Whether it is in your personal or professional life; rejection is hard to swallow. 

Anyone who’s experienced rejection will have created their own response system to cope with potential future rejection. 

One of those mechanisms may be looking for validation by seeking “evidence” from those who are willing to accept and praise you. This is a form of confirmation bias. Others may be intensely self-critical; that the rejection is a self-reflection. 

As founders creating something from the ground-up and against the odds, hearing someone find what you’re building as “not worth it” is difficult to shallow. The founders I have worked with are all extremely talented, intelligent, and if they were in any other profession or field would be considered leaders and elevated as successes. Hearing “no” is a swift blow to the ego. 

Yet too often the rejection is not a reflection of you as a founder or your startup, but your approach. It is that approach that makes it difficult for founders to go out and tackle the critical question you most need answering – is what you’re building worth it? 

When it comes to pricing, there is an aversion for startups to tackle the value question; figuring out your worth. Just a few reasons I’ve heard why startups say they don’t work on pricing: 

• We don’t have enough data.
• We don’t have enough customers / users. 
• Our product is still early and not what customers are really going to get. 
• We need to build up marketing and branding. 
• We can figure out pricing and  monetization later.
• Our current pricing doesn’t make sense until we scale. 

Do these look familiar to you? 

Unfortunately this list is an excuse to avoid the problem – which is figuring out your worth to the target customer.  Part of this is driven by a fear of rejection. 

A potential customer or user saying no your product is not worth $X. It’s even harder to accept when the product is free (read: $0) and customers still don’t take it.  Ouch. 

The goal early in the pricing journey is learning and iteration. Start with the foundational elements. 

For early-stage startups, I start with three areas: 

1. Customer – Are your “customers” actually rejecting you, or is your perception of your customer rejecting you? Like any other relationship, there are those you feel are right for you, and then there is the one. We find most startups, even further down their growth journey, are looking at customers too broadly. To narrow the field, we recommend using our customer rings principle. 
2. Value – Founders create startups to solve a problem or fill a gap in the market. What that means in terms of value and more specifically what value drives willingness-to-pay is often lost on founders. Most customers have a second brain when it comes to their wallet. It’s your job to understand what’s driving that second brain, otherwise you might end up spending a lot of time and money pitching “value” that is worth nothing. 
3. Experience – Do your customers actually understand what amazing things you’re offering them? This is not only a product or user experience question, but an important pricing topic. If it’s hard or frustrating for the customer to have their problem solved with your solution, then you may be making it more difficult for customers to find the value (that’s linked to your price). 

Hearing “no” is hard. Not figuring out your worth is really hard. As a founder, you need the right inputs to drive effective decisions. If you’re already having the hard discussions – great! If you’re not (yet), then it needs to be worked on now. You need as clear a view as possible, and omitting a crucial insight is not the way to do that. 

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In the article we had a chance to share our journey, and our vision for how startups can build thriving sustainable ventures. We are grateful for all the support we have received for our work to see innovative builders close the value gap to grow thriving sustainable ventures that contribute to their communities and the ecosystems they operate. 

One important takeaway shared in the article is the introduction of our “value debt” concept. With our experience with hundreds of startups and companies around the world, one of the most common threads we see if the misalignment between value delivered and value received.

This value misalignment has significant impact for a fast-moving growth venture specifically in terms of their trajectory and resources required to achieve that path.

The most obvious is the impact on revenue traction and pathways to profitability. When a company under-values their product this leaves potential revenue and profit on the table. This should not be confused with revenue or price optimization. This is foundational and several steps before optimization. The challenge is in articulating value through a proposition and price. For too many startups, this is a step that is needed, but rarely taken. 

Value debt also impacts a company’s competitive positioning and utilization of resources. Lack of clarity around what is the value for the solution created, but equally what drives that value for customers puts pressure on a company’s ability to position competitively. We see this manifest in a feature race with competitors, without a more mindful appreciation of what creates benefits for customers and differences between them. 

Related, but separate is the associated costs for supporting value debt. One of the biggest areas is in acquisition costs. Less insight into customer segmentation driven by willingness-to-pay, pricing, and value drivers creates a gap in how acquisition costs are targeted and utilized. This also influences the acquisition strategy a startup can and should pursue.

Read the full feature using this link here. 

Updated: July 16, 2021

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