Startup Founders, Have You Found Your 1,000 True Fans?

Photo by Alfonso Scarpa on Unsplash

Kevin Kelly’s original idea still applies to early stage CPG startups. Here’s why.

As usually happens, I leave Expo West feeling both inspired by all the great people I reconnect with and the great new brands I learn about. It helps to recharge my batteries for the rest of the year.

But after a week of exploring the product showcase flow, I also leave feeling that a lesson or two are probably in order for the younger brands that have so much to offer. So, here is today’s lesson: don’t spread yourself too thin, especially in the early going. Beware of too many products, too many channels and too many customers.

Too many customers? Come now, Robert, you must be kidding.

Not in the least. I met one founder whose situation summed it up pretty nicely. His company has 12 different products, 10 in snacks and two in another, somewhat related CPG category, and they’re trying to push into retail. They’ve been primarily direct-to-consumer. and now they’re trying to push from online into retail with $25,000 a month in sales. I asked him to tell me which of his 12 products was doing 80 percent of his sales. He told me, “One of them.” That sounded about right to me.

To make sense of this, let’s bring in a very deep thinker by the name of Kevin Kelly.

Some of you may have heard of Kelly. If you haven’t, he helped found Wired Magazine back in 1993. Wired won the prestigious National Magazine Award for General Excellence twice (in 1994 and 1997) during Kelly’s tenure as executive editor. Since then, he’s started companies and nonprofits and written prophetically and brilliantly about business, technology and society. In 2008, he wrote an essay about the 1,000 True Fans concept that he has refined and that still holds true today.

Kelly explains that a true fan will buy anything you produce. “These diehard fans will drive 200 miles to see you sing; they will buy the hardback and paperback and audible versions of your book; they will purchase your next figurine sight unseen; they will pay for the ‘best-of’ DVD version of your free youtube channel; they will come to your chef’s table once a month.” If you can acquire something in the neighborhood of a thousand true fans like this, “you can make a living.”

Kelly concludes by saying that to make a living, you need two things: first, you have to create enough each year to earn, on average, $100 profit from each true fan. Second, “you must have a direct relationship with your fans. That is, they must pay you directly.”

Kelly believes the key to making the 1,000 True Fans concept work is technology, which allows creators to maintain these relationships and sell directly to fans, who in turn can use technology to tell you what they want and where they want to get it. He was thinking about creative professionals when he wrote the essay, and he set $100,000 a year as the goal for this group. But I think the concept applies to CPG startups as well, although the numbers will change.

So let’s look at the two conditions needed to make the 1,000 True Fans formula applicable to change-the-world CPGs. In the past, I have written about the Findaway Growth Model. In the model, I argue that before you do anything else, you need to get to the place where your company makes $100,000 a month. If you do the math, you may need more than 1,000 fans, but you won’t need to try to get as many as you think. Look at the LTV of your consumers, and for each product you can fairly quickly figure out how to get to that $100,000 a month for your pool of most valuable customers.

Maybe you start at $20.00 per fan for a few months and, as your fans look to buy new products from you and you acquire new fans along the way, your monthly sales will rise from $20,000 to $50,000 and up to $100,000.

And for most brands — not all, but for most brands — that means focusing on direct-to-consumer where customers can pay you directly and you can establish that close relationship directly without having to worry about middlemen such as brokers, distributors or even Amazon, which will help you with volume but also take a piece off the top. So direct-to-consumer is almost always the best place to start for most small brands that I see. And what’s more, I submit to you that you will be able to hit that magic number of $100,000 a month most readily–and thereby prove your model to yourself and prospective investors like me–by focusing on one or two products rather than spreading yourself too thin.

Why $100,000 a month? (I’d be willing to stretch it and say $100,000 — $300,000 per month.) At this level, you can bring in some data and reassess en route to setting your sights on the next level of $500,000 — $1,000,000 a month.

Remember, there are no substitutes for climbing the mountain. You can’t rent a helicopter and zip straight up to the summit so you can ski down the mountain and get the spoils of climbing that mountain without actually climbing it. Entrepreneurism isn’t heli skiing. You have to hit each of those base camps along the way, of which $100,000 a month in sales is the first. If you create enough value for those true fans, they will buy more and they will tell their friends about you and they will become new true fans. But you can’t do this if you are constantly searching for ways to launch new products or open new channels without proof that this is what your customer wants.

Listen to your customer in a deep way and she will tell you what you need to do to keep your relationship alive and growing.

Oh, by the way, if you are only trying to get your first 1,000 true fans your marketing and messaging become WAY easier! Especially, if, like most entrepreneurs I know, you created your product to satisfy yourself. Think of yourself as True Fan #1 and then market to yourself. Easy, right?

And until we meet again, at Expo or who knows, let me know what you’re doing to cultivate your true fans.

Sincerely,

Rob Craven, scalepassion

Enjoy this article? If you would like to see simple, practical tips in your inbox every week sign up for TwoTip Tuesday to help scale your change-the-world business.

All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!