MBA2363 Q&A Wednesday: Should I launch my app without knowing how to monetize it?

Summary

Summary of "MBA2363 Q&A Wednesday: Should I Launch My App Without Knowing How to Monetize It?"

Podcast Information:

• Title: The $100 MBA Show
• Host: Omar Zenhom
• Episode: MBA2363 Q&A Wednesday: Should I Launch My App Without Knowing How to Monetize It?
• Release Date: September 13, 2023

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Introduction

In episode MBA2363 of The $100 MBA Show, host Omar Zenhom delves into a pivotal question from a listener named Bri: "Should I launch my app before knowing how to monetize it?" This Q&A Wednesday session explores the critical intersection between passion-driven projects and sustainable business models, offering actionable insights for aspiring entrepreneurs.

Understanding the Importance of a Monetization Strategy

Omar begins by highlighting a common scenario among entrepreneurs: the eagerness to launch a product driven by passion, sometimes without a concrete plan to generate revenue. He emphasizes that without a monetization strategy, a project remains a hobby or a non-viable business venture.

Omar Zenhom [02:15]: "If you don't have something that makes you money, it's not a business. It's a hobby, it's a project, it's something else."

He underscores the necessity of viewing any business endeavor through the lens of value exchange—offering something of worth in return for monetary compensation. This foundational perspective ensures that the venture is geared towards sustainability and growth.

The Facebook Example: Balancing Growth and Monetization

To illustrate his point, Omar references Facebook's early strategy. While Facebook initially prioritized rapid user growth over immediate monetization, the platform always had a monetization blueprint centered around advertising. This strategic foresight allowed Facebook to evolve into a profitable enterprise once a substantial user base was established.

Omar Zenhom [05:10]: "Mark Zuckerberg and his team didn't start monetizing Facebook immediately, but they knew their strategy was to sell advertising."

This example serves to demonstrate that having a monetization plan, even if not immediately implemented, is crucial for attracting investments and guiding product development in a direction that aligns with future revenue streams.

The Necessity of a Monetization Plan from the Outset

Omar advises that entrepreneurs should develop a monetization strategy before launching their product. This doesn't mean implementing the strategy right away but having a clear roadmap to ensure the business can generate revenue when needed.

Omar Zenhom [04:00]: "You should definitely know how you would like to monetize it. Have some options out there."

He points out that a defined monetization plan facilitates fundraising efforts, whether through investments, grants, or loans, by demonstrating the venture's potential for profitability and sustainability.

Adapting Monetization Based on Customer Feedback

Flexibility in monetization strategies is another key theme. Omar introduces the concept of "value metrics," borrowed from Patrick Campbell of ProfitWell, which focuses on understanding what customers value and are willing to pay for.

Omar Zenhom [08:33]: "What do your customers value? What are they willing to pay for? What are they not willing to pay for?"

By conducting customer interviews and surveys, entrepreneurs can identify premium features or services that can be monetized effectively. For instance, Omar shares his experience with a workout tracking app that offers an annual fee, justified by the time and convenience it provides users.

Omar Zenhom [07:30]: "This app saves me a ton of time and effort because I don't have to have a notebook with me. I can plug in the reps I've done and the sets I've done into my phone, and it's really cool to have it nice and easy."

Conclusion: Balancing Action with Strategic Planning

In wrapping up, Omar reinforces the importance of balancing proactive action with strategic planning. While taking initiative is essential, having a well-thought-out plan ensures that the business remains focused and adaptable to future challenges.

Omar Zenhom [15:45]: "In business, you have to balance taking action and just going for it and having a plan of action."

He encourages entrepreneurs to conduct preliminary research and develop a flexible monetization strategy that can evolve alongside the business. This approach not only fosters sustainability but also positions the venture for long-term success.

Final Thoughts and Encouragement

Omar concludes by reiterating the necessity of a monetization strategy for any business venture. He invites listeners to submit their questions for future Q&A sessions and emphasizes the value of community feedback through ratings and reviews.

Omar Zenhom [16:50]: "Have a strategy in place so that you can work with that strategy in mind, but also have it with you when you need it to raise funds to be able to make money and sustain the business."

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Key Takeaways:

1. Define Monetization Early: Establish how your app or product will generate revenue before launching to ensure it's a viable business.
2. Strategic Planning for Growth: Even if monetization isn't immediate, having a clear plan attracts investors and guides product development.
3. Understand Customer Value: Identify what features or services your customers are willing to pay for and tailor your monetization strategy accordingly.
4. Balance Action with Strategy: Combine proactive initiatives with thoughtful planning to navigate the complexities of building a successful business.

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This episode serves as a comprehensive guide for entrepreneurs contemplating the launch of their apps or products, emphasizing the indispensable role of a monetization strategy in transforming passion projects into thriving businesses.

Transcript

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[Sailor]

Race the Rudders. Race the sails. Race the sails.

[Omar Zenhom]

Captain, an unidentified ship is approaching. Over.

[Sailor]

Roger, wait. Is that an enterprise sail sales solution?

