Startups | 2 min read

The right type of revenue

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Don’t confuse consulting revenue, one-time deals, or charity donations with actual recurring monthly product revenue. They’re very different beasts.

Articles that boast titles like “How I built a product in a weekend that makes more money than Quora/Medium/Tinder/etc” always seem to miss the point that a few goodwill gestures are not the basis of a business. They provide a nice quick hit of emotion, but your friends can’t be your only customers. They’re the wrong type of revenue.

Just like any teenage rock band is guaranteed a friends & family crowd at its first few gigs, any new start-up is guaranteed a spike right after launch. And in much the same way rock bands start to run out of good will and good friends, start-ups start to run out of customers.

Yes, revenue is important, but only when it’s the right type. It’s not the right type if:

  • they’re paying to support you, not to get the value your product delivers
  • they’re paying for a custom white-labelled version just for them, not the SaaS product you’ve built
  • they’re paying for your time and consulting, not just for your product
  • they’re paying a heavily discounted price rather than what you wanted to charge them
  • they’re paying because you’ve promised to add a feature specifically for them

Doing things that don’t scale is what it’s all about in the early days, but there are some fundamentals that you can’t run away from. Getting the right type of revenue is one of them. Until you’ve sold a product that you haven’t customised, at a price you haven’t adjusted, to a customer that you don’t know, then you’re not growing a SaaS business. You’re growing a services business, or a short-term charity.