I made $350,000 in our first year operating. Here’s what I’ve learnt
In 2017, shortly after leaving my cushiony job in a financial institute to move to Shanghai with my fiancee for her new career, I started my own business. Within 12 months, we were having $350,000 of revenue and here’s what I learnt. I wrote about here if you’re interested.
Luck — The Most Important Factor
I was lucky. We were lucky.
I chose the right market, the right niche, created the right product that customers were looking for. Our second product in an entirely different market had a very bad outcome as compared to our first.
Luck cannot be controlled but yet it play a very outsized role in our life. Don’t dismiss it and bow down your head hustling. While luck cannot be controlled, we can increase the serendipity of it happening. Doing proper amount of research, don’t overthink, launch your product out there and increase your chance of luck
Product/Market Fit feels gradual then sudden
Every stages of a company, while having milestones to hit, stages of growth to go through feels like nothing. You literally can’t feel it. Many people write this or say this but the problem is that the readers cannot empathize with this. Product market fit then becomes a term that everyone uses to communicate within each other, with VCs and their friends.
The thing about this is that it feels so gradual, you self-doubt yourself in every steps possible and think to yourself, “will this work?”, “will customers like this?”. Then, all of a sudden, with all the stars and planets aligned, your sales shoot up, customers love your products, words get passed around and you can think to yourself, “ok, I think I hit Product/Market Fit, but I’m not too sure if this is it”
Good Market is better than a great team or a great product
Can’t remember which book I read. Someone asked if market, team or product is the most important. I definitely think is a good market. Because product/market fit is a pull that you feel from your customers. Customers are asking hell lots of additional features, colours or even questions about your products, without a good market, you can’t build a product that fulfills your customer’s needs and without the need to have that particular product, a world class team wouldn’t help too.
In contrast, if there is a market for your products, no matter how bad your first version of the product that you launched into the market, customer will buy it to solve their problems, their jobs to be done. As long as your product is a tad better than what is in the market and what they have built themselves.
Success is short-lived
Our first product was a hit. Then once it became a hit, an influx of competition came in, some attacking the lower end of customers with an exact same product but a third of our pricing and others attacking the higher end of the market increasing on the performance of the product.
Success is short-lived. If you studied microeconomics before, you know that most of the markets are perfect competition. Once competitors saw your success, they want a cut of your revenue and they are more flexible to do so since they don’t have a product in the market, and best of all, you have copywriting, photos and everything that they could copy. More money with minimal efforts. Why not?
I won’t blame the copycats. Money is money, nobody won’t say they have enough money and feels bad about taking away marketshare from you.
The only way to sustain the success is continuous innovation. Run like hell is chasing you, because that is what exactly your competitors are doing. They are chasing you from behind.
Don’t be complacent. Don’t settle. Continue innovating.
Cashflows > Profits
I used to be like an eagle in the sky looking at my numbers. I will scream and shout whenever our gross margins and unit economics got impacted by copycats.
I used to always say, “Customers will know they are copycats, they will come to me instead, so why reduce my pricing?”. I was wrong, terribly wrong. Customers don’t care. As long as it solves their problem and do the job that they want done, they are not going to care whose content is more original, they care about 1 thing — Pricing.
So while we are struggling from the past mistakes that we have made (and read a lot of books), I now see cashflows as the true bloodline of a company. Without cash, your company cannot survive. Gross margins means a lot but not when you are fighting for survival.
Sell.
As an entrepreneur, you need to sell. You need to sell why your product is better, you need to sell VC your company’s story.
By selling, I mean by empathizing with your customers. Think in their shoes. Think why they need your product and why your product is better than your peers. Then sell. Sell to their emotions. Let them feel that they really need your product.
Selling > Product Development. Period.
Conclusion
In conclusion, though we made our first 6 digit revenue in year 1, we have been struggling because of many many mistakes that we have made in the past, and we are paying for these mistakes. I hope this article could really allow you to empathize what we have went through, not because I want you to pity us but to know these problems are lurking behind your initial success and probably also know how to avoid it.
