Your Free-Tier Customers Are Killing Your Business

Let’s talk about the damage being done to your company by customers who aren’t actually paying customers.

I hear this one a lot, especially from first-time founders. Their plan is to build a massive and loyal audience around a product or a concept, and then when that audience reaches critical mass, start charging them.

My advice in this situation is always the same: Be careful with that audience, it could kill your startup.

There is a time and a place for a free-tier audience, and it all depends on your motives. If those motives include making money, that audience is poison. And while it may be necessary to offer a free tier to customers in the beginning, you have to convert that audience to paying customers quickly, before the poison sets in.

I’ll go over why and how to do that.

Problem #1: They’re Costing You Time and Money

Think about it this way: Let’s say you were in the lawn-mowing business. How many lawns could you afford to mow for free before you start charging customers?

The reason that answer is so obvious is because we’re already familiar with the full lifecycle of the lawn-mowing process. On the surface, we own the mower, it’s a buck for the gas. Go! Right?

But we wouldn’t dream of forgetting the time it takes someone to mow the lawn. Then we get into the costs of acquiring the customer, the costs of travel, maintenance, support, scheduling, insurance, scaling, and on and on.

We totally ignore these costs in startup mode, especially for digital or knowledge-based products.

But most crucially, a free-tier audience will waste your time. An audience has mostly the same needs as a customer base, and just because they’re not paying doesn’t mean they won’t expect quality in the offering.

Problem #2: They’re Giving You Bad Information

You need your customers to tell you what to build. When your audience is consuming your product or your service for free, everything they’re telling you is coming from a customer base that hasn’t decided whether your product or service is worth paying for yet.