[LinkedIn Advertiser]

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[Omar Zenhom]

Hey O. Welcome to the $100mb. You get better at business with every single episode. I'm your host, your coach, your teacher, Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started back in 2014. And today's episode is Q and A Wednesday. On Q and A Wednesdays, we answer a question from one of you, one of our listeners. If you got a question you want to ask, go ahead and email me [e-mail] Today's question is from Bri and Bri asks, should I launch my app before knowing how to monetize it? This is a fantastic question because so many entrepreneurs are gonna come up with ideas. They're gonna come up with ideas for apps, for products, for services, for websites, for blogs, for podcasts, and not necessarily have a business model, not have a way to actually make money off this idea. But they are so passionate about this idea, they wanna just get started, get it out the door. So in today's lesson, I'm gonna answer this question. Is it okay just to have an app to get started and fulfill this dream of yours without thinking about how to monetize it first? Is the monetization strategy or business plan even needed at the start? Or is it essential for the actual product to survive, to thrive and be viable? So let's get into it. Let's get down to business. Today's question, and the wording of this question is actually quite important. Should I launch my app without a monetization strategy or knowing how to monetize this app before I launch it? That's not the same as asking, should I be monetizing it when I launch it? Because really, the question is asking, should I have an idea of how I'm going to make money with this thing before I actually start building and launching this product out in the world? A strategy. Having a strategy is not the same of having the monetization turned on and actually working and making you money. Now, the reason why I am starting with this idea or this differentiation is that it's important for you to understand that if you don't have something that makes you money, it's not a business. Okay? If you're building a software, if you're building an app, if you're building a blog and anything really, and it doesn't have a way to make money or plan to make money, it's really not a business. It's really something else. It's a hobby, it's a project. It's something that you're doing for philanthropy. Maybe, maybe it's something to fulfill your own needs or growth. But by definition, a business is exchange of value for money. So if there's no plan in place on how you're going to do that, then you're not really building a business. And that's really important to understand, because if you start out that way, it's going to be very hard to pivot into a business when you want to make money, because you've made a lot of decisions without that piece of the puzzle. You've kind of built something out that's not meant to be made money for or made money with, I should say. So this is actually a mindset and a critical thing to understand. This is why I always say that if you're trying to make a successful business, trying to build a successful business, or you're trying to monetize, or you'd like to monetize something in the future, do it from the start. Plan it out from the start. It doesn't matter if you don't actually implement this strategy in the beginning, but it does matter that you actually have a plan in place. A good example of this is Facebook. Okay, Facebook wasn't making any money at the start. Their whole goal is to grow, is to expand, to be everywhere. Okay? They wanted to first be on, you know, Harvard's campus and other college campuses, and then beyond, you know, the US and the world and everybody was on Facebook. Okay? So before they started monetizing, they wanted to grow. But doesn't mean that Mark Zuckerberg and his team didn't have a monetization strategy. They did have a monetization strategy. That's how they got investment in the first place. They asked them, how are you gonna make money with this thing? They're like, well, we're gonna sell advertising, but right now we wanna grow first. Once we grow to a certain point, then we'll start advertising or start selling advertising spots and we'll make money. So why is this important? Why am I giving this example? Well, in this example, when Mark is building out Facebook day after day, week after week, month after month, year after year, before they start monetizing it, they're thinking, okay, we're gonna make money this way. We're gonna sell ads. So how do we make the actual app? And the way people interact with this app help us make money in the long run? Are people staying on the app long enough? Are they looking through the feed? Where on the feed are they looking? Are they looking on the sidebar? Can we sell spots there in the future? So they're building it out knowing this is how they're gonna monetize it. So if you're like bre. Building an app and you have no monetization strategy, get one quick, okay? Because you don't want to start building something that is gonna be hard to make money with in the future if that's the plan. Another reason why you wanna have a monetization strategy when you're starting out, when you're building out your app and launching it is it's gonna help you raise money. It's gonna help you get grants from the government. It's gonna help you get a loan if you need to get a loan. The point here is that if you can show that, hey, this thing has potential to grow and to make money, then people are go to invest in it or back you. And if you don't have that, it's gonna be very hard to sell something that doesn't make money, okay? It's gonna be very hard for you to actually prove that this thing has legs. Plus, it's gonna be hard for you to do this on the fly quickly. If you decide to raise funds at any given time or try to, you know, get some cash for your business, it's gonna be hard for you to just come up with a monetization strategy overnight. Right? You're gonna have to think about this and understand Your users understand how they interact with your app, interact with your business, interact with your blog. So the point here is that you may not think you need it now, okay, but you're going to need it in the future. If this is a business, okay, if this is a non for profit, it's something else. That is another story. Now, even if your business is a non for profit, even if this business is not meant to make you rich, you still need money, right? How are you going to sustain this business? Okay? It costs money to run a software company, to run an app, whether it's employees, whether it's server costs, whether it's you getting it out there in the world, it's going to cost you money. So how are you going to fund it? So making money is a good way to fund it, right? Monetizing it some way is a good way to fund it, even if that means like donations, like what Wikipedia does. So just think about how you're going to sustain this business. Even if right now you're in this stage, you're just like, I want to make this product out in the world. I want people to enjoy it and then I'll learn from my customers. Great, but have some options for monetization.

