How solving a real pain makes us already $1000 a month, even before the big launch

This blogpost is part of the series: ‘My Challenge: From Service Business to Product Business in 1 Year‘. You can read the full series here, or you can read this as a stand alone post.

Conclusion after last blogpost in the “service to product challenge” was:

Between today and september 2013, we have to find a pain that we can solve with software, and for which 200 people in this world are willing to pay $50 a month (=$10K per month recurring).

This blogpost is about “find a pain” in the above statement.

Actually I have some good news (at least for myself and the rest of the company). We are now making almost $1000 a month on automated recurring revenue with our product that is still in private beta. Yes, you did read this right. We didn’t do the ‘big launch’ and we are already making $1000 of monthly recurring revenue! 10% of our target is reached! Yay. The reason why we achieved this has mostly to do with the rest of this blogpost. So please read the rest of this rather long post if you are serious on bootstrapping a software product business.

Finding the pain

The first step and probably the most important step for any startup: finding a pain. Finding a problem. Finding headaches of your future customers. Don’t come up with an “idea” without having identified a clear, burning, irritating pain or frustration for a certain niche market. A lot of startups fail because they have a brilliant idea, a so called solution, that is actually not solving a real pain point. Finding a pain point in a market is one of the most important steps. If you find a very frustrating pain, selling software that solves that pain will be easy (please read that blogpost if you didn’t – and this one). However, if you come up with a “solution” for something that is actually not a problem for no one, you are putting a lot of time, energy, caffeine, nightly overwork and health into something without any evidence it would actually sell. Good luck selling software that nobody is waiting for!

How do you know a pain is worth writing software for?

Exactly.

If there are people willing to pay for a it!

Think about this: Every day there are hundreds of people quitting there job, investing their savings, working 70 hours per week, drinking liters of coffee per day and giving up sleep, risking their reputation, taking credit, working 6 months 7 days a week 12 hours per day on their idea …. all without knowing if there are people that would actually pay them soon or late for what they are building.

HOW CRAZY!

(I know, because I can tell you from experience)

So, how did we find a pain out of thin air, worth writing software for? How did we know for sure that we would not spend 6 months of our time, energy, hard work, sweat, tears, discussions, meetings and endless debugging sessions on something that nobody would every buy?

Well, we used a very sophisticated and special tool to collect information and feedback: our mouth and our 2 ears. We called around until we did find 10 people who told us literally that they would pay us to get rid of problem XYZ.

This is the step where it goes wrong so many times. People prefer to stick to their original great solution or billion dollar idea (born in their head instead of during conversations with customers). They spend all their time building their idea, instead of validating their idea first. They prefer to dive into the code immediately, spending all their time and energy on fancy ajax, clean code, a trendy logo, a responsive site and a cool company name. Designing a logo and brainstorming on a company name is far more fun than cold calling people asking if they have time for you to talk about their pain points.

People are scared of be proven wrong. They are scared that their billion dollar idea turns out to be not so great after all. And so they postpone the crucial confrontation: “WILL SOMEBODY PAY FOR THIS?”. By all means they focus on everything except asking people if they would pay for their solution.

Auwch…

Tackle the most difficult thing first. You have to do it anyway. So why not start with it? You know you can build software, and make your site responsive. You know for sure you can come up with a fancy company name and logo (or hire someone to do that for you). But are you so certain you’ll find at least 10 people willing to pay for your product? Tackle that first!

1 mouth, 2 ears and 1 phone…

So, there we go. Our approach was the following:

  1. call people to ask what their pains/problems in their business are
  2. find a common and recurring pain in a niche market for which people are willing to pay
  3. write software to solve that pain
  4. get paid with a 99% certainty once the first version of the software is ready

During 1 month, we have been calling over 500 people from different niche markets, asking what their pains are and if they would pay to get rid of them.

