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Price is too low vs the competition
It’s natural to reduce barriers to entry and get customers in the door, and you don’t want price to be a barrier. However, a low price leaves money on the table which you could invest for growth.
Furthermore, you are creating either a future price problem (needing to raise prices) or a quality perception (you are cheaper because you are inferior). If you're building in a particular space, it's because you've seen a differentiated way to deliver success for customers. As such, you should get the upsides and price competitively.
Screenapp has experienced this directly and moved from tiered price points of $3-5 to $9-19. Over time this actually increased the conversion rate with healthy MRR growth and is positive as it has signalled greater quality and value to customers.
How to address this
Increase the price by 20% or be within 10% of the market leader (whichever results in the higher price).
Paid tiers are too easy to avoid
All too frequently, I see businesses where the free allocation is sufficient for many users to avoid the paid tier. Future investors want to see both willingness to pay and clear retention; reducing your options in terms of these factors will hurt your growth.
Ideally, you have identified the key feature driving your usage, then make sure you’re limiting this actively. A great example is Tactiq (real-time AI meeting transcription) which limits the number of meetings recorded as their key factor.
How to address this
- Put 10% of new sign-ups through a ‘reverse trial’ paid flow instead of freemium to test true willingness to pay
- Halve the free usage allocation
Requests from early customers drive product roadmap, not the founders
It’s a delicate balance between keeping customers happy and building the product you want. However, I’ve seen product roadmaps quickly bloated by tactical feature requests from early customers outside of the target profile.
When engineering resources are tight, founders need to manage requests very tightly and drive towards what their target market really needs vs what early customers want. This is especially true for UX requests vs genuine feature development.
How to address this
Designate 2-3 early customers in your ideal customer profile as ‘design partners’ and collaborate with them on development. This has the benefit of building for your target and driving engagement with early adopters without taking feature requests from everyone.
Hiring Sales too early
It’s tempting to hire a salesperson early on to increase the pipeline and free up founder time, particularly for technical founders. However, until you have a repeatable sales process, outsourcing sales is setting both you and the salesperson up for failure. They won’t know the key insights of the problem and they won’t have the same cut-through as a co-founder to source and close deals. Plus you’ll be adding additional burn before achieving PMF without a clear revenue pathway.
How to address this
- Set up a basic CRM to track the reasons for ‘Closed - Lost’ as well as ‘Closed - Won’. This will allow you to reflect and until there’s a clear process which you can outline, you should continue founder sales.
- When you do hire (likely after 20-50 founder sales), make sure your salesperson has worked at a true startup before and can manage without brand/sales ops support etc.
Engage with your first customers
Founder-led sales is hard to balance with other priorities, but founder-led customer success is even harder. Remember these first customers will be your best source of future business - whether by referrals or reference calls - so it’s highly important to keep them engaged. Helping them feel like they have a front-row seat on the rocketship can buy you time on product development, plus retention is a key focus of seed/Series A stage investors.
How to address this
- Timebox a 1-hour weekly slot for ‘Customer Success’ to check in with customers.
- Put your champions into a Whatsapp/similar group as a ‘First Believers’ group to develop community.
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