Having a Better Mousetrap; Then What?

“A ‘startup’ is a company that is confused about – 1. What its product is. 2. Who its customers are. 3. How to make money.”

– Dave McClure

Startup Marketing…

Got the product?

And your people (aka beta-testers) love it? 

If the answer is yes, is probably a good time to start thinking about marketing.

Yes, marketing…

As we have established in an older post self-selling products don’t really exist.

I know… sad!

And if that alone was not enough, here is the kicker:

Getting noticed as a new (& mostly unproven) startup is a tough work.

In fact, according to many, making a new product visible to its target group is probably one of the biggest challenges that new startups’ face.

But you probably already know that.

So, how do you let know people you exist?

Introducing Paid Traffic

Well, a very popular choice among startup founders is to buy (or at least try) their way into market penetration.

Yes, even the ones with the small pockets (which as you might imagine are still the large majority) play around with this idea.

And needless to say, there are a ton of such options out there…

… search ads, social ads, display ads, video ads, sponsored articles, programmatic marketing, 3rd party email lists, just to name a few.

As of why, if I had to pick one factor, I’d probably say that is because unlike the past, most contemporary advertising platforms, do not require you to bet the farm, but rather give you the option to start small.

But options-aside the question really is:

Does it make (business) sense to deploy paid traffic when you’re just starting out?

Or maybe is simply just a terrible idea for getting the word out at this early phase?

To Advertise or Not To Advertise?

So, what’s the verdict?

Well, before jumping to early conclusions, let’s first take a look at both sides of this argument.

Shall we?

Cool … here you go!

The Case for Paid Traffic (For Early-Stage Startups)

Wonder why it makes business sense to deploy paid traffic?

2 (key) reasons…

Reason #1: Paid Traffic helps you test biz assumptions fast

Yes, test assumptions!

After all, you have a new product aren’t you?

So, even if it’s something people love, you still have to…

… fine-tune all the other pieces of the puzzle such as your product’s pricing, painkiller users, messaging, positioning, and so on and so forth.

Hence, rather than waiting for ages to get your house in order, you can, with “a few clicks of a button”, drive paid traffic and start going through the iteration cycles fast based on real feedback from real people.

But wait there is more!

Reason #2: Paid Traffic Enables You to Get Out There NOW

That’s right – now!

And according to the advocates of paid traffic that’s damn important.

Why?

Because, in their opinion, since for most founders not only growth is vital to survival, it also needs to happen fast, unlike ‘organic marketing’ paid ads deliver instant results.

Whether these results are good or bad is a different conversation…

But nonetheless, you can hardly question, the immediacy effect of paid traffic.

Yep, you just need to pick a channel, a target audience, craft a couple of ads, and once your ads go live your product will get immediate exposure to 100(0) of targeted people.

Hard to disagree, right?

So, what do you think; time to open up the (paid) traffic floodgates?

NOPE!

Thinking about Paid advertising? STOP!

But why?

Reason #1: Getting PPC profitable is easier said than done

Whether we want to hear it or not that’s a fact.

Yes, most PPC campaigns are NOT money-making…

Of course, that could be attributed to a number of factors (e.g. poor product/market-fit, weak ad copy, small profit margins, flawed sales funnel, etc.) but the reality is still the same.

And especially for bootstrapped startups with ‘invisible revenues’ the idea of adding more expenses on their balance sheet is simply unpalatable.

Furthermore, going back to an earlier point, what also makes paid traffic not such a great idea for startups just getting out of the woods is that…

… unlike established businesses, they do NOT have a proven sales funnel, winning marketing assets, fine-tuned proposition and a nailed customer persona.

And yes all these combined make turning ads into money even LESS likely.

Reason #2: It doesn’t produce long-term benefits

Whaaat?

Long-term I hear you ask?

I know – as Keynes famously said not that long-time ago: “in the long run we are all dead.”

And for startups, that’s particularly true since most are forced to live ‘in the now’.

So, why I bring this up?

It’s simple – because although theoretically, long-term planning shouldn’t be that a big consideration, organic marketing has a cumulative positive impact over time.

Yep, just like compound interest – think SEO, content or even referral marketing.

In other words, the time you invest in these (organic) channels today will keep creating value (almost on a ‘set it and forget’ basis) month after month.

