Editor’s note: This article was first published in July 2015. HelloSign (and HelloFax) were acquired by Dropbox in 2019 and HelloSign was later rebranded Dropbox Sign; Walla’s role may have changed.
Joseph Walla, CEO of HelloSign, shares on his LinkedIn account what he has learned while building his business, in the time it took to go from earning nothing to bringing in more than a million dollars with two different products: HelloSign and HelloFax. Both offer services and tools for small, medium and large companies that make all kinds of processes easier.
These are some of the lessons Walla learned while fighting to make his business profitable.
1. Charge for your product as soon as possible.
Some founders believe they have a good reason not to charge for their product, but it is usually a bad one.
You have to focus on the product, but you also have to focus on revenue. Building a product should go hand in hand with ever-growing revenue. People show that they value your product by paying for it.
A healthy business has to keep growing, as we explained in “How much a business should grow each year, when it is best to sell and when to make other kinds of decisions“.
2. Revenue tells you which feature to focus on.
Revenue is a powerful indicator of whether you are building something people want or something they don’t believe in. If you are not bringing in revenue, you are very likely spending money on something users don’t really want.
The people who pay you have opinions on what should be improved. Making them happy will bring in more people like them who are willing to pay for your product.
(Read: How to know which business is perfect for you)
3. If you have a distribution problem, you don’t have a product problem.
It is much easier to change your message and refocus on a different target market than to change your product completely. Change the message before you change or rebuild your product.
4. “Cheaper and better” doesn’t necessarily make a product sell more.
Customers often doubt that a product is better because it is cheaper.
The founders of Wufoo explain the idea of being more expensive and better: if you bring in more revenue, you can invest more in the product and make it better.
Perhaps there are some scenarios where “cheaper and better” makes sense, but that truth should be questioned and perhaps turned around: more expensive and better.
It brings to mind the case of the writer who put his book on sale at $3.50 and did not sell a single copy. His strategy was to raise the price to $18.50, and the book started selling. The explanation? We buyers can be that silly sometimes. There is no other explanation.
5. Being too cheap can lead to slower growth.
Distribution takes money and effort. At HelloSign, because their plans were cheaper, they couldn’t afford to reach more customers. With more expensive plans and a higher LTV (customer lifetime value), they could spend more on acquiring customers.
Being “cheaper” and “better” actually just gets you to fewer people in the long run.
6. There is no strong correlation between beautiful design and success (in the early days).
Designer Garry Tan has said that he hasn’t seen a strong correlation between beautiful design and how successful companies are at launch. So, if you have to choose, it is better to go for a great user experience first and add beautiful design afterwards.
On the other hand, if you focus on perfection in the early days, it may even stop you from bringing in the revenue you need.
Clearly, the legendary Steve Jobs would not have agreed much on this point, since for Jobs design and perfection were everything when it came to success.
7. Don’t listen too much to users about pricing.
Innovate on the product, not on the price. Walla says they tried all kinds of innovative pricing models, often driven by their user base, which led to a great deal of custom development. Ironically, when they switched back to industry-standard pricing, the plans performed significantly better.
8. Five dollars a month is too cheap.
If you have a work tool and you charge 5 dollars a month, you are very likely leaving a lot of money on the table.
Justin Kan told them they were running a charity. He was right. So they doubled their prices.
9. Try to be profitable, at least once.
Walla says he often meets founders who say they are working on growing their free user base. His controversial view: with rare exceptions, you should never focus on growing free users at the expense of revenue unless you have been profitable before or have run a profitable company. He doesn’t think most first-time founders know how to strike the right balance between growing free and paying users.
10. “I don’t use it enough” or “It’s too expensive” means they are the wrong customers.
Some founders react to this feedback by cutting their prices. That is usually exactly what you shouldn’t do. If someone doesn’t use a product often, they will always complain about the price, because they can’t see or appreciate its value.
That just means that person is the wrong customer. Instead, you need to find people who use your product often and know how to value it.
11. Startups will probably be your first users, and they will complain the most about pricing.
Be careful about listening to startups, or you may start developing your product or your pricing in unnatural ways that have nothing to do with the wider market. Walla admits that HelloSign did exactly that at first, and regretted it.
12. Free users make more noise but pay less.
HelloSign certainly gives its free users the best support it can, Walla says, but takes their requests with a grain of salt. If you listen too closely to these users, you can steer your product in unwise directions. Build features for the people who pay you. Their opinions are worth more, because they value your product more.
13. Customer development
Do customer development to focus on the right users, but don’t get stuck in endless customer development and research cycles.
Customer development is important, but it should occupy a completely different place in your mind from growth. Plenty of companies get trapped in customer development cycles and, as a result, can’t focus on distribution.
14. Word-of-mouth growth makes some investors nervous.
Word of mouth is nice, but it isn’t predictable, and you need predictable growth. A company that managed to grow on word of mouth alone would certainly be admirable, but it is unlikely. No investor is going to bet on a business idea whose growth rests on the hope of word of mouth. Have a plan to “hunt” for customers if they don’t come on their own.
(See: Not having a marketing plan is like planning to fail)
15. Customers don’t look at the sticker price as much as you think.
How your price compares with your competitors’ shouldn’t worry you too much. Walla notes that HelloSign is sometimes more expensive and still wins the contract. So don’t obsess over competitors’ prices; just optimise yours for your users.
16. If you are only winning on price, rethink the value you add.
Unless you are Amazon, a price war can be brutal. Instead of being cheaper, think about how to set yourself apart.
17. Consumers and businesses behave differently when it comes to money.
As Walla points out, as a company they pay huge sums for software without batting an eye, yet in their personal lives they use free Spotify accounts.
Many founders have no real work experience before starting a company. Without having been in a workplace, it is hard for a founder to imagine how many companies will pay for software, and that leads them to undervalue their product.
Further reading
