How to Create a Million-Dollar Business This Weekend (Examples: AppSumo, Mint, Chihuahuas)

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Noah Kagan built two multi-million dollar online businesses before turning 28. He also looks great in orange. (Photo: Laughing Squid)

I first met Noah Kagan over rain and strong espressos at Red Rock Coffee in Mountain View, CA. It was 2007. We were both in hoodies, had a shared penchant for the F-bomb and burritos, all of which led to a caffeine-infused mindmeld.

It would be the first of many.

The matchmaker then introducing us was the prophetic and profane Dave McClure, General Partner of 500 Start-ups, which is now headquartered just down the street from Red Rock.

Mr. Noah has quite the start-up resume.

He was employee #30 at Facebook, #4 at Mint, had previously worked for Intel (where he frequently took naps under his desk), and had turned down a six-figure offer from Yahoo. Since we first met, Noah’s helped create Gambit, an online gaming payment platform and a multi-million dollar business; and AppSumo, loved by entrepreneurs and moms everywhere. He also helped pour fire on both the 4-Hour Workweek and 4-Hour Body launches.

The purpose of this post is simple: to teach you how to get a $1,000,000 business idea off the ground in one weekend, full of specific tools and tricks that Noah has used himself.

He will be your guide…

Enter Noah

For some reason, people love to make excuses about why they haven’t created their dream business or even gotten started. This is the “wantrepreneur” epidemic, where people prevent themselves from ever actually doing the side-project they always talk about over beers. The truth of the matter is that you don’t have to spend a lot of time building the foundation for a successful business. In most cases, it shouldn’t take you more than a couple days.

We made the original product for Gambit in a weekend. “WTF?!” Yes, a weekend. In just 48 hours, some friends and I created a simple product that grew to a $1,000,000+ business within a year.

Same deal for AppSumo. We were able to build the core product in one weekend, using an outsourced team in Pakistan, for a grand total of $60.

Don’t get me wrong–I’m not opposed to you trying to build a world-changing product that requires months of fine-tuning. All I’m going to suggest is that you start with a much simpler essence of your product over the course of a weekend, rather than wasting time building something for weeks… only to discover no one wants it.

I know what you’re thinking: “Yes, Noah, you are SO amazing (and handsome), but what can I do this weekend to start my own success story?”

Here are the steps you can take right now to get started on your million dollar company:

Step 1: Find your (profitable) idea.

At this stage, you are simply looking for something that people are willing to spend money on. So grab a seat and write down a list of ideas that you think might be profitable. If you’re having trouble coming up with ideas, try using the methods below to speed the research process along:

Review top sellers on Amazon. Find products that already have guaranteed customers, then build something complementary. A good example of this is Dodo making a gorgeous $60 case to buy for your iPad (which costs over $500, and over 5 million sold).

Think of all the things you do on a daily basis. Anything done more than once has potential for a product or service to improve the process. For me, one of those products was a mirror I could hang in the shower. It saves me tons of time while shaving, and now I don’t know how I ever lived without it.

Be cognizant of products you use and frequently complain about. Before Gambit, we were constantly asking our payment tool partners for certain features, yet our requests were always rejected. That was the impetus for us to create Gambit for our own games.

Check completed listings on eBay. This allows you to see how well certain products are selling. It’s also an easy way to measure sale prices of items and gauge the overall percentage of the market that’s receiving bids (i.e. in demand).

Look for frequent requests on Craigslist gigs. These listings are from people actively searching for someone to give their money to in exchange for particular services. Try searching for certain keywords (e.g. marketing, computers, health) and keep track of the total number of results displayed. Evaluate the most popular keywords and see if you can create a product or service around those requests.

Step 2: Find $1,000,000 worth of customers.

Now that you’ve found an idea, it’s time to assess whether there’s a big enough pool of prospective buyers. In this step, you’ll also want to ensure your market isn’t shrinking, and that it fares well compared to similar markets.

