A Little Revenue Is Worse Than No Revenue

In the startup world, payment is validation. If someone is willing to pay you for your service, you’re onto something. If no one will pay you, then you’ve got an issue with your message, your offer, product/market fit, something.

December 16th, 2016   |    By: Stuart Brent    |    Tags: Onboarding, Management, Idea Validation

In the startup world, payment is validation. If someone is willing to pay you for your service, you’re onto something. If no one will pay you, then you’ve got an issue with your message, your offer, product/market fit, something.

But payment can be misleading.

If you’re not selling at all, it’s clear that there is a problem. If you’re selling a ton, it’s clear that you’re validated.

But what if you’re just getting some orders?

I had a startup that provided feedback on online dating profiles that limped along for a couple years, never having great market fit. It was hard to market, and the model itself made it hard for customers to need to come back.

I should have taken it down it after a year. I eventually killed it after 2.5 years, after putting too much time and money into it. I learned a lot, and have no major regrets, but I was misled by having revenue.

A couple weeks would go by without a customer, and I would think about taking it down. The AWS bill would come in, and I would see the cost of hosting an unpopular startup, and I would think about pulling the plug. There would be a bug, or something would break, and I would debate just deleting it.

But then I would get a customer, and they’d be happy and I felt like I was helping people out, so I would keep going. Rarely did I focus on it entirely, but I would do sprints of marketing to try to get the ball rolling, but it never got real traction or momentum.

It was those few customers that tricked me into thinking I had validation. They made me think the business was viable as-is, when it actually needed a ton more work, and even then it couldn’t overcome everything going against it.

A slow month followed by a spurt of customers would make me think “oh awesome, people are finding it again!” But it’s the days without a Stripe notification that tell you more about your revenue and viability.

Besides the brokered feedback on online dating profile, we also sold a service in which we analyzed the feedback and then edited your profile for you. Only two people ever ordered this. But the most recent customer who ordered it, he raved about it in emails to us. We changed his life, it seems. Gave him new confidence and helped him meet girls online. It was awesome.

But no one else cared. He was the only guy who ever used that service. And I’m thrilled we helped him so much, but he’s a false positive.

And so were the rest of the customers who paid me.

Because a few people paying you isn’t always good. It doesn’t always mean you’re on your way to success. Sometimes you’ve already hit your ceiling right away, and you should realize that you’re extremely limited in how much revenue you’re going to have, but you’re getting false validation, and you’re thrilled by it, because you don’t realize what’s going on.

Clear failure is awesome. Absolutes are great. Knowing that it’s just not going to work lets you move on with a clear conscience, whether it’s a startup or a friendship or a romantic relationship.

Month over month growth is awesome too. It’s clear that you’ve got potential if you’re growing at 30% a month for several months.

It’s the continuous small revenue that is murkier. Are you onto something? Do you just need to make a few changes in your copy or onboarding or whatever? Do you need a bigger pivot? Or are you already close to your revenue peak?

Don’t relax and think you’re winning until you’re beyond initial revenue. Don’t get tricked. Having no revenue at all would have been better.

This article was originally shared on userinput.io

About the Author

Stuart Brent

Stuart Brent is the founder of userinput.io, a service that provides on-demand feedback for websites and business ideas. He’s a dork and actually really into feedback, and happy to help you form the best questions for your own surveys.

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