So, the claim here is, that by skipping organic marketing you would be doing yourself a BIG disservice.

But what about paid traffic; would that not have an accumulated positive effect?

Well, in the opinion of the paid traffic opponents it will NOT.

As they put it:

“The results of paid campaigns are largely based on how much money you put in. If you stop bidding for terms and stop buying adverts, your traffic will drop. While your traffic probably wouldn’t die off completely overall traffic will haemorrhage. Relying on that sort of traffic is super dangerous and can cause havoc if anything goes wrong.

Hard to disagree, right?

WRONG!

Conclusion

Yep, it’s time to put things into perspective by addressing some of the key claims of both camps…

Claim #1: With a couple of clicks, you can drive targeted traffic to your site

So, is that claim any true?

You guessed it – NOPE!

Knowing a thing or two about paid advertising, I can assure you one thing.

Irrespective which option you choose (social, search, display, affiliate, programmatic, etc.) unless you put the time to…

… fully understand that marketing channel, heavily research the targeting options and iterate multiple times your (marketing) copy expecting to drive targeted traffic in a cost-effective way will simply NOT happen.

Yes, even though this option indeed has an immediate nature, as any form of marketing it takes time to be mastered.

Claim #2: For bootstrapped startups paid traffic is simply not an option

As you might guess that’s also not true.

And I say this with full confidence having seen multiple bootstrapped startups (mine included) using this traffic source almost from day 1…

Having said that, since the cash for most pre-revenue startups would need to come straight out from the founders’ pockets naturally won’t be an attractive choice.

But nevertheless is still an option…

… and let’s not forget that in reality there is no such thing as a free marketing (because your time has to worth something from an opportunity cost viewpoint).

Claim #3: Organic marketing has a cumulative positive impact over time

And last but not the least the idea that somehow organic marketing has a compound interest nature.

TOTAL BS.

Yep, other than SEO, none of the other organic sources has that effect inherently.

I highlight the word inherently because both paid and organic could very well have compound interest if we play your cards right.

What do I mean by that?

Well, if you think about it, you may well decide to launch marketing campaigns for building an audience rather than just doing direct response marketing campaigns. 

And yes, by doing so, you’ll eventually have a growing “fan-base” you can harness overtime time and time again.

But to answer today’s question, “does it make sense to deploy paid traffic when you’re just starting out”…

I will say probably yes if a) you know what you’re doing and b) put the time to master that channel.

And with that said comes the end of this post.

***

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Be so good they can’t ignore you.”

-Steve Martin

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Underpricing A ‘Startup Product’: A Necessary Evil or The Worst Thing You Can Do To Your Fledgling Business?

“Pain is temporary but suck is forever”

– Yves Behar

Underpricing, Overpricing or Somewhere in Between?

If I were to ask you…

what’s the one thing new entrepreneurs nearly always leave to decide until the very last moment before the launch what would you answer?

If you said “the pricing of their startup’s product”, you got this right!

But if you think about it, that doesn’t sound about right.

Especially if you consider that pricing alone can make or break a business.

So, why it always comes last as if almost it doesn’t matter?

Well, many argue that’s the case because unlike other business elements it’s something that can be easily changed.

Of course, whether that’s a sound practice or not is a different story…

But leaving that aside, let’s move to today’s ‘main menu’.

Which as you can see from the heading is, the common business practice of starting out by, wait for it…

… undercutting the competition!

Yep, love it or hate it, it’s been here forever.

Today’s question?

Is underpricing a ‘startup product’ an absolute must have or the worst thing you can do to your fledgling business?

Ok, let’s dive in.

Underpricing a Startup Product: Simply Necessary

So, why new entrepreneurs jump on the underpricing bandwagon?

A couple of reasons:

Reason #1: The product is not yet as good as the competition

This, of course, refers to the stark reality most startups face of releasing something out there that is still rough and rather inferior to the leading competing products.

And especially in this time and age, this reality is more prevalent than ever due to the ‘lean startup’ revolution and its widespread influence on how products should be built in the 21st-century.

Yep – design, test, learn, and iterate the ‘fast and furious way’…

Or, as Reid Hoffman, LinkedIn founder, famously once said: “if you are not embarrassed by the first version of your product, you’ve launched too late.”

Which this line of thinking pretty much makes creating a superior product from the get-go by default a non-option.

