Defining the business model
Fixing a failed business. Part 1.
I’m starting a new personal challenge in this newsletter.
Four years ago, I tried to launch my own product and failed – mostly because I didn’t know much about growth and marketing. A couple of years later, almost by accident, I started working on growth from the engineering side and found my passion there.
Now I want to test how much I’ve learned. I’m going to take the same product and grow it to $1M ARR. The most boring product in the most crowded market – a todo app in the productivity space – feels like the best way to test my knowledge.
Let’s see if I can make it.
First, let’s start with the business model.
Four years ago it sounded like some magic phrase and I was lost when asked about it. “I’m going to make a good product, people will come and pay” – that was pretty much my understanding of this concept. I didn’t know much back then.
In a nutshell, a business in a classic sense is a money-printing machine. You put in one dollar, and it prints you back two. The business model captures the repeatable process behind the scenes – what exactly happens when we put in that dollar and how it makes another one.
With my todo app, I could just say it’s going to be a subscription-based business, SaaS. But to make the business model useful, I need more details than that.
So, let’s work it out from our constraints:
It’s a side project for me and my co-founder, so we don’t have a lot of time.
We don’t have any funding apart from relatively small amounts we’re willing to spend personally.
We don’t have any influence in the productivity space and can’t attract users through it.
These constraints leave us only a couple of options:
Work with influencers via affiliate programs by offering them a cut from each sale.
Or run ads.
Affiliate programs might be a great option. But they take time to kick off and are tricky to run successfully – from fraud prevention to finding the right affiliates. Neither my co-founder nor I have any experience doing it.
But we do know how to run ads.
However, to run ads successfully within our constraints, we need to play it smart.
As we don’t have any funding, we need to make our ad spend back as quickly as possible – ideally within a few weeks. This means we’re going to sell high-tier subscriptions only – either annual or lifetime. Also, to move fast when experimenting with ads, we need to keep our sales cycle short – a very short trial or no trial period at all.
Let’s sum it up:
It’s a subscription-based model.
We’re going to run ads to attract users.
We should get our ad spend back in a matter of weeks, plus some margin.
To achieve that, we’ll need to sell only expensive tiers – annual or lifetime.
To enable quick experimentation, we also have to keep the sales cycle tight – we’ll start with a 3-day trial.
To make this work, we need the right audience.
Not just any potential customers, but high-intent customers – who are motivated enough to pay for an annual subscription with a very short trial period. In the next issue, I’ll show how we’re going to find them.
This cat is curious about the results as well.