Entrepreneur Office Hours - Issue #159
More lessons about entrepreneurship from poets... yay!
First things first, I need to apologize for an editing error. In last week’s issue, I messed up the Q&A by including the new question but an answer from a previous week. To those of you who noticed the mixup and sent me an email, thanks for letting me know! To everyone else who didn’t mention anything, I’ll assume you either figured out the mistake on your own, or you were incredibly confused by my answer in the reader Q&A. In either case, I’ve corrected the error below by including the proper question and answer. I also wish I could tell you I fired the incompetent editor responsible for the mistake, but… well… I’m still here. Sorry.
To make up for my negligence, I’m sharing an article I loved writing and have been meaning to share for a long time. It’s a little different than what I usually post, but, if you’re interested in content creation, the info is definitely worth knowing. The article is about Walt Whitman — the famous, 19th Century poet — and how, 150 years ago, he was basically pioneering the kinds of strategies TikTok and Instagram stars use to successfully build their audiences. Here’s a hint about what it covers: did you know “thirst traps” were a thing in the 1800s?
Not interested in being TikTok famous? No problem. In this issue, I’ve got startup advice for you, too. In the second article, you’ll find a story about one of the most common phrases entrepreneurs use when fundraising and why it’ll cause investors to not trust you.
Whether you realize it or not, social media content creation is an industry that’s been around much longer than most people realize.
The littlest things you say in your fundraising pitches can be more impactful than you probably realize.
Office Hours Q&A
I’m wondering if you could share some insights about how to set your product’s price when you initially enter the market with a new company.
I’m no pricing expert, and I also appreciate that people spend their entire careers studying pricing, so I don’t want to overstep my usefulness here. However, I will note that startup pricing is very different from the type of pricing optimization that occurs when companies mature.
The first price for your product is a bit of a guessing game. The most important thing is to make sure your guess is reasonably well educated. You do that by considering things like:
What’s my competition pricing similar products at?
How much does it cost for me to develop and deliver my product?
How will the costs of development/delivery change as my company matures?
What are consumers willing to spend?
In addition, you need to be prepared to experiment. By that I mean whatever price you start at, it’s not the price you’re going to have to live with. For example, I remember worrying that if I charged my first customers one thing, I’d struggle charging higher prices in the future.
Nothing could be further from the truth. In fact, I had one company where we charged our first customer $25 per month and, within a few months, we were charging customers $1,000+ per month for the same product. Yes, our target customer turned out to be completely different than we’d initially thought (hence the big shift in price), but it never mattered that we’d only charged $25 for the same product a few months earlier because our new customers had no idea.
The same will be true for you, too. Each customer is its own silo, and charging one customer one amount won’t prevent you from charging other customers different prices. This is what allows you to do lots of experimentation in order to find the right price. And, ultimately, that ability to experiment is the key for startup pricing. The only way you’ll find the best price for your startup’s product is through trial and error.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!