Reason #2: It makes your offer more compelling 

The logic here is that no matter how good your product is by bringing your price down not only your undercut the competition but you also…

… make your offer more compelling to the end-customer due to better value for money.

The moral of the story in a sentence?

Here it is from Sharon Vinderine a big proponent of this school of thought:

The easiest way to be competitive in a crowded market is to be the cheap alternative… Stand out from your competitors with a proposition that clients can’t refuse, and you are sure to gain loyal brand ambassadors.”

Reason #3: It’s a necessary evil since you have little to no credentials

And last but not the least comes the classic argument:

When you’re just starting out and don’t have any traction, hard stats and fancy testimonials/case studies/featured “happy clients”, that prove you know your stuff it’s a necessary compromise for getting a foot in the door.

Therefore, this form of “competitive pricing” gives you an opportunity to close clients you wouldn’t otherwise close, get some real market experience under your belt and build a portfolio that will act as a springboard for your future “world domination”.

Sounds about right?

WAIT!

Before making up our minds, it’s time to have a look at the other side of this argument…

Thinking of Underpricing your Startup Product? Think Again!

Yes, you did read that correctly.

For many the idea that somehow all startup products should be priced lower than the competition is fundamentally flawed.

In fact, as they put it “underpricing your startup product is the worst thing you can do to your fledgling business”.

But why?

Mainly due to these 3 reasons:

Reason #1: It can create a negative brand association

Negative what?

What I am trying to say here is that since customers often infer quality from price (and the product’s positioning) by labelling yourself as the cheap option you’re doing yourself a disservice.

Just think about this: on a personal level when do you choose to go for the cheap option?

Well, I am not a mind reader but at least myself I go down that path only when:

a) The brand is well-known and trusted

b) The product I am buying is commoditised

c) I buy low priority/importance items

My point?

Since a startup product typically does not belong in any of these categories being perceived as ‘cheap’ makes people question the value of your product.

Yep, making big claims about what your product can do and then say “btw, is on discount” you make buyers BS detector hit like crazy!

Reason #2: It attracts the so-called bottom feeders

Don’t act surprised – you know what I am talking about!

Yep, the kind of customers any business (or at least the serious ones) hate to do business with. Such as:

– Free riders

– Serial bargain seekers

– ‘Penny-spenders’ with wildly unrealistic expectations

And needless to say when you’re “the cheap alternative”, chances are, that’s the type of customers you’ll end up dealing with.

Or at least that’s the claim…

Reason #3: It’s a silent business killer

How about?

7 words.

You. Are. Underpicing. Your. Business. To. Death

Or as Shripati Acharya more eloquently put’s it:

“When a product is underpriced what typically happens is that}, the business will be forced to under-invest in sales, which can lead to a vicious cycle of stagnant sales that impede further investment in the business resulting in further erosion in sales.”

And especially when it comes to bootstrapped startups this approach can end-up being lethal…

Conclusion

My take an all this?

The assumption that you absolutely have to price your startup product lower than everybody else for getting a foot in the door is simply not true and we have to kill it once and for all.

As I said time and time again as a startup competing just on price (even temporarily) makes NO SENSE unless you have a pile of cash and a product type that suits the cost-leadership model.

But to answer today’s question…

…yes my friends, I do believe that underpricing a new product is probably one of the worst things you can do to your fledgling business for the very reasons listed above.

As for how you can get a foot in the door if you’re not the cheaper option…the regular readers already know the answer: By Going Vertical and putting in place a proper (marketing) loss leader!

And with that my friends comes the end of this post.

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Not having a clear goal leads to death by a thousand compromises”

 – Mark Pincus

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Hustling: A Prerequisite for (Startup) Success; or Maybe Just BS?

“The first principle is that you must not fool yourself — and you are the easiest person to fool.”

“Cargo Cult Science

“The (Hustle) Talk”

Whether you’re new to startups or being in this space forever I bet you had “the (hustle) talk”.

As matter of fact, is not really a talk…is more like a lecture if I may say so.

Which pretty much goes something like this:

If you’re not hustling, you’re losing

Yep, is short, sweet, and to the point.

And sort of binary I may add!  

Either you do it, or you’re destined to fail.

But what does hustle really mean?

