- Community, Advice
Why my first business failed — and why yours doesn't have to
For a class project back in college, I learned how to build a website. Now, we’re not talking one with fancy, breakthrough graphics and cool widgets, but rather a simple homepage with a couple of blog posts, and a contact page for visitors to reach us. And while this first project was very straightforward, I continued to develop my skills and, over time, became pretty good at putting together amazing websites in a short amount of time.
After graduating, I decided to make use of these skills. I partnered up with one of my closest friends and we built our very own web design company. Fortunately, we found quick success. We were even featured in HR Magazine as a completely bootstrapped company leveraging skills from remote employees across the world.
While I would love to say that we dominated this niche for years and that we found an incredible, deep sense of gratification running that company, the truth was that after two years of moderate success, we had burned through all of our money and were forced to shut down.
Looking back on it all now, I can say that we made many of the common mistakes that cause companies to fail.
Here are seven things that doomed us from the start, all of which we could have avoided if we had taken the time to create a road map to the success we envisioned.
1. We had no USP.
A unique selling proposition is what separates you from every other provider in your space. It gives your audience something to remember, something to compare, and something to believe in. Humans are biologically programmed to spot differences and notice even the most subtle changes. How obvious is it to us when a constant sound, like a fridge running, suddenly stops?
A USP also gives you a foundation upon which to build a comprehensive marketing plan, which is critical to growth.
Be clear when creating yours. Your target market should know exactly what you provide and, more importantly, why you provide it. Focus on the benefits to your clients, or how your product will take them from where they are to where they need to be. And if your USP is technical, find a way to translate it into something everyone can understand — decision-makers are not always engineers.
We failed to explain to our customers why we were the right option and ended up becoming replaceable by other mainstream (and more cost-effective) cloud-based web development services.
2. We failed to specialize.
A USP also hints at what you should be focusing on. There are too many competitors and too little time to be able to do everything well. Focus on one thing and make it great. Almost all of the unicorns in the market started with something specific and did it well before expanding.
Specialization also provides some insight on when to say no — yes, you should be saying no from time to time. Some customers will take you in the wrong direction. While taking their projects on will get you revenue in the short term, it doesn’t do much for the longevity of your business.
We spread ourselves thin by trying to provide our services to too many industries. Not only did this scatter our efforts, but we failed to capitalize on the compounding knowledge that comes when you focus on a specialty.
3. We didn’t create an effective sales funnel.
A sales funnel is an integral tool for any business, no matter how big. Not only does it provide a consolidated place for your leads to be nurtured, it also generates data with which you can make informed decisions. Sales is not a static problem, it evolves — as should your approach to it.
A sales funnel can even be automated. There are countless marketing automation and sales tools that take visitors from your website or blog and turn them into qualified leads. Use them.
A study uncovered that 79 percent of leads never become customers. Nurturing our prospects and building a relationship of trust should have been our top marketing priority. It wasn’t.
As a result, we never knew where our next customer was coming from. Most of our contract sales were generated by repeat customers, referrals, and PR. And while this is a great way to sustain a business in the short term, you can only grow with new customers.
A well-designed sales funnel would have ensured that we had new business coming in to scale predictably.
4. We lacked true leadership.
All too often, new entrepreneurs get trapped working in the business when they should be working on the business. Sure, at first, you need to get your hands dirty, but there comes a time when the productive work needs to be done by someone else.
When you’re actively executing the day-to-day operations, it’s difficult to take the required “step back” to examine the business on a macro scale. Leadership is not just about knowing where the business should go, it’s about communicating that map to the team and ensuring they’re all using it.
This one hurts to admit because it fell directly on me. I assumed that working myself to the bone would make the business successful, when in reality, working smart was the order of the day.
5. We had no company story.
A company story is more than just the history of your business. It’s a relatable way of describing the problem, why your business exists to solve it, and how it solves it. Moreover, it is a nice way to show how passionate you are about your particular industry or solution.
Your brand is built on your story.
A story is a tool to create trust with new customers. If it’s compelling enough, it will give them a sense of familiarity with your brand which will help them pull the trigger when it comes to buying or sharing with their peers. Transparent branding is especially important for startups, small companies and freelancers who are looking to differentiate themselves.
We thought our story wasn’t compelling enough, so we didn’t tell it. But the truth is that any story can be compelling if it’s told in the right way.
6. We didn’t nurture customer relationships.
A strong customer relationship is an integral part of growing your business. It’s not just about them knowing and liking you, but about them being comfortable enough to provide critical feedback — feedback that is essential to improving your product offering.
Our company built beautiful websites and integrated the most innovative widgets for our clients, yet we had a big problem: Our service was transactional.
While we focused on making the transaction as positive as possible and delivering the highest-quality product, we never developed deep enough relationships with our customers and lost out on multiple opportunities to grow. In the words of Steve Jobs, “You’ve got to start with the customer experience and work back toward the technology — not the other way around.”
7. We did not create a value ladder.
In his book Dotcom Secrets, Russell Brunson unpacks value ladders. A value ladder is a visual map that outlines your services, from entry-level offerings to high-ticket products.
In our case, instead of offering one core service and providing supplementary ad hoc services like marketing or copywriting, we stuck to web design. By limiting our offering to simple web design services, we never stood a chance. Our marketing costs would have eventually chewed away at our profits. We made the common mistake of competing on price instead of value.
We should have assessed and mapped out complementary services while examining which of our offerings could be productized. This would have given us a way to scale and generate revenue over quieter months.
Learn from my mistakes.
There is a reason experience is so highly valued. Going through a startup failure taught me more about business than any book or course could. More importantly, it showed me why some of the lessons are so important.
Starting a business is hard, and while many startups will close within their first five years, it doesn’t mean you have to follow their same path and experience the same mistakes.
My goal is to share my experience with you in the hope that you don’t have to fail before you succeed.