This was a typical start of a phone conversation:

Hello, I am Pieter from Zorros. We build software for businesses like yours. These days we are writing software to improve the business of [doctors/nurses/industrial cleaners/dentists/music teachers/construction business/…]. I’m calling you to hear from you if there are any pain points in your business. Any frustrations, any issues, any time consuming and administrative tasks that ruin your day? Would you have 10 minutes to talk about that with me? That would be helpful to build the software in the right shape…

We called people from different niche markets. Like doctors, vets, teachers, lawyers, researchers, dentists, construction companies and so on. Our criteria for the markets or industries were:

  • It had to be a niche market.
  • We wanted to think wider than the typical developers target markets. We don’t need another another Twitter client or another project management software. Here is a list of 100 Twitter clients. Good luck competing in such a crowded market.
  • It had to be B2B. No B2C. Businesses know how important is it to cut costs by 10%, to get 20% increase in revenue, or to save 10 hours per week. They will actually pay a lot of money if you software can do any of those.
  • We would need to be able to reach our market online. That means: via (a combination of) blogs, twitter, email, community sites, facebook, or anything related. Offline marketing is much more difficult and less scalable. 60 year old yoga teachers is not an easy niche to market to, following these criteria.
  • We had to be able to reach the business owner/boss directly and solve his/her problem. If the boss (the one with the credit card) and the person for who you solve the problem are not the same, it’s more difficult to sell, since it will be less clear for the boss why he would actually need to pull out his credit card.

And so we started calling randomly through those niches, looking for pain.

Of course, as you can imagine lots of people told us that they don’t have time for strangers calling them. Which might actually be true if you run a business, have children, need to go to the store or are in the traffic jam! But a big portion of them were quite happy that there is someone caring about their business and listening to their frustrations or pain points. Lots of people love complaining about their problems or frustrations.

At the end of the conversation, ask them if they would be willing to pay for any software that could reduce their pain. This is crucial. If they are not ready to pay you for a solution, then very likely the problem is not big enough for them. Be sure to have at least around 10 people from a certain industry telling you literally over the phone that they would pay for a software to get rid of problem X.

Being featured on TechCrunch, having a nice logo, 1000 likes on your Facebook page or your friends telling you that you have a fantastic idea sounds great. But after that, nobody cares. Really not! The only thing that matters is 10 people telling you directly that they would pay for your software.

If you can find 10, then you can find more. For sure. No software has a million users the day after launch. They start with 1. And then 2. And then 5, 10. And so on. So why don’t you start with getting 10 concrete confirmations over the phone? In stead of just dreaming of a few thousand users?

Most startups have zero people willing to pay them when they start coding. Be smarter and get at least 10 before you start coding.

Here some numbers and facts:

  • We did around 500 cold calls in 10 niche markets.
  • I estimate that more or less 150 of them actually wanted to talk to us, the rest thought we were selling something, thought it was a joke, or had no time.
  • The first 20 calls were the most difficult. It gets much better after a while. Get used to it.
  • We quickly got a spreadsheet full of potential problems to solve with software, about 100 ideas. Once people start complaining, they complain about everything. A great source of ideas!
  • It’s not easy to extract pains from people. Often they can’t immediately tell what are their problems, since they are so used to how things are going since years.
  • Only a fraction of the 100 ideas were big pains and recurring problems that were mentioned over and over again. About 15 of them. The rest were less relevant problems or were only for one person.
  • We called for about a month.
  • Our phone bill was high. But I prefer a high phone bill over months of sweat, hard work and building something nobody is waiting for.
  • So, at the end of the 500 calls, we had around 15 concrete ideas for software, where each time at least 10 people confirmed literally that they would pay money for software that could solve that problem.

Now, ain’t that nice?

EVEN BEFORE WRITING ANY SINGLE LETTER OF CODE, JUST USING OUR 2 EARS AND 1 MOUTH (and a lot of patience and listening), WE FOUND 15 CONCRETE SOFTWARE IDEAS FOR WHICH WE ALREADY HAVE A LIST OF CLIENTS THAT CONFIRMED THEY WOULD PAY US.

We are now in (paying) beta with our software, and we actually make $940 per month of recurring revenue. We didn’t even launch in big. We launched in silence for a small group of people that subscribed to the “keep me posted page” (more on that in the next blogpost). I’m sure that most of the success is directly related to the fact that we started from problem, instead of starting from our own idea.

