I know that this opinion on this forum will be unpopular, and that it goes against what all the gurus teach, but after years of reading stories of misled entrepreneurs, I needed to make a post.
Time and time again I see people following this business model:
Give value for free --> People will eventually start paying you. --> You'll be rich.
The theory preached behind this "model" is that to make money, you have to give people value (upfront). You give them value. They understand your worth. And then if they so choose, they'll give you money.
Ok. Nothing wrong with that. However, I want to point out that this model is nothing more than a funnel. It's a marketing tactic.
It has a lot of pitfalls and potential traps for starting entrepreneurs.
For the majority of businesses, it is not a "business model" that you want your business to be centered around. It is one of many tactics that you want to try out before deciding where to allocate your sales/marketing budget, but not something that you want to bet the house on before looking elsewhere.
The biggest problem with the model is that it comes with the requirement of giving value upfront. You give before receive. In a large number of scenarios that could work, but there's one key point that this sort of thinking leaves out:
99% of people will only give you money for FUTURE value. They don't give a F*ck about what you did for them for free before.
Let's go through an example of a bakery in multiple scenarios:
A bakery wants to sell more cookies. To sell more, they have a person stand outside giving samples away.
Scenario #1 where things go well:
Because enough people try and taste the samples, a few realize that the cookies are good, and end up buying a dozen cookies each to take home. The bakery is ecstatic and considers it a success. They end up building their entire business model around giving away samples for free.
Scenario #2 where things go bad:
People try the cookies. Eat as many as they want. End up buying no cookies because they already got their sweet fix for the day. Tomorrow, or whenever they choose, they know they can get another cookie for free, so they end up buying none. The bakery goes bankrupt and the people feel bad, but not to the point where they'll donate to open the bakery up again; they'll just buy they cookies from now on.
Scenario #3 the default scenario without samples:
A bakery puts great looking cookies in the window. Whoever wants cookies, comes and gives them money for cookies.
Using this example above, gurus will tell you that Scenario #1 is the only way that you can build a business. You need to give value upfront before having a chance to receive value.
Bullshit.
Scenario #3 is the most common scenario for a reason. How many of your local bakeries are giving away top quality samples all the time for free? They might do it once in awhile, but there's little to no chance that they're doing it everyday, and if they are, they're only giving you a taste.
This is the same reason why Groupon doesn't work for most businesses.
Or why all the Youtube gurus like @AndrewNC that make videos for free end up getting zero customers. Edit: Alright, maybe they end up getting two or three and then start calling themselves successful entrepreneurs.
It is merely a funnel/marketing tactic for you to get sales.
But to get sales: YOU NEED TO CREATE FUTURE VALUE.
You need to have a product or service that is valuable enough for people to give you money. The book Ca$hvertising puts it best: For someone to give you $20, they have to believe that the $20 they're giving you is worth less than what they're getting. If they believe they're getting $30 worth of value then they'll give you money with zero hesitation.
The only time you should be giving value for free is when you're attempting to increase the perceived value. If you know your service is worth $30, and you're selling it for $20, but no one's buying, then giving away a TASTE for free is worth it to increase the perceived value from let's say $10 to $30.
But if you're giving value away for free, expecting the customer to eventually pay, then you're mistaken.
I saved a former mentor of mine millions of dollars by optimizing his supply chain. I fell into the trap of giving value away for free, assuming that eventually he would reciprocate. You know what I ended up getting? Not shit - because there was zero reason to give me a dollar other than "loyalty".
I have friends that have invested years into the wrong pursuits. I've read countless posts on this forum of people betting their business around these tactics and then wondering why they failed. Time and time again I've seen this model fail.
End of the day, it's a marketing tactic. It is not the only way to operate your business, and more often than not, it does more detriment than good.
You're a freelancer?
What's better? You writing a thousand forum posts here and on Quora? Or you creating a strong landing page and cold emailing a thousand potential clients with a few clicks?
I don't know what's better. That's for you to test and decide. But if you bet you whole business on just one tactic instead of trying multiple until you get traction, then you're an idiot and deserve to fail.
