Know Your Startup’s Customers: Whom to Turn Away, and When Losing Money Can Make Sense

Originally published 2023-04-28Robin’s commentary (as of April 2023, responding to Hong Dashen’s views)

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English translation of the Chinese post originally published 2023-04-28. Translated 2026-10-31 with AI assistance. Historical figures and claims have not been updated or independently verified. 中文原文

Reading guide

Robin agrees with most of Hong Dashen’s views: startups must know their business, their customers, and how they make money. Early on, pass on people seeking freebies, merely comparing prices or asking questions, or lacking commitment. A loss-making sale can still make sense: printers, coffee machines, water filters, and game consoles sell the main product cheaply and earn money from consumables or services. Show your core differentiation, or become one vendor among many lined up for the buyer to choose the cheapest. His four points: clarify the model, define customers, make trade-offs, and avoid highly replaceable businesses.

Key points

Make trade-offs about early customers to avoid unpaid work.
A model can lose money on the main product and earn from consumables or services—illustrative examples.
Core differentiation determines whether customers merely compare prices.
Clarify the model, define customers, make trade-offs, and avoid weakly differentiated businesses.

One clear path continues into the distance among several branching routes, suggesting choice and focus. — Entrepreneurship & strategyThematic illustration · AI generated

Full text — English translation

I agree with most of Hong Dashen’s views. A startup must be very clear about what business it is in, whose business it serves, and how it actually makes money. Define customers clearly and make trade-offs. Early on, pass on customers who only want freebies, compare prices, ask around, do not know what they want, or lack commitment. Do not pour time, people, and resources into work for nothing. Nor does losing money on a sale automatically make it a bad business. Many hardware businesses know exactly how they earn money: sell the main product at cost or at a loss, then earn from consumables or follow-on services once customers are tied in. Examples include printers, coffee machines, water filters, blood glucose meters, and game consoles. Also, make your core differentiation visible. Can customers do without you, or do you have a unique advantage that makes you indispensable? If they have many alternatives and your product or service has little differentiation, vendors end up lined up while the buyer chooses the cheapest. That is a difficult business for a startup. My summary: 1. Clarify the business model and users’ urgent needs. 2. Define customers clearly. 3. Make explicit trade-offs about customers and product features. 4. Avoid highly replaceable, weakly differentiated businesses wherever possible.

These articles are personal notes, book excerpts, and collected reprints. Figures and events reflect the time of the original publication, are not current information, and do not constitute investment advice.

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