Well according to our friend Adam Pittenger, a ‘believer’:

Hustle is saying no to happy hour to prepare a pitch deck. Hustle is waking up early on a Saturday to write a new company blog post. Hustle is quitting Clash of Clans because it took more than 5 minutes of your day. Hustle is skipping dinner and a movie because that $50 is two months of your team’s Github plan.”

Or said differently, is the notion that unless you absolutely devote your whole life to your thing & burn both ends of the candle you won’t make it as an entrepreneur.

So, today’s question?

It couldn’t be more straightforward…

Is hustling a core ingredient to a startup’s success; or maybe just BS?

Ok, let’s jump straight into this.

The Case For Hustling

So, why many think hustling is a prerequisite for (startup) success?

4 words…

No Pain, No Gain!

Not surprised, right?

After all, we have all trained to believe that nothing good in life comes easy…

But if we get back to Adam’s definition & read between the lines… (ok, this might be a stretch as it’s pretty obvious) you’ll see that he is not just talking about hard work.

That’s right – other than that, he indirectly touches another key premise behind the concept of hustling.

Which is of course the idea that you have to be willing to do things that others won’t…

Because, if you think about it working hard is so intrinsic in most societies (especially in the Western world) that it makes it almost ‘business as usual’ for the majority of people.

But a true hustler not only works hard but also goes above and beyond ‘the call of duty’ (aka as going all in, big time) and do what others won’t even dare to think…

Think that is hard?

No problem – Michael Arrington has an advice for you:

“Work hard. Cry less. And realize you’re part of history.”

Yep, in an article of his on this topic suggests to new entrepreneurs to…

… get used to the idea of working crazy hours, crying less and quitting all the whining because startups are hard and there is no other way.

Or at least that’s the claim!

So, what do you think; time to explore the other side of this story?

Good, let’s do it!

Thinking of Hustling? STOP!

Kind of counter-intuitive, right?

I know – nonetheless, quite a lot of insiders think that the ‘culture of hustling’ promotes a path to nowhere.

As they say, the idea that if you’re not hustling, you’re losing, is a lie.

Why I hear you ask?

3 reasons to get you started:

Reason #1: Hustling ≠ Being Productive

And the reasoning behind this statement is that the hustle mantra produces a belief that you have to do it all.

Yes, everything!

But what’s wrong with that?

You guessed it – lack of focus, strategic thinking and delegation.

And surprise, surprise a common by-product of this attitude is poor productivity.

Which as might imagine at this sensitive level of a fledgling business it can very well be a startup killer.

Reason #2: It’s a fast-track to burnout

The assumption here is that working crazy hours comes at a hefty cost.

As the proponents of this line of thinking suggest hustlers’ have to come to terms with their body’s biological limitations and stop pretending they’re robots.

Because otherwise will find themselves sooner than later not just being overworked but also stressed, overwhelmed and inevitably irreversibly burn-out.

And considering that turning an idea into a viable, cash-producing business can be a long game you simply can’t afford putting yourself in this situation.

So, the advice from our hustling opponents couldn’t be more straightforward:

Stop trying to sprint a marathon, ditch unhealthy working habits and abide by the human biological needs…

Reason #3: It exacerbates new entrepreneurs’ hero syndrome

And last but not the least comes the hero syndrome.

Not familiar with this term?

Here is a neat definition:

Hero syndrome is an unconscious need to be needed, appreciated or valued that disguises itself as a good thing, but threatens to make you bitter and to overextend you.”

But how is that related to today’s topic?

It’s simple – hustling is a form of a virtuous signalling deployed by new entrepreneurs to fulfil their own hero syndrome (and make them feel good about themselves).

Just think about this…

How many times you’ve listened to other entrepreneurs humblebrag about NOT what they have achieved but instead how many hours they put in on a daily basis?

As I guessed…

But you know what; hustling is not just a ‘humble-brugging exercise’.

People actually do that because they also believe in what I call the input-output theory.

Which as the name implies is the idea that the more hours you put in the better results you’ll get in return.

And needless to say that goes hand in hand with what scientists call the busyness disease (for how busyness became the ultimate status symbol have a look at this post).

Conclusion

So, with all that said what’s my take on this?

