Presales, raising funds for your business & FINDING YOUR FIRST CUSTOMERS

“While most startups who set up pages on Kickstarter, Indiegogo or a host of other crowdfunding sites are looking to hit a specific goal and then get started making their project a reality, a new crop of businesses are using the platform as a wholly different business model: selling their product before it exists.”
Harvard Business Review
 
In this post, we'll cover several topics.

• The benefits of preselling products and services
• Crowdfunding options
• Alternatives to traditional bank loans

 
Once you’ve identified your target customers and have them at the heart of everything you do, let’s look at how you might further increase your confidence that your product idea is attractive to your target market and that you’re “on to something” good!
At this stage, your focus should be on ensuring that you've done all you can to avoid wasting time and money in creating a product that the market does not really want or need.
 
How do you find out whether your product idea is a “no”, a “maybe”, or a resounding “yes!”?
There are many smart businesses and business people that do not advocate spending a penny on product development until they are confident that:

1. The market is large enough to support their business
2. They've identified a target market and understand its pains, frustrations and desires
3. They’ve identified ways to solve those pains and frustrations or to deliver on the identified "wants and needs" and either possess, can develop, or bring in the capability, skills and resources to deliver that solution
4. They’ve confirmed that there are people that like their product idea and are genuinely interested in it - i.e. people like the way they are planning to solve the problem and would pay for it
5. They understand what the product needs to be and do in order to make customers happy - the features or elements that need to be included which make the product worth paying for

 
But how do they measure genuine interest?
If you progress on to reading Don’t Hire a Software Developer Until You Read this Book, we'll be working on creating and testing prototypes in chapters 9 and 10 and talking about running user tests and customer interviews as methods to help you assess interest in your product idea.

These activities can also help you identify target customers who will pay for your product in advance by identifying the "essentials" needed to ensure that your product is seen as being valuable.
 
Which of these 5 stages would you like to be at and which one would make you feel most secure about spending your money (or other people’s money) in order to pursue your goals? Every one of these stages may need to be revisited and fine-tuned many times, but it's still very useful to have clarity on what you are aiming for.
 
What are presales?
Presales can refer to a technical type of sales which covers an analysis of the customers needs before they purchase a product, presales, preselling, or preorders also refer to the sales of services or goods before their release date which allow a business or entrepreneur to assess the market’s willingness to buy the product. This is done in order to minimise the investment risk in creating the product, as we know that it can be risky to create an "all singing all dancing" product until we know more about how well it might be received. Presales can also be used to fund the creation of the product in full or to contribute towards development costs. Do you think that the odds of success would be in your favour if you were able to achieve this?
 
Here are a few examples of companies and industries who use the presales method all the time:

• Off-plan house sales. When a customer buys into the glossy brochure provided for a new property development, when all that might exist is a hole in the ground, or where building work has started, but may not be finished for months or even years - that is a presale.

 

• Apple. Did you order your new iPhone before it came out? If so, you were a presale! A big presentation was done, Apple fans got whipped into a frenzy and pre-ordered because they wanted to be among the first to get the latest new gadget.

 

• The Gaming world. What about the latest version of the Sony PlayStation - did you order one in advance for yourself or a loved one? Presale!

 
There are also a number of online shopping sites which allow traders to put their products up for pre-order and crowdfunding sites use this model too. This is seen everyday on Amazon where you can order books months in advance in some cases. 
 
There is nothing “scammy” or dishonest about presales or preorders as long as you:

• Give people what you agreed to give them for the money they have paid, and
• If you return any monies paid in full if you aren’t able to deliver on your promise

 
If you’d like to investigate pre-selling in more detail, here are some ideas:

• Begin close to home. Which family, friends and acquaintances need your product or service? Would any of them sign up to be your first customers? Could you request a deposit, or down payment?
• Take a look at the major crowdfunding sites. If you’d like to raise funds to build your product, Crowdfunding might be the way to go if you’re happy raising funds from a large number of people happy to make a contribution to your venture. Rewards based crowdfunding operates to raise money by offering some kind of product, service or "reward" in exchange for backing the fundraising company. The top crowdfunding sites may change over time, but take a look at Kickstarter https://www.kickstarter.com/, Indiegogo https://www.indiegogo.com/, RocketHub https://www.rockethub.com/ and GoFundMe https://uk.gofundme.com/. You can find information about equity based crowdfunding in the Other finance options section below.
• Model success. Take a look at the technology-based campaigns on the crowdfunding sites and see how they have pitched their product(s) and positioned themselves. Look at the campaigns that are going strong that are on target to reach their funding goal and those that have raised funds in excess of their goal - and also those that are struggling to hit their funding target (or who have already failed to reach their target). Try to get an idea of what to do (and what to avoid). Some of the crowdfunding sites provide great videos and blog posts with tips on how to make your campaign a success. Here’s some advice from Kickstarter: https://www.kickstarter.com/help/handbook/your_story and this YouTube video, from Indiegogo also has some brilliant tips. It’s just over 3 minutes long and the tips and data insights at point 1:30 in the video are pure gold: http://bit.ly/29afJqb. YouTube, Udemy and Slideshare also feature advice on how to “win” at crowdfunding.
• Use your customer knowledge to help you with marketing. Don’t forget about your target customers and what you’ve learned about them, their interests and priorities. Include elements of this in your campaign, so that you are able to present a clear and compelling message and pitch which attracts your target customers.
• Read the small print. If you want to go down the crowdfunding route, make sure you’re familiar with each site’s legal terms and conditions, fee structure and rules before you make a final decision about which one is right for you.
• Get help to spread the word. Email or message friends and family and get people you know (and the people they know) to support you across as many social networks as possible. The crowdfunding sites say that those who are consistent and have a good network of supporters helping them to spread the word are invariably the most successful. Virality can be amazing if it happens, but first you need a marketing plan that you can sustain over a period of time in order to hit key targets, and get the crowdfunding sites algorithm working in your favour to increase your visibility. If you have a large network of contacts, this could really work to your advantage.

