Most of the time, businesses should be working toward increasing the contacts in their sales funnel so they can get more paying customers. That makes sense, right? No cash flow will soon mean no business!
Most businesses need to start creating cash flow right away in order to survive. For example:
- That convenience store on the corner needs customers so they can stock more inventory.
- That automobile manufacturer needs to customers so they can pay for the factories and raw materials.
- That insurance company needs customers so they can gather premiums.
But some companies — certain companies — don’t need to get customers (at least, not right away).
In fact, there are two well-known examples of successful businesses that were not working toward a sale when they first started: Google and Twitter both famously started without any discernible cash flow.
Google mastered the search space and then introduced AdWords. They incorporated as a company in 1998 and in 2000 they introduced an early form of AdWords “against [Larry] Page and [Sergei] Brin’s initial opposition toward an advertising-funded search engine” (ref. Wikipedia and Planet Google by Stross).
Twitter has become a key social media site and one of the most widely used sites on the web. Yet, they have not really embraced a revenue model yet. (They seem to be experimenting still with paid tweets, which I don’t think will go over well). There are some other potential revenue models, too. (Read more about their forays into revenue generation here).
Google and Twitter are good examples of the kinds of companies that don’t need customers at the very beginning.
Companies that don’t need customers at the very beginning are companies that need to have a lot of user activity first in order to become attractive to other users and to marketers. Social media sites and sites that gather user data are two good examples. Customers and sales will eventually come but they aren’t needed in the early days.
For these companies, the early need is for users who are willing to sign up and be active. Consider that Google would have sucked if there were only a few websites. Facebook and Twitter would have sucked if there were just two or three users. But billions of websites and millions of users. When you achieve that level of use, you can then consider turning some of those users into customers.
Are you looking to start a social media site, forum, blog, or something similar? Take a page from Google and Twitter’s early-stage business plan and forget generating cash flow by converting customers. Instead, focus on gathering as many users as you can first.