I wasted $40k on building a product & how you can avoid it.
I met someone on Twitter and she said she’s been doing ads for the past six months for her new startup and has already lost $9500. And I was like, I’ve been there but combining all, I lost $40k. 🤦♀️
This brings me to a question, or I want to know because I’m curious, do first-time founders lose money a lot?
And it’s possible because they aren’t aware of so many things. Like I could have built my MVP on code tools but I hired senior developers, without knowing a single user.
So, let me share with you a few things where you can avoid losing money.
1. Taking a lot of risks
Risk is a huge bet and a big cost. Rather than hitting a shot in the air and taking a lot of risks, experiment with risk in control.
If you plan to build something your number one risk will be to build it in market time or else someone else will be ahead of you. For that, you can either build it yourself or hire someone. If you build it yourself the risk is it can take a lot of TIME and if you hire someone it can COST you a lot.
If you have a marketing plan to be on every other social media platform, it’s a risk that you won’t be utilizing one single platform at the most. You can take a bet on one platform, work on it until you’re confident that you’ve build a good presence and then move on to other platforms.
Basically, the risk is everywhere, you can’t stop working on something because of it and you can’t let it go out of control.
2. Thinking ads will do everything
Ads are definitely great but only when you have some business around your product already. They help boost sales and expand but it shouldn’t be in the early stage strategy. At a time when nobody knows you, building trust, visibility and brand awareness among early customers will help more than an ad does.
The best Ad strategy is to already have some paying users and a niche down audience segment. So, when you create an ad you know whom to target, how to describe the product & users and create the right call-to-action (CTA).
With your already paying users, try to find out why they use your product, what they think when they use the product & how their life is changed after using the product. These type of questions will make you think hard about the user behaviour and their journey. Ultimately creating a more strategic ad campaign.
3. Creating a wrong product for a user segment or vice versa
Building a fully functional product is a huge investment and is a big bet if you do it without validating it with customers. Rather than building a complete vision of the product, it is always better to start with a smaller MVP version.
An MVP that solves one problem and is for one particular user segment.
I’ve wasted more money here because in my head I’ve created a perfect product that my users WILL use when they get to KNOW about the product and for that, the PRODUCT NEEDS TO BUILD WITH EVERY FEATURE THEY MIGHT NEED. I hired a team of senior developers and they did a quite good job but only after I launched it, I realize that’s not what my users need.
Also recently, I was advising a founder who had already built a prototype of the product and was so confident that there is a need for the product but still haven’t got users to try the product. So, I gave my two suggestions:
- If you see a problem, that you assume has a market, doesn’t mean a product is required for the solution — what will be the biggest scenario for people using it?
- If you find that this problem requires a product, go to the place you found the problem first-hand, because most of the time you’ll find initial users close to it.
If you build a product or add a feature without thinking about a user segment for it, think again about how will you get new users. Your product strategy shouldn’t be just to build features but it should be a system that works with understanding the user journey and overall company vision.
4. Not knowing how the product will make money
No wonder how fantastic Twitter is, it’s my only favourite social media, in comparison to Facebook or Instagram it still hasn’t figured out how to make money. But unlike Facebook, it has fewer direct competitors. (But it’s making changes now)
Even though Twitter is the heart of social media, your product doesn’t need to be like it. With your product, at least have one pricing strategy and the best thing is to implement it early. Your product might grow slower but it will save you a lot of thinking and experimenting in future.
When you’re clear about what will you charge, you can then focus on doing marketing to get paying users from specific sources.
Pricing can be hard but if you keep a reasonable cost and you see people are paying for it, even a few, you have done your price testing correctly. Also, don’t experiment with it frequently because it can negatively affect the user’s mind and brand value. Stick to one for at least a year so that by the time users can see added value with the increased price.