I use Google Trends, Google Insights, and Facebook ads when I’m in this part of the process. They’re great tools that help me evaluate the growth potential of my target market.

For example, let’s say you decide to build information products for owners of Chihuahuas (remember “Yo quiero Taco Bell”?). Here’s how I would check to see if there are enough customers:

1. Search Google Trends for the term “chihuahua” and other similar words (e.g. poodle, dogs) for comparison:

(Click image to expand)

We can see that the word “chihuahua” has a decent search volume (relative to “dogs”), and that “poodle” isn’t as popular. It also looks like the number of searches for “chihuahua” has been relatively stable for the last few years.

2. Double-check on Google insights:

Google Insights is great, because it breaks down the search data by location (i.e. what regions the searches are coming from), by date, and what they’re searching for (news, images, products). Click here to see the full report for the above chart.

3. Look at the total number of people available on Facebook for dogs:

3.1 million. Not bad, not bad.

And for Chihuahuas:

84,260 people. Score.

You can also see if there is a large property that you can piggyback on.

Paypal did this with eBay, AirBnb is doing it with Craigslist home listings, and AppSumo looks to the 100 million LinkedIn users. If you can find a comparable site with a large number of potential customers, you’ll be in good shape.

What helped me with finding $1,000,000 worth of customers for AppSumo was studying my successful competitors; specifically, Macheist. Their site did a Mac-only deal that generated more than $800,000. Macheist shares their sales revenue publicly, but you can use your own business acumen on the CrunchBase list to see which business you want to replicate. For instance, you might research Airbnb.com, discover that they have a profitable and growing marketplace, then decide to create a similar service for alternative verticals.

I like to create a Google Spreadsheet of the key numbers for my competitors’ businesses. Below is an example of what that might look like for Macheist in their Mac bundles. [Warning to the haters: This may not be accurate, but I used these numbers just to get a rough idea of the business’ potential.]

Step 3: Assess your customer’s value.

Once you’ve found your idea and a big pool of potential customers, you’ll need to calculate the value of those customers. For our example above, we’ll need to estimate how much a Chihuahua owner (i.e. our customer) is worth to us. This will help us determine the likelihood of them actually buying our product, and will also help with pricing. Here’s how we do that:

1. Find out how much it costs, on average, to buy a Chihuahua (about $650). This is the base cost.

2. See how much it costs to maintain a Chihuahua each year (i.e. recurring costs). Looks like it’s between $500-3,000. For this example, we’ll call it $1,000.

3. Look up their life expectancy, which is roughly 15 years. This is the number of times they’ll have to pay those recurring costs.

Therefore, a Chihuahua’s average total cost of ownership is:

[$650 + ($1,000*15)] = $15,650

Damn… you could buy a lot of burritos with that kind of cash. Silly dog owners.

In any case, these owners are already committing to spend a LOT of money on their dogs (i.e. they are valuable). After putting down $650 on the dog itself and an average of $80/month on maintenance (a.k.a. food), spending $50 on an information product that could help them train their Chihuahua–or save money, or create a better relationship between them, etc.–does not seem unreasonable. Of course, the product doesn’t have to cost $50, but we now have some perspective for later deciding on a price.

Now we need to utilize the TAM formula (a.k.a. Total Available Market formula), which will help us see our product’s potential to generate a million dollars.

Here’s the TAM formula for estimating your idea’s potential:

(Number of available customers) x (Value of each customer) = TAM

If TAM > $1,000,000, then you can start your business.

Let’s plug in some basic numbers to see the TAM for our Chihuahua information product:

(84,260 available customers) x ($50 information product) = $4,213,000

We have a winner!

Okay, obviously you are not going to reach 100% market penetration, but consider the following…

1. This is only through Facebook traffic.

2. This does not include the 5,000,000 monthly searches for “Chihuahua” on Google:

3. This is only for one breed of dog. If you find success with Chihuahuas, you can easily repeat the process many times with other dog breeds.

