Sell first, then produce: use pre-orders and small orders to confirm demand before investing in manufacturing

18. Sell first, then produce: use pre-orders and small orders to confirm demand before investing in manufacturing

Cost: Just a few dozen to a few hundred yuan is needed to create a prototype or a simple landing page. After that, reach out to dozens of real potential customers and ask them to make advance payments or place small orders. This approach takes a few extra weeks compared to starting production right away. The hard part is resisting the urge to produce the goods first.

In plain terms: A study followed 116 newly founded Italian companies for about a year. Entrepreneurs who first formed a hypothesis and then tested it against real market feedback tended to run their businesses better, were more willing to pivot when needed, and did not quit earlier than others. So, if no one is willing to make advance payments or place small orders, you should not believe the claim that “products will sell on their own once made.”

Benefit: This randomized controlled trial tracked 116 Italian startups over roughly one year. In such trials, participants are randomly split into two groups; only one group receives a specific intervention, and the results of both groups are compared. The findings showed that entrepreneurs who received training on the “form a hypothesis first, then rigorously test it against market feedback” method achieved better business results, were more likely to switch strategies when needed, and did not have a higher early dropout rate. The authors argue that this approach lowers the risk of pouring resources into projects that seem promising at first glance but ultimately fail (published in Italy in 2020).

Evidence grade: B

Sources: Camuffo A, Cordova A, Gambardella A, Spina C (2020). A Scientific Approach to Entrepreneurial Decision Making: Evidence from a Randomized Control Trial. Management Science 66(2):564-586. <https://doi.org/10.1287/mnsc.2018.3249>

Notes: This is the only study on this topic, and its sample size is relatively small; it was also conducted only in Italy, which is why it is rated as grade B. The title, source, and abstract have been cross-checked via Crossref and Semantic Scholar; however, the exact effect figures cited in the text have not been independently verified. In practice, if no customers are willing to make advance payments or place small orders, you should not trust the idea that “products will automatically find buyers once produced.”