Evan Carmichael explains why you should get customers to pay before you build anything. Get a purchase order or sales commitment first, then produce. He built features nobody wanted in his first software company until he switched to charging customers for custom work, which became his product.
Chapters
Don't spend money until you're making money. It's one of the hardest things to do as an entrepreneur, but one of the most important lessons that you can take. Because anybody can spend money. If I gave you a million dollars, I'm sure you can find a million different ways to spend it. But making money is the challenge, and I want to make sure that you're still around. I love bootstrapping up businesses, but I want to make sure that if you are not still around in a couple years because you've blown through all your money, then you're not going to be there to realize the opportunity that's ahead of you. A question came in from Shelley, who's one of my readers, who's selling meatballs. She's got gourmet chicken meatballs. And she said, if I'm gonna launch with no money, can and should I get purchase orders from companies who'd be interested in purchasing the meatballs for their stores and restaurants? Absolutely. Try to line up the sales before you even make the product as much as possible. If you're making your own little gourmet meatballs, then maybe you can make some in your kitchen just as samples, but you don't want to go out and spend tons of money on something and then not have it work out The worst thing you can do is spend all this money, get lots of inventory, and then find out that the market doesn't want it. And that's a common mistake a lot of entrepreneurs make. They have a great idea for a t-shirt line or food product or whatever it is, and so you go out, and if you're going to get somebody to manufacture it for you, there's, there's minimum orders. So suddenly you're now stuck with 10,000 t-shirts or frozen chicken dinners or whatever it is sitting in your garage. And nobody wants it. That's what I want you to avoid. So go out and start making sales. See if people want this. Get the purchase orders. If people are saying, yeah, this is great, then you can go out and spend the money to actually make them. If all the feedback you're getting is saying, nah, we're not interested, then you just saved yourself tons of time, effort, and dollars from not going down the wrong path. With my first software business, we made that mistake where we invested tons of time and energy into building this one feature that turns out nobody cared about. We thought it was cool, we thought it'd be really helpful, my partners were in the field so they should know what we're doing, but nobody really cared about this feature. Now luckily we had enough that was still in the software that people would buy it. But we wasted so much time going down the wrong path. And from that moment on, we started building only around our customers. And we talked to our customers and we said, what would you like in the next version? And our prospects, what can we do to make this better for you? And we charged them to make the product for them and then rolled it out to everybody else. And so we only built new features in around what we knew our customers were interested in. And that's the right way to build a business. And so I hope you learned from that, you know, that lesson, my mistake of going down the wrong path. You don't want to invest tons of dollars into something because you think it's a great idea. Get some justification from the market. Get them to say yes. Go out and get those purchase orders. If you can get purchase orders, you can get financing. You can get the money you need to launch this thing. If you can't get purchase orders, then maybe you shouldn't do this business. Maybe you should find another way to stand, another way to market, another product to sell. If nobody wants it, then that's a good indicator for you as to what you probably shouldn't do. So great question, good luck with it, Shelley. For those of you watching, if you agree, please give it a thumbs up below. Everybody who's trying to bootstrap their business, give it a thumbs up. I love seeing those come in. And if you have a question for your business, please leave it in the comment section below. I always read those and look forward to seeing what you have to ask. I'll see you soon.