4. This is only for one product. It’s far easier to sell to an existing customer than it is to acquire new ones, so once we’ve built up a decent customer base, we can make even more products to sell to them.

By all measures, it appears that we have a million dollar idea on our hands. Now we can move on to the final step!

Step 4: Validate your idea.

By now, you have successfully verified that your idea has that special million-dollar-potential. Feels good, right? Well, brace yourself — it’s time to test whether people will actually spend money on your product. In other words, is it truly commercially viable?

This step is critical. A lot of your ideas will seem great in theory, but you’ll never know if they’re going to work until you actually test your target market’s willingness to pay.

For instance, I believed AppSumo’s model would work just on gut-feeling alone, but I wasn’t 100% convinced people wanted to buy digital goods on a time-limited basis. I mean, how often do people find themselves needing a productivity tool (compared with, for instance, how often they need to eat)?

I decided to validate AppSumo’s model by finding a guaranteed product I could sell, one with its own traffic source (i.e. customers).

Because I’m a frequent Redditor and I knew they had an affordable advertising system (in addition to 3 million+ monthly users), I wanted to find a digital good that I could advertise on their site. I noticed Imgur.com was the most popular tool on Reddit for sharing images, and they offered a paid pro account option ($25/year). It was the perfect fit for my test run.

I cold-emailed the founder of Imgur, Alan Schaaf, and said that I wanted to bring him paying customers and would pay Imgur for each one. Alan is a great guy, and the idea of getting paid to receive more customers was not a tough sell :) The stage was set!

Before we started the ad campaign, I set a personal validation goal for 100 sales, which would encourage me to keep going or figure out what was wrong with our model. I decided on “100″ after looking at my time value of money. If I could arrange a deal in two hours (find, secure, and launch), I wanted to have a return of at least $300 for those two hours of work. 100 sales ($3 commission per sale) was that amount.

By the end of the campaign, we had sold more than 200 Imgur pro accounts. AppSumo.com was born.

I share this story because it illustrates an important point: You need to make small calculated bets on your ideas in order to validate them. Validation is absolutely essential for saving time and money, which will ultimately allow you to test as many of your ideas as possible.

Here are a couple methods for rapidly validating whether people will buy your product or not:

Drive traffic to a basic sales page. This is the method Tim advocates in The 4-Hour Workweek. All you need to do is set up a sales page using Unbounce or WordPress, create a few ads to run on Google and/or Facebook, then evaluate your conversion rate for ad-clicks and collecting email addresses. This is how we launched Mint.com (see one of our original sales pages here). You are not looking for people to buy; you are simply gauging interest and gathering data.

[Note: With Facebook advertising, $100 can get you roughly 100,000 people viewing your ad, and about 80 people visiting your site and potentially giving you their email addresses.]

Email 10 people you know who would want your pseudo-product, then ask them to send payment via Paypal. This might sound a bit crazy, but you’re doing it to see what the overall response is like. If a few of them send payment, great! You now have validation and can build the product (or you can refund your friends and buy them all tacos for playing along). If they don’t bite, figure out why they don’t want your product. Again, the goal is to get validation for your product, not to rip off your friends.

Of course, there are other techniques for validating your product (like Stephen Key leaving his guitar pick designs in a convenience store to see if people would try to buy them). However, I’ve found these two methods to be super efficient and effective for validating ideas online.

No need to get fancy if it does the trick.

The Final Frontier: Killing Your Inner Wantrepreneur

We made it! You officially have a $1,000,000 idea on your hands and you know for a fact that people are willing to pay for it. Now you can get started on actually building the product, creating your business, and freeing yourself from the rat race!

I can just see it… You’re all nodding and thinking, “Hey, this Noah guy is pretty snazzy!” (Sorry ladies, I’m taken.)

So, what now?

- You are inspired. Check.
- You want to do something. Check.
- You get a link to a funny YouTube video, then you open up Reddit. Check.
- Suddenly, everything you thought you were going to do goes down the drain. Check.
- You and I softly weep. Check.

