There's a new wave of entrepreneurs eliminating virtually all risk associated with launching a new product. They're building a proposition we call the Minimum Buyable Product.
You’ve witnessed it a million times on Dragons’ Den (or Shark Tank if you’re in the US): a likeable couple or solo inventor pitches their novel idea to a problem you never knew existed. Only it’s not just an idea. They’ve actually sunk their life savings and many years into perfecting it before introducing it to the public. Now it’s out in the wild it turns out nobody wants it. Or certainly not enough people to recoup their investment or pay a wage.
You can sense the desperation in their voice. You feel for them. You know what’s coming from the Dragons before they even open their mouths. Sure enough, they’re not going to invest. “I’m out”, they say.
The magic solution to this problem came from Eric Ries in his book The Lean Startup. It would be to build a Minimum Viable Product (MVP). It sparked a movement.
The mantra went as follows: Be lean. Ship early. Fail quickly. Repeat as many times as necessary before you’re ready to start charging.
So you would build something. Anything really. Just as long as it resembled the most rudimentary version of a product or could test your biggest assumption.
So that’s what all start-ups stared doing. All they’d ask for in exchange for beta access would be an email address. All they wanted to know was “Would you use this?”
Whatever the answer is to this question is it lured them into a false sense of security. Either they’re onto something or they soon will be with a few fixes. And they would feel reassured that they could invest more time and resources into building a better version.
So the MVP evolved. It became the Minimum Loveable Product (MLP) - an enhanced version of the product that could leave you enthralled. To borrow from Ryan Singer:
If you decide to build a feature you should live up to at least a basic standard of execution on the experience side.
The promise was that if you get your MLP right you’d soon have your 1000 loyal fans.
It was definitely a step in the right direction but even then it still wasn’t quite enough. Building something loveable is important but if no one is paying for it expectations will still be artificially low. Even if it was technically brilliant and has thousands of free users, nothing is really proven at this point.
It was clear products needed to be further ahead on their journey to sustainability. The emphasis become on earning, which give birth to the hybrid Billable Minimum Product (BMP). It makes sense: a paying customer is the only true validation for any potential commercial product or service. It’s only when sales come in the door can you begin to structure a valid company around your product.
That was generally accepted as the leanest, most effective way to develop with customers and guarantee profitability. That is, until recently…
There’s a new wave of entrepreneurs eliminating virtually all risk associated with making a product
Companies have realised they can start earning before they even commit to making anything. Customer interest comes in the form of purchases before prototypes are developed or a pixel is put to screen — once a threshold is met then they kick into action and start building.
It takes all that’s good from Kickstarter and puts it on a standalone direct-to-consumer website.
In old fashioned terms, this would be called taking pre-orders. It’s highly effective because it taps into entrepreneurs’ willingness to back other dreamers and pay it forward on good ideas.
I’ve just bought a book this way: MAKE by Pieter Levels. I also bought Seth Godin’s latest book this way. Thinking back, I’ve done it loads, including signing up to AI website builder The Grid a year before its launch.
It’s a trend appearing more and more across sectors. Taking sales before a word is written or a proposition is fully formulated. Where books are concerned, in return for the leap of faith you’re invited to edit proposed chapters and topics, and even suggest new ones.
Attract real customers is always going to be a better strategy than attracting ‘maybe’ ones. Who wouldn’t want to turn a profit upfront? You can work out how to ship it later, as long as you keep your promises. The technical term for this ‘pretotyping’ (I agree it’s not catchy!).
I love this story from a former Google Product Manager on faking it until you make it:
During my 8 years at Google as a product manager (PM), I interviewed more than 400 PM candidates. One of my favourite interview questions was about product development and testing.
‘Say you are working for McDonald’s and are considering a new menu item called McSpaghetti. How do you figure out if people would buy it?’
Most candidates talk about bringing on board a consulting firm for some extensive market research. Way too expensive. Some suggest to pick a few stores and start offering the meal. Still too expensive. Very few consider a more radical approach: add the item on the menu and see what happens; and when people ask for the McSpaghetti, just tell them you are sold out with a big smile and a free basket of french fries.
And if you don’t build your proposed product and are honest about its vulnerability simply hand the money back. No harm done.
It’s really easy to keep your head down and get lost in ‘making-mode’ wilderness rather than trying to sell upfront. Selling takes us out of our comfort zone.
But the reasons to think about profitability from day one (or even sooner) are pretty compelling:
- Becoming okay with asking for money.
Far too many Founders see ‘sales’ as a dirty word. But you can’t build a successful business without revenue and the only person putting it off is you. I get that picking up the phone or adding that ‘buy now’ button can be daunting, particularly if you’re just at the ideas stage, but the buzz of making that first sale more than makes up for it.
Waking up with more money than you went to bed with can be a huge motivator.
- Get a sense of its true value.
Having paying customers is the only way to really know your pricing sweet spot. I know one business that found they could increase the cost of their subscriptions eight-fold on their original predictions by declaring their hand early and acting when customers responded positively to price increase. Plus getting it out there forces you to start speaking a language that truly resonates with customers.
- With focus comes speed.
If people aren’t willing to pay for your idea you’ll need to adapt. Quickly. With profitability a priority it’ll soon become obvious whether you have the agility to match market expectations.
- Avoid being too ‘minimum’.
Most people will do what they can to champion entrepreneurial endeavours but they must live up to MVP expectations. Launch too soon with a substandard prototype and you risk losing them forever.
- Live for now.
This one comes from Jason Fried, Founder & CEO at Basecamp in his post ‘Why we choose profit’. When you’re owed rewards, take them. Sure, don’t take too much but don’t sell yourself short either. And be sure not to reinvest it all. Building up a safety net for any bad months is a wise move.
- Reduce the need for outside investment.
If, like me, you value freedom over anything else then you’ll need to stick to your own vision on your own terms.
If someone else owns your time, you aren’t free. And if you aren’t free, you can’t be flexible.
Early and often profit buys you time and independence. Outside investment, on the other hand, usually has a different end game: more investment or an exit.
- Build a customer base as well as your audience.
The latter is relatively easy: find a point of view and blog consistently or give away your expertise for free. It doesn’t mean they’ll pay the bills. Just ask the Guardian. Profit buys you valuable time for your passion-projects without the need for them to pay you back.
- Makes decisions easier.
Once you enter profit you won’t want to leave it. You’ll keep a close eye on your costs and only spend what you can afford or what’s likely to give you a return. Far too many start-ups become bloated and explode because they’ve lost all perspective on when they’ll enter profit.
So remember, turning your Minimum Viable Product into a Minimum Buyable Product might be as simple as sharing your idea upfront and adding a ‘preorder’ button. It got me as a customer this week.