. Why? OMG, let me count the ways. One, you’re smart, and you’re going to constantly improve this process. Two, you’re just getting your first market feedback. For example, what if at the farmer’s market, people kept talking about lettuce. One guy told you he couldn’t keep track of all the great varieties of lettuce. You’d talk about bananas, he kept coming back to lettuce. Another lady was literally eating the lettuce while you asked her about bananas. See where I’m going: The market is talking to you! Are you listening???
Very rare is the business that gets it perfectly right from the very beginning. That’s why going out and producing a bunch of inventory, or wasting months writing a bunch of code, is so dangerous. You need market feedback to hone and refine your idea, your org.
Your first ten no’s will do more to launch your business than anything else short of a huge infusion of money. And if you do get a huge infusion of cash, you owe it to that investor to ramp up the hunt for no’s and accelerate your no rate, and thereby increase the efficiency and speed at which you hone in on a successful thing.
There is another option you can run simultaneously, Because this one is a bit of a cop out, I left it til the end of this chapter, and I’m encouraging you to do this concurrent with your sales calls.
You can run an on-line survey, using Survey Monkey or another similar service. This is especially helpful if you’re planning to build a product of some type.
Writing a good survey isn’t that hard. Take a little time to think about what you most need to learn about, and keep it short. Like 3-5 questions short.
The challenge with a survey is getting the word out, as only a small percentage of people who hear about it will take it. But even just 3 survey responses can give you some valuable insight.
To be clear, a survey is no substitute for good ol’ fashioned sales calls.
What are you waiting for? Go sell five!
[This post is an excerpt from my book Building Something From Nothing.]