$3.95? We’re Rich! – Learn to Test Business Model First
How to test your Business Model?
On Friday, I received this welcome email:
Subject: Sale – Entrepreneurs Guide to CustDev- ID:5777670 Entrepreneur’s Guide to CustDev eBook
You have earned an affiliate fee of 3.95 USD for the sale (ID:5777670-686=
2856) of Entrepreneur’s Guide to CustDev eBook on Thu May 27 2010 23:52:3=
Entrepreneurs Guide to CustDev
startupSQUARE, having not yet progressed to beta testing, now has revenue! Granted, a very small amount of revenue. Why?
Confirm Every Hypothesis
After enjoying the Startup Lessons Learned Conference, we decided to simplify yet again and try and figure out how we could test business model/ every hypothesis, no matter how silly. One of those hypotheses was, “We can earn sufficient revenue from affiliate marketing to offset operational expenses.” (Translation: That we’ll make more money than we spend per customer.)
That hypothesis is too complicated to test right now and we actually hadn’t planned on testing anything until September or later. So we tried to pick something simpler we could test today.
We settled on, “Entrepreneurs will click on affiliate marketing links.”
So we picked a couple products that we think are genuinely useful to all entrepreneurs and that we actually use. Then we threw a couple of links into the right hand column of this blog for “Four Steps to the Epiphany” by Steve Blank and “The Entrepreneurs Guide to Customer Development” by Brant Cooper and Patrick Vlaskovits. Result? $3.95
Get Rich Quick
Ok… $3.95 isn’t really a huge success story and I’m certainly not going to retire on it. (In fact, split three ways I was only able to buy a bagel with my share.) I’m just happy it only took two clicks to get a sale.
Regardless, it does confirm that it is at least possible to make some money off a very specific target market (entrepreneurs) without charging up front.
We’re a long way off from really confirming that we have a viable business model with a revenue per user higher than our customer acquisition costs. However, it was important to us to develop a business model which helps entrepreneurs start their businesses. Charging entrepreneurs up front for the service seems…well…off.
When you’re trying to start a business, you’re short on time, money, and people. Charging $15-20 or more a month to offer a co-founder dating service is not a lot of money and people have largely indicated that they’d be willing to pay it if it works. Still, we’d like to do one better. We’d like to offer a free service to entrepreneurs and get paid by the people already in business.
Clearly we’re don’t want to run a site plastered with Google ads and certainly we’ll work hard to develop our premium model like everyone else. This was just a small test to recommit ourselves to the customer development and lean startup philosophy.
We’re still alpha testing and we’ll keep testing both our product and our hypotheses until we’ve created something that will sustain itself by helping entrepreneurs build businesses. I’m happy that we were able to take that first step towards real revenue now.
Now…off to earn another bagel.