[Sailor]

Race the rudders, race the sails. Race the sails.

[Omar Zenhom]

Captain, an unidentified ship is approaching. Over.

[Sailor]

Roger, wait. Is that an enterprise sales solution?

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[Omar Zenhom]

Now, even if you have a monetization plan in place, be flexible. Because what you might learn as your customers start using your product or service in the beginning, your app, you might learn what they find valuable. What are the value metrics of this business? I learned this term or learned this idea of value metrics from Patrick Campbell, the founder of ProfitWell. And what value matrix means is what do the customers value? Okay. What are they willing to pay for? Right. What are willing not to pay for? Right? They, they don't really value that. And you know that, that, that's something that really they're not willing to pay for. So don't charge me for it, Right? So maybe that you want to include that in the free plan or something that's kind of included as a part of the trial. The point here is, is that you want to make sure you understand what customers value so that you can say, hey, maybe in the higher tiers or after the free plan, we will, you know, provide these features, provide these products, provide these functionalities, because people are happy to pay for it. Valuable. So understand your customers really well. And this is going to take you understanding how they're using your product, doing customer interviews, doing some surveys, and also understanding what actually gives a return on investment for the customer. Now, I know that a lot of products and services out there are not business focused, where, like, they put a dollar in, they get $2 out. But even in terms of a game, an app that's a game or something that's for productivity, if they're going to put in time and use this product, what is going to save them? Time? A return on investment of time. It's not just money we're talking about here. What's the return on investment in terms of effort? Okay, so a good example of this is a app I have on my phone to track my workouts at the gym. Okay? It's called the strong app. And this app has an annual fee. And I'm willing to pay this annual fee because it saves me time and effort at the gym. And I know exactly which workouts I have to do, which works I don't have to do. You know, it tracks how many reps I've done, tracks the weight I've done. I can just plug it in and it just automatically tells me, hey, next time you do this workout, let's up it a little bit. Let's increase it. This saves me a ton of time and effort because I don't have to have a notebook with me. I don't have to remember. I don't have to write things down. It doesn't interrupt my flow of the workout that much. Okay? I just take my phone out and I have my phone out with me anyway. Cause I'm listening to music, listen to podcasts, you know, listening to audiobooks. So it's not that inconvenient. I can plug in the reps I've done and the sets I've done into my phone, and it's really cool to have it nice and easy. So even though I'm putting money in, I'm not getting money out, but I'm getting so much value out of that, that is well worth the annual fee. So to wrap up the answer to Bri's question on Q and A Wednesday, should I launch my app without a monetization strategy? Well, you should definitely know how you would like to monetize it. Have some options out there. So that way you can think with that lens when you're building out your app and learning from your customers. Ideally, you have a way to monetize from the start because this will help you fund your app, even if it's just an annual fee or a monthly fee, a very nominal one for some premium features. Okay, so maybe there's something you want to think about where you launch with some sort of premium package. Or maybe soon after the launch you can offer this premium package or premium type of level where they pay a monthly annual fee, maybe something nominal. And then maybe you can sell some advertising if you want to on the free side. If not, some people, they don't do this in their app. They don't have any advertising on the free side or the free version, but the app is so good they want to upgrade to the premium features. So that's something you can explore and another topic for another day. But I hope that helped. Bri, have a strategy in place so that you can work with that strategy in mind, but also have it with you when you need it to raise funds to be able to make money and sustain the business. Thanks so much for listening. And thanks so much, Bri, for the question for Q and A Wednesday. If you have a question you want to ask right here on Q and A Wednesday, go ahead and ask me over at Omar MBA Net. If you haven't left us a rating and review, please go ahead and do so. Whether you're on Spotify or Apple Podcasts, we'd love to hear what you think of the show. It also helps us tremendously when you leave a review to let other people know that, hey, this show is worth listening to, worth checking out. Thanks so much for doing that. Right now, before I go, I want to leave you with this. In business, you have to balance taking action and just going for it and having a plan of action. Okay? A lot of people think that, oh, business is just about winging it. Go out and do it and just figure it out while you go there. No, it's a balance between, you know, taking action but also understanding that, hey, a plan is not a bad idea. Okay? Be flexible with the plan. Have some foresight about what's going to happen in the future. Have an idea of what you want to do. And it's good to have a little bit of information and research in your back pocket. This helps you become more successful. I used to be a person that just went and jumped into things and figured it out and said, hey, I'll figure it out when I get there, or figure it out when I have a problem. And I realized that's not really smart. Really. You know, when you go into something, do a little bit of research, do a little bit of planning, have a plan in place, and then go for it. You know, they say measure twice, cut once. It's a good thing to think about. You know, Hey, I want to save time and be more efficient. Don't under plan, don't do no planning at all, and have no idea what you're going to do. Okay. So it's good to have a good balance between taking action and planning and strategizing. Thanks so much for listening, and I'll check you in Friday's episode. I'll see you then. Take care.