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If you are the founder or CEO of a tech startup or a business represented by a digital product, then, as an entrepreneur, first and foremost, you know that any business must be profitable. Otherwise, it simply won’t survive.
I have observed how many stakeholders believe attracting a massive user base should come before asking users to pay for the software they offer. How do I know? I thought the same way when I launched my first product, and after numerous examples from the customers’ projects, I began to reflect on this pattern.
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Counting users vs. counting profits
Product analytics is the foundation, and the metric of active users over a period of time is indeed essential for your digital solution. Users are the lifeblood: they bring in money through their actions (or inaction, sometimes). However, the main question is: do they bring it in?
Having many users doesn’t automatically mean high profits. The unit economics of your product has to be based on the fact that the profit from a single user should be higher than the costs of acquiring that user. This is exactly the path that leads to a sustainable business model.
If we exclude revenue from direct sales of goods (services) through digital channels, then monetization becomes the only way to achieve this goal. There are no valid reasons to postpone it.
Four benefits of prioritizing monetization at the very start
Instead of focusing solely on the number of users and quantitative ways to attract them, consider how you are specifically going to convert them qualitatively into paying customers.
For this purpose, depending on many variables, I suggest expanding the budget for your technical project from the start so that it’s sufficient for implementing monetization from day one. And here are four reasons why.
1. You focus only on what brings value to users
Once, our team worked with a wellness startup that introduced their minimum viable product (MVP) platform with a subscription model right from the start. Instead of chasing user numbers, they concentrated on providing premium features that addressed genuine user needs. It took a lot of effort, but together, we managed to deliver an experience that drove purchases.
This approach left us no choice but to provide it and do it in a way that competitors were not doing, or perhaps no one was doing yet. In just six months, they validated their product and achieved consistent revenue, enabling them to reinvest in development and grow rapidly.
In other words, you will inherently focus on delivering the real value. If you want to charge for your product, you have to make it worthwhile for users. Conversely, if you want to make it worthwhile for users, you have to charge for your product.
2. You get operational funds for the project
Running out of cash can cost everything literally. The case above illustrates this: the customer could save one-fifth of their budget initially and risk losing 50% later, remaining stuck in a perpetual MVP phase. Instead, the profit generated in the early stages was used for operational needs, allowing for progress.
Add no obvious bonus here: you not only win in the moment but also avoid subsequent costs. You need to clearly understand what and how you will implement it, where in the architecture of your technical product’s monetization will take place, and take care of the UX/UI design.
Even if you address this issue later, any changes during the post-release will require even greater financial investment. A well-thought-out monetization strategy during the discovery phase will help you address this in advance.
3. You validate the idea through users’ willingness to pay
When developing and launching any software project, it is, of course, impossible to skip the idea validation stage. This product approach itself is based on releasing less in a short time and immediately gathering feedback. But what if the users’ willingness to pay is another way to validate a specific feature?
I touched on the topic of expanding the budget, however, the smart use of current resources is also essential, especially when designing an MVP. Integrating monetization into the budget from the beginning, rather than investing the same dollar amount in numerous features with uncertain returns, can establish a more dependable growth strategy.
Depending on the results, you will be able to make data-driven decisions and prioritize the project’s scope — turning vague ideas into actionable strategies supported by concrete numbers.
4. You educate users for future loyalty to the product
Current trends show that so-called “premium” users truly seek exclusivity: they literally demand an environment for a valuable online experience (Gen Z has grown up!). Communities built around web and mobile products are the reality today. It’s essential to understand that selectivity and belonging when paired with a well-structured monetization strategy, are your trump cards.
When you start monetizing early, even with an MVP, you can lay the groundwork for building a loyal user base. While the product may still be in development, offering a well-defined value proposition can attract users who appreciate its potential. These early adopters are willing to invest and have some expectations, enabling you to get higher-quality feedback.
Payment, in some way, is the entry threshold that ensures results — recall Grindr, Headspace, and Spotify. And regarding ‘I will start monetization when…’: if your app, service or tool is completely free and suddenly requires payment, what do you think will happen to the retention rates the day after?
Final words
You can rely on the number of users to measure success; however, users vote with their dollars, and what matters is revenue and a solid, potentially beneficial profit and loss (P&L) statement.
Whether you are building and launching a digital product with your own team, as an indie hacker, or partnering with an external development vendor, ensure you don’t make the mistake of overlooking monetization from the very beginning.