So, Pieter, will you finally tell me what software you are writing?

I know. You want to know what software we are working on. But I first want to launch “in big” before actually announcing it here on my blog. However, the actual techniques and figures shared here on the blog are far more important than the software we are working on. It does not matter which software we write. It matters that you get the “problem first” approach right.

You get my word: later through the blog post series, once live, I’ll announce the actual name of the software. So if that name matters to you, stay tuned!

(Pssst….if you like this blog post series and you want to say thanks, just tweet or like or share this blogpost.)

Author: Pieter Eerlings

http://www.linkedin.com/in/pietere http://www.last.fm/user/pietereerlings

12 thoughts on “How solving a real pain makes us already $1000 a month, even before the big launch”

  1. Hey Pieter,

    Nice blogpost. I am in a very similar process and it’s great to get a little insight in to your approach, thanks for sharing.

    If you’ve recognized some of the simple (but hard, boring and un-sexy) truths you describe (such as that one should never start with an ‘idea’ but with a proper target group and its ‘pain’, etc) it’s amazing how often you come across people falling in this ‘idea trap’.

    It’s interesting that you’ve chosen to research by ‘cold calling’: I can see the value for a non-technical niche (where it’s harder to find online communities to research) but I wonder if it would be misleading because of the relatively small number of people you talk to.

    Also: (as I’m sure you know) there’s a huge difference between what people say and what they’ll do. I’m sure there’s a lot of people that would say they’d pay, but that would not actually pay ;) The way you’ve conducted your phone strategy/conversation seems crucial.

    Thanks, Dave

    1. David, next to the cold calling we did set up a “keep me posted” page on which we got a few hundred sign ups (= next blog post). So yes, 10 is certainly not enough to open up your development environment and start coding. But it’s good enough for first idea validation and finding a pain point. The few 100 sign ups afterwards on the landing page are a confirmation and proof that it’s also marketable easily.

      About the difference between saying and doing. Indeed. But out most of the people that we called and talked to, called us back after a few days: “and, how is the dev going?”. Or they mailed us several times: “so when can I start using it?”. So how they say it is important. We really felt they needed something as they were getting impatient to start using our (to be built) software.

  2. Good read. Definitely helps! A few questions though…

    You say “…we started from problem, instead of starting from our own idea.” Say you’ve already got your idea and dozens of relevant ones for its content, but its main focus is still solving problems. Would you start from the problem with those initial ideas in mind, or start from product/ideas and enhance to include a fix for those problems? If you catch my drift.

    And the “keep me posted” page, how much in advance of actually starting to build your product did you put it online? Did it talk about a general idea, or very specific ones? Really curious :)

    And Dave, here’s a crazy thought: after discussing the problems and getting input, why not propose to enter an agreement and offer them to pay a small fee in advance, in exchange for early access, benefits over time (earning back their investment that got you up and running) and whatnot. Does that seem a viable way of doing business to you? It’ll sure provide you extra funds ànd you’re sure your product’s launch will be successful based on the amount of business that agreed to the proposal.

    Cheers!

    1. Thanks for your comments Sebastiaan.

      I must say I’m a bit lost for your first remark… But we started from nothing. No idea. And then we called around looking for problems. And out of those problems came concrete software ideas.

      About your second question, the “keep me posted” page is going to be covered in my next week blogpost.

      Your idea about paying in advance is indeed a great one. If you got people paying in advance, you are so sure that they’ll pay once the product is ready since it proves you really hit a pain point.

  3. This is a good post and I really like your writing style.

    However, I won’t be too optimistic _only_ because you already have 1000$ of recurring revenue. This is… well, nothing. I’ve created 2 different software products in the past and I always had 10+ customers from the beginning. I found I could easily scale them to almost 10K of revenue but then I was stuck. In hind-sight, this is what went wrong:

    1st product: too much support costs. For every new customer we signed up the daily amount of phone calls and emails increased noticeably. We had the same scaling problem that you outlined in your service company post.

    2nd product: Market too small. Although it’s nice to find a niche and “laser-focus” on that one, you have to make sure this niche isn’t too small. It’s tempting to pick one that has a clearly defined target group, but often this also means that you can’t scale to sell hundreds or thousands of copies a month, just because there aren’t enough potential customers out there.