Well, even though I am a firm believer in the ‘no pain, no gain’ philosophy I do believe most hustling preachers are…

… serial virtuous signallers (and a good chunk of them committed BSers if I may say so) that preach an aggressive form of hustling that does more harm than good (for the very reasons listed above).

Yes my friends, the idea that you have to put “17 hour work days” to make it, in my opinion, is by all standards just ridiculous.

And I say this as a person that I did my fair share of sacrifices so far…

But to answer today’s question; is (this form of aggressive) hustling a prerequisite for startup success; or maybe just BS; I would probably say the latter!

Because in my opinion startups win with focus and not by doing (or trying to do) more…

Plus, ‘the input-output productivity theory’ according to many (me included) is more a myth than reality.

And with that my friends comes the end of this post.

I hope to see you soon.

Best,

Andreas

***

If you enjoyed today’s post, check out my kindle book, The Aspiring Entrepreneur Entry Strategy: A practical step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

 “Figure out how to “kick your own ass; Right now, someone out there is trying to figure out how to be better than you at what you do. The best way to beat them is to put yourself in their shoes and figure out how to beat yourself”

-Mark Cuban

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Profitable From The Get Go: Is That Even Possible?

“A dead end street is a good place to turn around”

-Naomi Judd

First year of trading

About to start a business?

And wondering how long would it take until ‘the baby’ to start spitting out (net) cash?

I have some bad news for you…

Not anytime soon.

Or at least that’s what the conventional wisdom suggests!

Shocker, right?

I know – after all, someone has to pay the pills.

And that someone is YOU!

But is ramen profitability really beyond reach when starting out?

Ramen what?

Ok, for those of you wondering what’s that about, here is a neat definition from our friends at QuickBooks:

Ramen profitable describes a business owner who is barely making enough to earn a small salary and pay living expenses, but is making a profit.”

So, with that aside let’s get back to today’s question:

Is getting profitable, even at a ramen level, doable during your first year of trading; Or is it just a sheer fantasy?

Ok, let’s start digging…

Shooting for ramen profitability? Don’t hold your breath!

Yes, you did read that correctly!

Profits at your first year shouldn’t be expected.

In fact, it takes much more than a year for hitting cash-positive.

How much more?

Well, Dee Lio, an advocate of this line of thinking, put’s that number to 3 years.

In his words, the story typically goes something like this:

“In the first year, you’re usually red. The second year (if you make it), you’re generally even, but saddled with the first year’s start up costs. Year three usually pays back year 1, with true profits starting near the end of year three.”

But what’s the reasoning behind this phenomenon/claim?

The reason why the majority of new companies, on average, have to go through this cycle until to find their footing and turn things around is because

hitting product/market fit TAKES TIME!

Yep, getting the product’s value prop right doesn’t happen overnight.

Of course, this comes to no one’s surprise.

Only a quick look out there (aka market) makes it clear even to the hardest critique that rough, half-arsed, products are more the norm than the exception.

And if only that was the problem…

What do I mean by that?

Well, here is the thing.

Even after your product hits ‘market acceptance’ you still have to refine/boost a bunch of other critical business elements such as your:

  • Marketing Engine
  • Business Economics
  • Product Pricing
  • Business Credentials
  • Value Delivery
  • Customer Retention

And the list goes on…

Tough, right?

I know.

So, with all that said, is it time to settle with the idea of being cash-strapped for a couple of years post-launch?

Wait for it…

NO!

How come?

Introducing the ‘alternative reality’.

Not such thing as an exact time-scale

Yes, my friends.

There is another side to this story.

The one that suggests that these numbers are just made up and don’t stand up to the slightest scrutiny.

As they say, every business is different, hence naturally depending on factors such as the type of industry you’re in, your level of domain experience and the business model you have adopted, the breakeven time would naturally be different.

But let’s take these 3 variables one by one:

1. Business Type

Yes, it seems that there are some winners (plus some losers) when it comes to time-to-profit.

Or again, that what the claim is.

Here you go…

Winners: Professional services, online/home-based businesses, drop-shippers, e-commerce stores, ‘sharing-economy’ companies.

The why?

Because company types like them are characterised by low overheads, little to no startup capital needed, and a flexible business structure.

Losers: Retail shops, hospitality/leisure businesses, manufacturers, construction companies, restaurants, software providers, apparel stops, recruitment marketplaces.

The why?

