Transforming a product idea into something that generates revenue involves more than presenting a good product and hoping for the best. The gap between creation and initial sale is where many entrepreneurial endeavors either gain momentum or fold into obscurity. Yet marketing decisions made in this formative stage often determine which fate befalls a new business. Yet many new entrepreneurs fall into a semi-structured mode of marketing decision making.
This isn’t to say that the process is entirely obscure. Many decisions are just more critical than others, and understanding the criticality of initial decisions when there’s still much to learn can save entrepreneurs months of frustration and thousands of dollars lost.
The Channel Selection Dilemma
The first legitimate decision many startups make is where to find customers. It seems there’s too much choice—social media ads, search engine marketing, content marketing, email marketing, influencers, display marketing, you name it. The newly founded entrepreneur either dials into the channel with which they’re most comfortable or replicates what competitors are doing in their space.
But this distracts from the justification for channel selection in the first place. The best channel depends on various circumstances unique to the nascent enterprise; who the customers are, how they decide to buy, how much the product costs and how much can be spent to acquire each customer. A $500 software subscription differs from a $20 consumer item, and their acquisition strategies need to be worlds apart.
New businesses benefit from looking past the obvious mainstream platforms and exploring options that might offer better economics. Testing channels where the best pop ads network for advertisers or similar specialized platforms operate can provide access to quality traffic at lower costs than the big-name channels everyone uses. The goal isn’t finding the single perfect channel but identifying two or three that work well enough to build a sustainable customer acquisition model.
Budget Allocation Without Wasted Spend
Where many new businesses go wrong is their approach to budget; either they spend too little and do not learn what’s useful or they waste their entire budget within the first month chasing quick turnaround.
Smart budget allocation assumes money will be spent with certainty—and wasted—albeit, not waste in vain, that’s tuition. It’s learned spending, meaning every dollar needs to either secure a customer or yield insight for the next run in order for it not to be considered a failed spend. This implies that enough budget must be tested for worthy conclusions, yet not enough that if it fails it sinks the entire enterprise.
A rule of thumb is 70% of one’s budget tested across channels and tactics that yield favorable results or at least some initial promise; 20% tested on variations of what’s working thus far; 10% on new avenues entirely. Most dollars should be spent on what’s producing results so that there’s still room to experiment for the sake of refinement and ongoing learning.
A New Entrepreneur with This Discipline is Ahead of Many
Relative to who did what with what dollars last month, new entrepreneurs who can answer how much it cost them last month to acquire customers from every channel are already ahead of most competition.
Too many new businesses believe they’ve validated their model after ten customers purchase their product. Ten customers means that the new business sold ten products. That’s it. This distinction between having made sales and scaling up before validation of a true, repeatable model creates problems down the line.
Validation means an understanding that acquisition will be met with investment potential downstream. This means not only understanding acquisition costs, but whether those customers have returned or will return down the line, how much they spend, and what percentage of those who ever tried or could have used as leads converted.
Early marketing decisions should capitalize on this feedback without need for revenue. Feasibility testing across channels and messaging strengths and weaknesses should be tracked beyond the sale to see what happens so that this slow work avoids the real problem—the larger problem—of scaling something that doesn’t scale because it doesn’t work.
Prevalent Decision Making
There’s seldom talk about when it’s appropriate to make start-up decisions about acquisition cost. If one waits too long, competitors may beat them to market. If they spend too soon, opportunities may disappoint users trying to navigate an offering that’s not yet present or clear.
The appropriate window is often sooner than perfectionists want it but later than optimists would think. The general rule is simple: when the product works well enough that someone buying it will find value—even if it’s not everything the entrepreneur dreamed it would be—then it’s time to push it to market. Early adopters often forgive misalignment if they’re getting a solid value and through feedback helps steer what’s more valuable instead of asking an internal team to guess what users will want before they want anything at all.
Compounding Decisions
The most critical marketing decisions are less based on outcomes than they are on value creation for subsequent decisions down the road. Channels selected because they’re interesting to learn from versus instant rewards. Systems in place to measure effectiveness instead of subjective gut feelings. Content that has value beyond just one use or relationship building that eclipses relevance after one cycle.
Startups who make it through those first few difficult months usually do so because they use marketing as an opportunity to develop value instead of just functional cost reduction. The decisions that matter most are those that lend themselves to compounded results—where the next decision is easier and formulated based on development from this initial stage.