I want to challenge you! Whoever generates the most profit (not just revenue) within 14 days of this article will win some fantastic goodies. First, here are the basic rules and the process:

- Contest void where prohibited.
- The business/product must be new. This means either a landing page created from scratch using Unbounce or WordPress above.
- Results and proof of some type must be submitted as a comment below no later than 1am PST Saturday on October 8, 2011. Don’t cut it too close; if a timezone misjudgment knocks you out, we can’t make exceptions.
- Put your 14-day profit number (or increase) in the FIRST line of your comment.
- Ultimately, verifiable proof with lower number beats unverifiable proof with higher number.

[NOTE: THIS CONTEST HAS ENDED. Still need help starting a business? Check out AppSumo’s “How to Make your First Dollar” course.]

The prizes:

- $1,000 credit from AppSumo.com
- Roundtrip flights to Austin, Texas to have the most delicious tacos in the world with Noah Kagan, CEO of AppSumo. Sorry, but we can only cover flights within the USA. If you want to hoof it to the US, we can then pick up from there.
- Above all: your $1,000,000 business, of course!

Don’t let this post become another feather in your Wantrepreneurship cap. Just follow the steps and start working towards your $1,000,000 business! Remember, you can start laying the foundation for your product without building anything.

All you need is one weekend.

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Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration)

434 comments on “How to Create a Million-Dollar Business This Weekend (Examples: AppSumo, Mint, Chihuahuas)

  1. This is a great read and a great motivator. I created a small start-up about ten years ago (it didn’t work out). I’m going to get started on my second start-up today.

    Thanks, ill keep you posted.

    Kwadwo Asare…..

  2. Howdy! This post could not be written much better! Going through
    this post reminds me of my previous roommate! He constantly kept talking about this.

    I’ll send this post to him. Pretty sure he will have a good read. Thanks for sharing!

  3. Tim,
    I am a student of yours who some time ago purchased your book the 4 hour work week and put it down when I was maybe a chapter in ( I just hadn’t had the intelligence to fully grasp what you were saying at the time). Since that time I have had a multitude of jobs in many diverse and various fields. I always fought that thought in my head “you’ll reach the top in anything you do, just pick something and stick to it”.

    The voice in my head was right, I will always rise to the top but the second part of that thought was opposed by the expression “diversity is the key to life”. You see, It was important for me to experience many types of careers to get a understanding of a broader picture. To have perspective from different angles. Perspective one does not gain from just picking something and sticking to it.

    I remember hearing you on the Joe Rogan podcast, not recognizing your name from a book I had purchased and not read. Your outlook felt so familiar. Like something I had herd as a child that resonated in my psyche. I feel like now is the time I can better understand and comprehend the knowledge you so generously pass on.

    I am trying to keep this short, what I am asking of you is a favor. Circumstances in my life have brought me to this serendipitous moment where clarity has shown itself on my horizon. I have moved to Beaverton, Oregon leaving my life in Southern California to help my wife pursue her dreams and finish school so that she may become a physicians assistant.

    I told her, on one condition! We move near nike headquarters so I can run their track. I had no idea what the portland area had in store for me. I just knew that if times were good or bad I can find my bliss, my life’s balance running that track. We have been up here for a little over two weeks now and of course I have been looking for jobs at nike. Not really knowing where I would fit in and just last week I found it.

    The nike “EKIN”! A position that utilizes all my talents but will also allow me to grow in ways I couldn’t even imagine before. My philosophies align and my imagination soars with the amount I can contribute to this position and beyond it.

    I ask as your student to endorse me, recommend me, do what you can do to help me reach this launching pad for which I can take off. It would be my deepest and most sincere gratitude, of which you have already earned.

    I’m writing this open letter with a thank you for what you have already done for my life, in hope that there is more in-store.

