If I had a penny every time a consumer requested me this query, I’d’ve owned all their startups.
You had been enjoying round in your storage, and also you invented one thing known as The Blabla Maker. You determine to promote it. It’s your entrepreneurial factor now.
You place a desk outdoors of your storage and current your product. Somebody comes by and loves The Blabla maker. They’re very considering proudly owning it. However there’s an issue — you haven’t any concept how a lot to cost.
You see, the Blabla maker is the primary of its sort. You possibly can simply say that because it value you X, you’ll cost double that. That’s not a foul concept. However what if that particular person is prepared to pay 10X your prices? It’s essential to know this.
You: “Why? That’s simply greed? Take your 2X and go dwelling.”
If we accept 2X, your neighbour will present up the following day with The Blahblah 2 Maker, a copycat product that sells for 10X. You’d suppose that folks will come to you as a result of your product is cheaper.
Nonetheless, for those who see a Coke for $1 and one other soda model for $0.01, which one will you purchase? There’s a selected vary that simply makes you suspicious.
I can’t show you how to with the Blabla Maker, however you probably have a startup and somebody comes over to spend money on your organization, you’ll face the identical query — How a lot fairness do you have to give them?
PS — I’ve developed a cool minimalist monetary mannequin for pre-revenue subscription companies for those who’re . I spend 96% of my time engaged on my publication — Right here’s a hyperlink for those who want to turn into a part of my community & entry that template (this one is for my paid subscribers).
Ultimately, the mannequin has a component that features this (it’s a sluggish GIF):
The reality is, if you don’t earn money or customers, this can be very troublesome to challenge one thing tangible. You possibly can do the whole lot in your energy to make this clear to the investor. However the investor may simply say, “Meh, I don’t purchase it.”