    I’m definitely not an expert in product (company) development in any kind – we’re also in the same process that you are and still making most of our monthly income from custom projects. I just like to warn you not to fall into the same traps that I did.

    Good luck! – It’ll be interesting to follow you!

    1. Thanks for the feedback / warning Daniel. I’ll try to not make those mistakes, but future will tell if our market is big enough and/or if support is bearable… I’ll share on this blog, whatever the outcome is.

  4. Hi Pieter,

    I enjoyed reading your blogpost. I’d like to hear your thoughts on how your approach to find a so-called pain can be combined with thinking “outside the box” to create new products. I personally believe that an elaborative and profound market research can sometimes suppress the latter. By focussing on the rather confined outcomes of your research, there is a risk of not looking at other opportunities which are situated outside the range of the results of your study. Thinking outside the box is necessary, not only from a innovative point of view, but also from a competitive perspective.

    Kind regards,

    Mike

    1. True, innovation and thinking outside of the box can lead to great businesses as well. But for that you need capital. Market research, inventing and creating a new product, trying to convince people to use it or selling it via heavy promotion cost a lot of money. Since you come with a solution of which people are not yet aware that they need it, you’ll need much more marketing/selling/promotion/making people aware of your new invention.

      So, big innovations are definitely an option if there is a lot of cash at hands (so if you have investors). But I’m a convinced bootstrapper (read: I don’t want to work for investors). So, there is much less time for me between starting up and the cash collection, since no funds. Therefore, as a bootstrapper, important to solve a problem people are willing to pay for, to cut out months of research, marketing and promotion.

  5. Nice post, and I look forward to following your progress!

    No matter how many times I’ve came across the notion of talking to your customer or your future customers, I never acted on it. I remained in the camp of trying to find a market for my idea. This would be okay, if I was good at marketing — which I am not.

    Why haven’t I followed the advice? Mostly out of my fear of “cold calling” folks. Recently, I had a little gut check with myself and decided I needed to start tackling my fears head on (I guess my personal “pain points”). I still haven’t done any “cold calling”, but I just committed myself to this new way of living ;)

    I have a couple of questions:

    1) How did you find businesses to talk to? Forums, Directories, etc.
    2) If the person on the other side of the phone said they didn’t have time, did you offer to call them back at more convenient time?
    3) Did you test different scripts?
    4) Did you think about offering an incentive to folks who weren’t ready to talk? I am thinking along the lines of a gift card to Amazon, iTunes, etc.

    Thank you for your time,
    Graeme

    1. Hey Greame,

      Sorry for the late reply, I was on holiday. Work hard, play hard, you know…

      1) How did you find businesses to talk to? Forums, Directories, etc.
      Well, actually we started calling quite some business “randomly”, but of course targeting business that make decent money, businesses where time = money (so if we can save them time with our software, they would pay us for sure), only B2B no B2C, … (you can see more of our criteria above in the blog post). I think actually that starting to call is more important than first thinking too much on what business to call. Calling a few different people from different businesses and getting feedback will get you to the right business / problem eventually. Thinking too much about it obviously not :-)

      2) If the person on the other side of the phone said they didn’t have time, did you offer to call them back at more convenient time?
      No, I just picked the next one. Convincing someone is much more difficult than just skipping to the next one. You never run out of people to call (for a market big enough). Of course, if your market is “skateboarders that are exactly 18 years old and speak French, Spanish and English” you might run out of candidates, but that’s a too small market anyhow.

      3) Did you test different scripts?
      In fact, again, i didn’t think too much about it. I took the first 10 calls to warm up & practice. Nothing to loose mentality. From then on, it went better and better and very natural at the end.

      4) Did you think about offering an incentive to folks who weren’t ready to talk? I am thinking along the lines of a gift card to Amazon, iTunes, etc.
      Again no. If they are even not ready to talk, then reaching them and convincing them to pay for software would probably be more difficult. If in a certain business people are not willing to talk and not open, you are in the wrong business. Pick another business instead that is open minded.

      Good luck!

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