The short answer
Pre-selling means asking customers for money or a formal commitment before the product is fully built. It is the strongest form of validation because it costs the customer something real. Common forms are paid pilots, deposits, discounted pre-orders and letters of intent. Each must come with honest terms: what will be delivered, roughly when, and how refunds work if you fall short.
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Why money is the clearest signal
Interviews tell you about the problem. Smoke tests tell you whether a message attracts interest. Neither tells you whether someone will part with budget, because neither asks them to. The moment you ask for money or a signed commitment, polite enthusiasm separates from genuine demand very quickly.
That is uncomfortable, which is exactly why it is useful. Many founders avoid asking because they fear the answer. But a no now costs you an awkward conversation; a no after a year of building costs you the year. And a yes gives you something no amount of positive feedback can: a customer with a stake in your success, who will tell you honestly what matters because they have paid for it.
The commitment ladder
Commitments sit on a ladder from cheap to costly. The higher up someone climbs, the more their behaviour tells you. Aim to move your most interested prospects as far up as honestly possible.
| Rung | What the customer gives | What it tells you | Your obligation |
|---|---|---|---|
| Compliment | Kind words | Almost nothing | None, but do not count it as evidence |
| Time | A follow-up meeting or demo | Some interest in the problem | Respect their time and prepare properly |
| Reputation | An introduction to their boss or a peer | They are willing to be associated with you | Do not embarrass them |
| Effort | Sharing real data or joining a trial setup | The problem is worth work to them | Protect their data carefully |
| Letter of intent | A signed statement of intended purchase on stated terms | Serious interest, usually non-binding | Be accurate about what you will deliver |
| Deposit or pre-order | Money, usually refundable | Real willingness to pay | Clear timelines and easy refunds |
| Paid pilot | Money for a defined, limited engagement | Willingness to pay for outcomes now | Deliver the agreed scope |
Letters of intent
A letter of intent, often shortened to LOI, is a short document in which a business states that it intends to buy your product on broadly described terms if certain conditions are met. LOIs are usually non-binding, which is their weakness, but they still require a decision-maker to put their name to something. They are common in business-to-business sales, especially where a product needs to be built or adapted before it can be used.
A useful LOI is specific. It names the buyer and signer, describes the problem and the capability being purchased, states an indicative price and volume, lists the conditions that must be met (for example, a specific integration or a security review), and gives a target date. Vague letters that promise to 'consider' your product are closer to a compliment than a commitment.
Have any template reviewed by a qualified adviser before you use it, and keep the language honest. Do not describe features as existing when they do not. The purpose of an LOI is to record a real intention, not to manufacture one for a pitch deck.
Paid pilots and deposits
- Paid pilot — A time-limited engagement, often a few weeks to a few months, where the customer pays to use an early version, sometimes delivered partly by hand. Define the scope, the success criteria and what happens at the end before it starts.
- Deposit — A partial payment that reserves a place or a unit. Useful for physical products and limited services. Make clear whether and when it is refundable.
- Discounted pre-order — Full or partial payment now, in exchange for a lower price or early access. Works for clear, well-scoped products where you are confident of delivery.
- Founding customer plan — A discounted annual plan for early adopters who accept a rough product in exchange for influence on the roadmap. Put the trade-off in writing.
Asking without being awkward or dishonest
The ask works best at the end of a conversation where the customer has already described the problem and its cost in their own words. Summarise what they told you, describe what you plan to deliver and roughly when, state a price, and ask directly. For example: 'You said this takes your team about a day a month. We are building a version that handles the matching for you, ready for pilots in about eight weeks. Founding pilots are a fixed fee for three months, fully refundable if we do not deliver the agreed scope. Would you like to be one of them?'
Then stop talking. A pause is not a no. If they hesitate, ask what would need to be true for them to say yes; the answer is often the most valuable thing you hear in the whole process. If they decline, ask why, and write the reason down.
Refund honesty and delivery risk
Taking money before you build creates obligations. Be explicit that the product is in development. Give a realistic timeframe, not an optimistic one. State the refund policy in plain language and honour it promptly and without argument. If you fall behind, tell customers early and offer refunds proactively rather than waiting for them to ask.
Keep pre-sale money in a way that lets you refund it if needed, rather than spending it all on the assumption of delivery. Check the consumer protection, tax and contract rules that apply to you and your customers, and get proper advice for anything beyond a simple refundable deposit; this guide is not legal or financial advice.
Finally, read the results honestly. As an illustration, if you ask twenty well-qualified prospects and three pay for a pilot, that is real evidence, and those three are now your most important source of learning. If none of twenty pay, even at a heavily discounted price, that is also evidence, and it is far cheaper to learn now than after building.
Your action checklist
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Questions
Is a letter of intent legally binding?
Usually not, and most startup LOIs are drafted to be non-binding, although some clauses such as confidentiality can be binding depending on the wording and the law that applies. Treat an LOI as evidence of serious intent rather than guaranteed revenue. If you need certainty, use a proper contract, and have either document reviewed by a qualified adviser before relying on it.
Can I pre-sell a product that does not exist yet?
Yes, provided you are honest. Make clear that the product is in development, give a realistic delivery timeframe, describe exactly what the customer will receive, and offer clear, easy refunds. Never imply that a product exists when it does not, and check the consumer and contract rules that apply where you and your customers are based.
How much should I charge for a paid pilot?
Enough that it represents a real decision for the customer, not a token amount that anyone would agree to. A common approach is to price the pilot as a meaningful fraction of what you expect the full product to cost, tied to a clear scope and success criteria. The point is to test willingness to pay, so avoid making it free.
What if nobody agrees to pre-pay?
Ask each person what stopped them and write down the reasons. Common answers point to the wrong buyer, an unclear offer, too much risk, or a problem that is not urgent enough. Fix what you can and ask again with a sharper offer. If well-qualified prospects still decline after that, take it seriously as evidence about the idea itself.
Terms in this guide
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