Why 100 customers are better than 1 million
This is part of a series of articles aimed at helping up-and-coming founders and entrepreneurs entering the startup game for the first time. The startup world can be intimidating so we’re here to provide free access to resources and education to help make it easier to get started.
Do Things that Don’t Scale
In a startup landscape where founders are constantly reminded of how important scaling is for increasing revenue and maximizing the success of a startup, it turns out that it might just end up being the wrong advice for early founders.
Today, I’d like for us to examine the antithetical side that takes an unorthodox approach to the scaling-fast-mindset and why the notion of scaling fast too quickly might be an upside-down strategy for early-stage companies.
While founders are constantly hounded by the feeling that they need to scale fast in order to generate revenue and become the next big thing, Y Combinator’s Paul Graham (PG) reminds us to Do Things that Don’t Scale.
The idea of doing things that don’t scale isn’t about moving slowly.
In fact, it’s the opposite and more about focusing all of your efforts early to generate a much larger ROI in the longer term.
This article are for founder(s) who are both building companies in the the B2C and B2B space as the lessons learnt here are applicable to both models across a variety of industries and sectors.
So what does this all mean exactly?
Let’s get into it.
Smaller is Better (for now)
This week’s piece is inspired by a quote from the founder and CEO of Airbnb;
“it's better to have 100 customers that love you, than a million customers that just sort of like you…” — Brian Chesky
In fact, it was this very quote that shifted the mindset and trajectory of Airbnb into becoming a household name and the multi-billion dollar company it is today.
The general rule here is that customers/users who really love your product will inevitably make it go viral — if 100 customers absolutely love you, then they’ll tell 100 more people about it, and from there it spreads like wildfire exponentially through their networks.
Moreover, it’s also easier to manage — you can spend your hard earned dollars on a much smaller and focused group than spread yourself too thin on a larger customer base.
Instead of focusing on scaling as fast as possible – doing things that don’t scale at the first instance by knocking on doors, cold outreach, manual customer relationship management/success, founder-led sales etc. are just some examples that can lead to that longer term success.
Even if your product isn’t fully fleshed out and doesn’t have all the kinks ironed out, go out there and test it anyway with your customers.
Perfection is the enemy of a startup.
Investing in sales and marketing, keeping the power of compound growth in mind will lead to a more solid foundation of customers that you can rely on as your company eventually does scale.
Ensuring proactiveness and not being lazy in recruiting a user base in the beginning is key.
Remember that you can’t expect customers to come to you!
Instead, trying to gather users with your initial launch and prioritizing the satisfaction of those users is how you promote longevity.
Make Customers Adore You
It’s true — customers are king.
In fact, it’s not just about customer satisfaction, it’s also about adoration — your initial set of customers need to adore you.
The idea is that once you’ve done the hard yards in building a strong relationship with your early customer base, they effectively become part of your marketing engine. But be careful, this is a double-edged sword.
A bad product can cause people to smack talk a company into the ground just as much as a great product can cause a company to grow and become talk of the town.
Making your customers happy and always trying to cater them in new innovative ways will keep your customers engaged and fuel the fire to success.
One of the key advantages of an early business is the ability to provide a level of intimacy with your customers that large companies can’t that allows you to test a product or service for refinement multiple times.
Naval says it best here
Iteration is key.
By going back and forth on the product in trial with your customers, this iteration helps with figuring out the nitty gritty details and ironing out those kinks that can lead to problems later on.
Remember that you’re invested in your customers just as much as the investments you’ve made into building your team and the product.
While scaling is undoubtedly a vital part of growing a startup, it isn’t everything.
We should habitualize the mindset of focusing on aggressive user recruitment and extreme customer attentiveness that will fuel your company’s success when you eventually do scale.
Hope this helps.
Until next time,
Nico.
🔥Latest Nuggets
Founders Podcast: Alistair Urquhart — an inspiring episode on the story of Alistair Urquhart. Someone you might have never heard of, but after listening to his story, I guarantee you will never forget his name!
Principles for Dealing with the Changing World Order (5-minute Version) by Ray Dalio — super cool animated video with a voiceover from the man himself on the notion of history repeating itself intertwined with changing geopolitics, and the rise and fall of empires over several hundreds of years of human civilization. Easy to understand but also insightful for just about anyone who’s keen to learn more about history and what it means for our future.
5 tips on how to speak VC and raise capital — a great article for founders looking to raise external capital from venture capitalists and how to prepare for it properly.
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