    Thank you,
    Chris Franklin

    • I came across this blog by Googling The effects of LSD on creativity :). Expected it to be a “junkie” forum/blog and as I kept reading the posts it become evident that it is a kind of “junkie” blog :). So many people getting high on how easy and simple it is to make money…lots of money with little downtime and effort…if you just know how. I felt i had to make a comment :)
      As a general rule there is no fast and easy money. Of course there are exception to rules and it seems most are used as case studies here. In reality to make it in the online business at this day and age you have to be smart above average like this guy Hogan. Unfortunetly, judging by the posts, most people aren’t. How many of you would think to offer money to bring someone else clients? The standard thinking is to cold email and ask for a commission…but who pays attention to cold emails these days. Its little things like that which matter and most of us do not have that kind of thinking. To make it you need to be smart and/or lucky. Do a simple fact mathematics. There are probably over 100million people trying to make money online and not so many profitable ideas out there. Although the internet market seems to be big it really isnt…..its actually just the western countries spending money online but people from all over the world compete for them. There has never been so much competition in the hstory of the world and brains and luck had never played such a big role as now. Give it a shot, and when it does not work try something offline..you got bigger chances there.

  4. I love the website and your post is really inspring to me.

    It motivates me to continue with my own project, a language learning method with which I have learned 5 languages.

    I am still working on it, having it launched 2 months ago. I hope one day it will be my muse and allow me to learn others languages and travel.

    Keep on posting, because it gives good ideas and motivates people to keep on going.

    Thanks a lot

    • I have followed this thread for two years and it still has the same magical impact to any passionate entrepreneur.
      Its however more directed to online businesses none the less the knowledge may apply to offline businesses as well. However it’s imperative to consider proven entrepreneur processes such as customer development and lean start-up approaches to minimize on the loss of precious time coding and investing money on resources that are not needed. Any business would require that you personally engage the intended market to understand their need and invest to achieve exactly that.

  5. Hi Noah,

    What a great strategy, I know not much people will be able to find the product that they can sell even with this strategy or some of them could have a product but they loose time promoting it because it’s useless; But some people may have already the product that will work but don’t have a plan to sell it. you have been kind enough to show us how to validate the product and see if it will work before wasting time and money.

  6. Hmm it seems like your blog ate my first comment (it was extremely long) so I guess I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog. I too am an aspiring blog blogger but I’m still new to everything. Do you have any tips for newbie blog writers? I’d really appreciate it.

  7. I went step by step. Testing: I have setup the website. Collected emails of those who are interested. I am now sure there is a demand. I did split tests with pricing etc. I even developed the product to 80% market ready. But so what when I don’t have money to finish the product and to cope with demand even if a percentage of the ones who left email address would order. Anyone?

    • If there really is a demand for a product and You have a solid background to prove it, surely You can find an investor. Just get out of the building, talk to people with cash and present them some charts and slides. They love to see sth real – not just the ideas and predictions.

      Btw, great article. The most inspiring one!

  8. Just the article and inspiration I needed to read I want my kids to learn and understand this business. So they can become there own business.
    Thank you so much for sharing your success.

    Monica

  9. hi!,I like your writing so much! share we keep up a correspondence more about your article on AOL?
    I need a specialist on this space to unravel my problem. Maybe that is you!
    Having a look ahead to see you.

  10. Wow! I am a South African Student and I am only reading this a year later and I am sick and tired of being just thinking about my ideas… My biggest fear though is how to I turn my idea into International Money Making Products…

  11. Hey guys, I’ve been so inspired buy all the posts. This one really got me motivated. I’ve actually have an idea Id like to take to market, so to speak. I’ve done what I can to research the idea and it seems pretty good. (I hope) Im to the point where I need to test its viability in the marketplace, but Im sort of stumped as how to do it. I was hoping the group might have some ideas or pointers for me. Its a kitchen item, sort of a pressure cooker accessory. I’ve looked around some forums but they don’t seem as active as Id like at least not enough to test sales ad. Any ideas on where I could plant the idea online to see if it’ll stick? Thanks again.