You guessed it – for the exact opposite reasons than the ones listed earlier.

2. Level of domain experience

Ok this one won’t need a lengthy explanation.

In a sentence, the suggestion is…

… the more domain experience you have before jumping in, the less time you would need for figuring things out and turning into profit.

And for some that’s only logical since by being an insider you will naturally be better placed to seize market opportunities and ‘steer the ship’ in the right direction.

3. The Space/Industry you’re in

Last but not the least comes the industry variable.

The suggestion here is that some industries are tougher to be cracked than others.

A couple such examples?

– Web Search Engines

– Social Networks

– Investment Funds

– Retail

– Recruitment

Conclusion

So, from everything that is being said so far what is true and what is BS?

Well, at least from my own experience, getting profitable, even at a ramen level, during your first year of trading is a tough one, especially for first-timers.

And just to be clear, in no way I am suggesting that is ‘impossible’ just highlighting that figuring everything out (see list above) and hitting product/market fit is definitely not a walk in the park.

As for those that are suggesting that “some business models out there are ‘loss-proof’ and conducive to immediate profitability…

… let me say this:

THERE. IS. NO. SUCH. THING. AS. A. LOSS-PROOF. BUSINESS. MODEL

Yep, that’s what I call a classic business BS as usual.

Having said that, I, of course, acknowledge that some business types, models, industries are tougher than others…

… but not to the extent of making it either impossible to beat the odds or in the opposite scenario to turn it into profit from the outset.

But to answer today’s question…

Yes getting profitable is doable during your first year of trading but tougher than most wannabe entrepreneurs would ever imagine. 

And with this said let’s wrap things up with today’s key takeaways…

Today’s Key Takeaways

– Hitting product/market fit is easier said than done

– There is no such thing as a loss-proof business model

– Some markets are tougher to be cracked than others

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my brand new book, The Aspiring Entrepreneur Entry Strategy: A practical Step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Winning is a habit. Unfortunately, so is losing”

-Vince Lombardi

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Breaking Into An Overcrowded Market: Is It Ever A ‘Sane’ Decision?

“If you come in late, you have to have a bloody good reason for the consumer to switch”

-Tim Ambler

The New Norm: Supply Exceeds Demand

We’re all scre*ed.

Yes, even you. Your ex-boy/girlfriend was right!

In case you’re wondering, I am of course talking about startups…

Whaaat?

Well, kidding-aside, here’s the thing – despite in which industry you’re about to enter (as a new startupper) the story is pretty much always the same:

The supply of products exceeds demand.

Put differently, unless you’re going after a brand new market category (which statistically speaking is more the exception than the rule) you’ll have to face an overcrowded market.

Yep, a market packed, big time, with competition!

And for some, that alone is kind of deal-breaker…

Why I hear you ask?

Ok, let’s start digging.

Is Entering A Crowded Market Worth The Gamble? NO

So, why many suggest entering an over-saturated industry should be a non-option?

A couple of reasons:

Reason #1: It makes it much harder to make it

The underlying assumption here is straightforward.

Unless you have a completely unique good (or alternatively something which is WAY BETTER than what is currently out there) attracting people with the will to even give you a chance becomes almost a mission impossible due to the myriad of rival offers.

The bad news?

You probably don’t have that product.

Or at least that what the claim is!

And for driving that point home, the advocates of this school of thought, back-up their claim with a bunch of, wait for it…

…startup failure rates statistics.

Love them or loathe them, are here ‘to tell the truth’.

I know, sad isn’t it?

Reason #2: It makes it much more expensive to break through the noise

That’s right – if shrinking (success) odds were not bad enough the increased marketing costs come to make things even more miserable.

And this is only natural!

Why is that?

It’s simple – one of the biggest challenges for new products is attracting the attention of the right people at the right time and…

with a market packed with competing products, offers, marketing messages/claims breaking through the noise becomes:

WAY. MUCH. MORE. EXPENSIVE.

Yep, irrespective which marketing strategy you use (organic, paid, inbound, social, etc.) you would still be competing – with a sh*t load of competitors for the attention of the very same crowd.

The moral of the story according to them in a sentence?

Cutting through the clutter in our over-communicated society is easier said done under normal conditions let alone when the market is oversaturated.