To summarize: Create a valuable product or service. Employ a multitude of tactics to get traction. More likely than not, giving value away for free is bad for your business.
Time and time again I see people following this business model:
Give value for free --> People will eventually start paying you. --> You'll be rich.
The theory preached behind this "model" is that to make money, you have to give people value (upfront). You give them value. They understand your worth. And then if they so choose, they'll give you money.
Ok. Nothing wrong with that. However, I want to point out that this model is nothing more than a funnel. It's a marketing tactic.
It has a lot of pitfalls and potential traps for starting entrepreneurs.
For the majority of businesses, it is not a "business model" that you want your business to be centered around. It is one of many tactics that you want to try out before deciding where to allocate your sales/marketing budget, but not something that you want to bet the house on before looking elsewhere.
The biggest problem with the model is that it comes with the requirement of giving value upfront. You give before receive. In a large number of scenarios that could work, but there's one key point that this sort of thinking leaves out:
99% of people will only give you money for FUTURE value. They don't give a F*ck about what you did for them for free before.
Let's go through an example of a bakery in multiple scenarios:
A bakery wants to sell more cookies. To sell more, they have a person stand outside giving samples away.
Scenario #1 where things go well:
Because enough people try and taste the samples, a few realize that the cookies are good, and end up buying a dozen cookies each to take home. The bakery is ecstatic and considers it a success. They end up building their entire business model around giving away samples for free.
Scenario #2 where things go bad:
People try the cookies. Eat as many as they want. End up buying no cookies because they already got their sweet fix for the day. Tomorrow, or whenever they choose, they know they can get another cookie for free, so they end up buying none. The bakery goes bankrupt and the people feel bad, but not to the point where they'll donate to open the bakery up again; they'll just buy they cookies from now on.
Scenario #3 the default scenario without samples:
A bakery puts great looking cookies in the window. Whoever wants cookies, comes and gives them money for cookies.
Using this example above, gurus will tell you that Scenario #1 is the only way that you can build a business. You need to give value upfront before having a chance to receive value.
Bullshit.
Scenario #3 is the most common scenario for a reason. How many of your local bakeries are giving away top quality samples all the time for free? They might do it once in awhile, but there's little to no chance that they're doing it everyday, and if they are, they're only giving you a taste.
This is the same reason why Groupon doesn't work for most businesses.
Or why all the Youtube gurus like @AndrewNC that make videos for free end up getting zero customers. Edit: Alright, maybe they end up getting two or three and then start calling themselves successful entrepreneurs.
It is merely a funnel/marketing tactic for you to get sales.
But to get sales: YOU NEED TO CREATE FUTURE VALUE.
You need to have a product or service that is valuable enough for people to give you money. The book Ca$hvertising puts it best: For someone to give you $20, they have to believe that the $20 they're giving you is worth less than what they're getting. If they believe they're getting $30 worth of value then they'll give you money with zero hesitation.
The only time you should be giving value for free is when you're attempting to increase the perceived value. If you know your service is worth $30, and you're selling it for $20, but no one's buying, then giving away a TASTE for free is worth it to increase the perceived value from let's say $10 to $30.
But if you're giving value away for free, expecting the customer to eventually pay, then you're mistaken.
I saved a former mentor of mine millions of dollars by optimizing his supply chain. I fell into the trap of giving value away for free, assuming that eventually he would reciprocate. You know what I ended up getting? Not shit - because there was zero reason to give me a dollar other than "loyalty".
I have friends that have invested years into the wrong pursuits. I've read countless posts on this forum of people betting their business around these tactics and then wondering why they failed. Time and time again I've seen this model fail.
End of the day, it's a marketing tactic. It is not the only way to operate your business, and more often than not, it does more detriment than good.
You're a freelancer?
What's better? You writing a thousand forum posts here and on Quora? Or you creating a strong landing page and cold emailing a thousand potential clients with a few clicks?
I don't know what's better. That's for you to test and decide. But if you bet you whole business on just one tactic instead of trying multiple until you get traction, then you're an idiot and deserve to fail.
To summarize: Create a valuable product or service. Employ a multitude of tactics to get traction. More likely than not, giving value away for free is bad for your business.
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