 
Other finance options
As an alternative to traditional bank loans, there are a number of organisations that may be able to help you obtain finance for your business. Take a look at these option(s):

For government funded loans:
https://www.startuploans.co.uk/
 
Angel Investors and venture capitalists:
https://www.angelinvestmentnetwork.co.uk/entrepreneurs-home
http://www.ukbusinessangelsassociation.org.uk/services-for-entrepreneurs/
http://www.venturecentral.co.uk/finding-investment/4583889654
 
Peer to peer (P2P) lenders are an alternative to going to a bank for a loan. The larger players in the market include:

• Funding circle UK: https://www.fundingcircle.com/uk\
• Funding circle US: https://www.fundingcircle.com\
• Zopa: https://www.zopa.com\
• Ratesetter: https://www.ratesetter.com/

 
Equity crowdfunding allows startups and growing businesses to find investors and raise funds. In return, investors receive shares in the company.

• Seedrs (offers “the crowd” equity in seed stage companies progressing towards building a prototype, or their MVP.) https://www.seedrs.com/raise
• Crowdcube. Raise finance using their equity crowdfunding platform: https://www.crowdcube.com
• AngelList (US) connects startups, investors, and those looking to join startups as employees: https://angel.co, AngelList (UK) https://angel.co/uk
• Fundable offers equity and rewards based fundraising so you can offer investors rewards in exchange for cash, https://www.fundable.com/
• EquityNet has been around since 2005 and will help you raise business capital, https://www.equitynet.com/

 
For an overview of the options available, The Business Finance Guide offers a comprehensive table of lending options for businesses at all stages of growth, with further information and videos available for you to explore each option: http://thebusinessfinanceguide.co.uk/finance-options/.

Always check the small print before making any commitments!

Other options...
The next best thing after having advanced sales under your belt, is to set up a Coming Soon landing page.

This isn't as good as having pre-orders because you won't have generated "hard cash" in advance, but if you can get a large number of people to sign up to your Coming Soon website or landing page this can give both you, or any potential investors evidence of the level of interest in what you are offering.

A landing page is a one-page website designed to convert people to take a desired action. (In this case, people will be providing their email address as the desired action, in order to be among the first to know when your product or service is about to go live.)

You will need to set up the page, create some compelling copy outlining what you will be offering, and how it will benefit your target market to excite and inspire them enough to want it, and to care enough to request a notification about when it will be ready for them to use.

A percentage of people who sign up will be your very first customers - if you are able to sell your concept and its benefits, and create a build up to your launch which prepares people and gets them ready to buy when the time is right!

Wix, Weebly, ConvertKit, LeadPages, and Carrd are just a few of the no-code / low-code website and landing page builder tools that you can use to create one.

​You can find an article on the core elements of a successful landing page on ConvertKit's website.

Take a look at the Wix template below - this example is for a bricks and mortar service, but you can choose an alternative template, or edit one like this and include a mockup of your website and app, along with some key product benefits.
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You can see the blue button to the top right, which will allow you to copy and then edit this template with your own brand fonts, colours, relevant images, and marketing copy.

I chose this example because the Are You Ready? message is quite eye-catching - however an even better structure for the page would have your number 1 Unique Selling Point front and centre, along with your brand tagline, and the classic Coming Soon message (as an alternative to the Are You Ready? text) big and bold so it is unmissable when people visit your landing page.

Make sure that what you are offering, and its usefulness is crystal clear to your target market in order to maximise the effectiveness of your landing page. There should be zero ambiguity and no guesswork required!

Once you have your landing page up, you will need to drive traffic to it via social media marketing, ads, or other marketing tactics.

​Originally published as a free resource offered with Don't Hire a Software Developer Until You Read this Book and adapted for the Purposeful Products blog and published on the Purposeful Group website.
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Copyright. Purposeful Publishing, K.N. Kukoyi, All Rights Reserved.