    • I’ve watched/read several things from Noah & Tim both, though am still seeking my own success so take this for what it’s worth. :P

      There are a couple common themes you’ll see with these two. As is emphasized in the article, never ask people IF they’ll buy; ask them to buy. It’s not real validation unless it’s effectual in the target audiences’ mind. Also, the human-to-human channel is underutilized. So often we want to take out an ad, make a website, and anything else that’ll keep us from having to be face-to-face with a prospect. But every non-personal channel is crowded and thus mostly ignored. Personal interactions are hard to ignore, cheap (in money cost anyway) and most conducive to actual, factual feedback. You won’t be left wondering if it was your ad or your product that failed.

      Even if you don’t have a prototype, find a friend who has a pressure cooker that could use your product, pitch them on the benefits and offer to sell them one that you have “in the car”. That’ll at least get the wheels turning. If they say no, find out why. If they say yes, great! Like Noah said, buy them some tacos and have a laugh over it or something. Repeat to taste. Remember: if you can’t sell benefits, you can’t sell products. It’s tough to stick your neck out, but it has to be done at some point or other. Might as well start with a format you’ll get a lot out of.

      Good luck!

      PS Also Google Noah Kagan as he’s got a lot of good vids out there. Just don’t let your entrepreneurial spirit devolve into wantrepreneur video watching. ;)

  12. A lot of fantastic information. My head exploded after the first couple of paragraphs. I have bookmarked it and plan on revisiting it.

    I am still trying to wrap my head around selling information products.

  13. A lot of good ideas in this post and also the post that I came here from, on the postal guy who is now making 4 thousand USD a month for his climbing glasses.

    I guess a lot of times people have good ideas, but don’t follow up on them. The most important thing is to take a risk and just jump in. Otherwise nothing will change. You need to take a risk to also get a gain!

  14. Hey Tim, Noah, et al!
    In this post you said…
    “We were able to build the core product in one weekend, using an outsourced team in Pakistan, for a grand total of $60.”
    I have an idea for a mobile app I want to build. I’ve seen all kinds of do-it-yourself tools, but I’d way rather pay somebody $60, hell I’d even pop with $100 to get a fairly robust version of my idea in one weekend.
    Can you share contact info or other details with me.
    Thanks!

  15. Hi Noah. You’re wonderful and i am really impressed. I have a brilliant idea that i’ve been going about it for a year now. It is a beautiful app to developed but am afraid they will steal it. Am looking for a reputable organization that can work on it. A university professor told me that this is wonderful idea but they will steal your idea. I checked google for similar app but no app like that. I’m scare! Please advice me.

    • Hi! I also have a few awesome ideas for some really good apps but I am also nervous about people stealing it. If you get any info on where I can go for help on who can help me with that can you please let me know?? It would be greatly appreciated :D

      Thanks!

      Taylor

    • @Nbaa Belbari:- please contact me, i might be able to provide a guideline on how you can protect your intellectual idea, copyright before launching the product.

  16. I have some ideas on creating a website, I’m really interested to know which company from Pakistan helped out for a whopping $60 ?
    If anyone can help me out with that it would be great. :D

    By the way I’m loving all of these posts. So inspiring, motivational and helpful, especially for someone my age and just getting started.

    Thanks all! You’re wonderful!

  17. hi. i liked your post even tho i think its kind of confusing…
    i’ve got an idea i just need to learn how to create the app.
    is there any advice that you could give me??
    also, who do i have to speak about the app to be seen on the appl store( iphone etc.?

  18. excellent step by step guide on how to get into a market. So many times people have an idea but dont know the steps to a ball park validation of the markets capability to keep on buying/ giving money. Excellent excellent guide.

  19. Read this article about two weeks ago for the first time. It and its followup article with Noah have helped immensely to understand the “muse” business concepts……just wanted to say thanks.