Reason #3: There will be “less meat at the bones”

And ‘surprise, surprise’, as a result of all these negative side-effects of jumping in an overcrowded market the profit margin up for grab will be much smaller.

As Jeff Thermond, a proponent of this line of thinking, explains in an article of him on Forbes:       

When buyers have a lot of undifferentiated choices, the price they are willing to pay drops… If the structure of the market says prices are well below what a less crowded market would have supported, then the ceiling of what any given vendor can expect in sales gets lowered precipitously.”

Yep, supply and demand baby!

So, time for ditching oversaturated markets?

NO WAY!

The Case for Entering Crowded Markets

You did read that correctly…

Entering a crowded market for quite a lot of ‘startup insiders’ is very much considered a savvy business decision!

The reasoning?

Well, according to them it mainly boils down to these 3:

Factor #1: Saturation = High Demand

I know, pretty obvious.

After all, it doesn’t take a rocket scientist to see why an overcrowded market is a clear sign of strong buyer demand.

And that’s why for many, the notion that you shouldn’t dip your toes in an overcrowded market is rather idiotic.

As Marc Andreessen famously said once, Market matters most; neither a stellar team nor fantastic product will redeem a bad market. Markets that don’t exist, don’t care how smart you are.”

Hence, by jumping in a market with proven demand you at least know you won’t try to square the circle.

Reason #2: The more mature an industry is, the more established the market needs are

How come?

Well, if you think about it in new industries, in general, peoples’ needs are vaguely defined (or even formed at the very beginning).

Take tablet computers for example.

When got introduced into the market in 2001 there was a lot of speculation about how a customer will react, what features will value most, how much will be willing to spend, what will be the impact on other mobile devices and so on and so forth.

Could someone predict all of these in advance? Or maybe just a couple months post-introduction?

Not really. 

Which that alone creates a lot of uncertainty because it forces entrepreneurs to base their business decisions based on few facts and many assumptions.

And unlike the big companies bootstrapped entrepreneurs don’t have the big bucks to afford take a gamble…

On the contrary, in mature industries, there are many more knowns than unknowns when it comes to customers’ needs, spending patterns, and priorities which naturally brings much more clarity.

Reason #3: You can still rise above the noise and get an edge

But how is that possible?

No guesses here…

By de-commoditising the product and carving your own vertical, you can claim your piece of the pie.

Yep, just because you will encounter many competing products out there doesn’t mean you’ll have to foolishly commit suicide and fell into the sameness trap.

And that not even news – today’s startups are doing exactly that successfully every day.

A couple such examples?

Here you go:

Referral Candy (referral marketing tool for e-commerce sites)  

Fetcher (profit analytics tool for Amazon sellers)

Makers Academy (computer programming bootcamp for aspiring web developers)

Writers Access (freelancing platform for content writers)

Adespresso (Facebook ads optimisation platform)

And the list goes on…

***

My take an all this?

OM: The Future of Today, Tomorrow and the Day After Tomorrow

That’s quite a bold statement you might very well say.

So, why I think that way?

It’s simple – because that’s has been the case FOREVER.

Yes my friends – completely new industries that are emerging almost out of nowhere happen from time to time but statistically speaking are more the exception than the rule.

Just look around you – how many of the products you see are coming from established industries and how many not?

As I guessed…

And you know something else – just because an industry is mature doesn’t mean is not evolving.

Take commerce for example.

You see 100s of new entrants per day (primary from online players), ground-break innovations, unprecedented technological efficiencies but the industry is still the same. 

Having said that, of course from time to time you see a completely new industry emerging almost out of nowhere

My point in a nutsell?

Hype-aside, breaking into an overcrowded market, in my opinion, is not just a sane decision, but especially for first-time entrepreneurs THE BEST WAY TO MOVE FORWARD.

Because, as Dan Norris famously said one:

“On your first venture do NOT play the visionary”!

And with that said let’s conclude this post with today’s key takeaways…

Key Takeaways

– Saturation = High Demand

– The more mature an industry is, the more established the market needs are

– Market matters most; neither a stellar team nor fantastic product will redeem a bad market

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Vertical Startup: A business type for down to earth, aspiring bootstrapped entrepreneurs for turning a late market entry into an advantage, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“The big problem with avoiding competition is that you are also avoiding customers.”

– Erik Sink

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