Pre-selling in Four Steps

08.09.2020 | Written by Ole Peterson

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Monetize your idea prior to product development

Imagine you develop a product over years and nobody needs it. Your time, effort and invested capital have been spent on a product that not enough customers are willing to pay for. Fortunately, there is another scenario: 20.000€ in pre-sales is not uncommon with the right business model and some experience. All that in two weeks is also anything but utopian. Using pre-sales you can generate the first serious cash-flow with your mere idea; this opens the door for bootstrapping, but also validates the idea for investors.

In this article you will learn about pre-selling and how you can already achieve a serious turnover with your product idea.

What is Pre-selling?

Pre-selling is the sales of a (often digital) product before it is actually being developed. It is used to validate business models of start-ups and to generate initial revenues in the so-called pre-selling phase.

Pre-selling customers themselves have the advantage of having a say in the product development and being one of the first to receive a new product. At the same time, the founders receive important feedback and can thus develop their product much closer to the customer.

Can my startup do pre-selling?

Your startup can do pre-selling best if you have a B2B model. Due to the often low volume of each order in the B2C sector, pre-selling is more difficult there; but not impossible as many crowdfunding campaigns show. Nevertheless, a switch to B2B has already saved many start-ups.

In order to do pre-selling, you should be able to answer the following questions from the checklist with yes:

  • Have I determined a price/value for the customer of my product?
  • Have I defined the unique selling point, the essence of my product?
  • Do I have a B2B model or could my B2C also become a B2B model?
  • Do I know my customers and am I prepared to approach them?

Tip:

If you cannot answer these questions yet, this should be your focus. Don’t rush blindly into product development, but get some experience! You can also make a free consultation appointment here with VIPERdev to discuss your possibilities.

What’s the value of my idea?

It is often difficult to determine and justify the value of the future product for the customer. Ask yourself which exact value the customer will gain from you; this will be based on some assumptions, like in the following, that users will have more fun and what this is likely to achieve.

Example:

By using a conference app, participants will have more fun during the conference. This means that engagement increases by 50% and about 30% of all participants will use the app beyond the conference. This gives 20% more views of all sponsors' logos and we can increase our revenue by 10-20%. For a conference with 50.000 EUR revenue, this is an increase of at least 5.000 EUR. In this case you can easily sell the product for 2000-4000€.

The most common question at this point is: How do I get to the concrete numbers? The answer is surprisingly simple: It is not you who gets the numbers, it is your customer. With concrete questions, you can get your customer to calculate the value of your product.

Let’s assume you’re using our app at your next conference. How much do you think your commitment will improve?

With the assumptions so far - how much more will sponsors’ logos be seen then? What is that worth?

With the right questions, you don’t sell your idea to the customer, but the customer to itself. That way you both define the value together and it’s quite easy to get a signature - on the condition that the product is delivered.

Pre-selling, by the way, does not mean that you should sell the product cheaper than in the actual sale. The product has the same value on delivery and customers can make an agreement to get the money back if you don’t deliver. The feedback function of the pre-selling is only representative if the price is as well!

How does successful pre-selling work?

Pre-selling is no witchcraft and can be very successful if you follow the right steps. After you have worked through the first checklist, this final pre-selling checklist will take you to the actual pre-selling:

  1. Have you summarized the already determined advantage with and for your customers in one sentence? For example: “We increase your turnover by 10-20%”.
  2. Call at least five potential customers and pitch your product with that one sentence. Ask for a personal appointment for more detailed discussions!
  3. Convince the customer of your product and convey the advantages of your product.
  4. Collect the money or make a written agreement with the customer to pay the amount when you deliver the product.

Pre-selling can be considered successful if you have won at least three customers in the B2B area or 10 customers in the B2C area. You often have a business customer in your network or 3-5 acquaintances who would rather buy the product out of friendship. If you have more customers, you can be sure that the customers are seriously convinced of the product and that you can build on further demand from your target group.

Growth on your own feet - thanks to pre-selling

To sum it up, pre-selling offers many advantages and costs only your own working time. In return, you can build your company on black figures and control your growth as sole shareholder. But even if you want investors, first sales make you much more attractive for them. A security in the form of proven demand and first sales through successful pre-selling will help you anyway.

After successful pre-selling you are well prepared for the next steps. An MVP can be financed and developed, possible financing for your business can be forced and first views can be directed to the final product development.

If you have further questions about the determination of the product value for the customer, the sale itself, the B2B possibilities for your business model or similar, you can always arrange a free consultation appointment with us at this link.

We at VIPERdev have helped many founders to successfully bring their products to the pre-sale stage and beyond. If you have any questions, please contact us via our contact form.

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