Let me be honest with you. I didn’t have a clue about business and entrepreneurship when I started in 2002, and I have suffered from a very early small business failure without even noticing.
I was a computer science student in college. And I didn’t enjoy or appreciate the teaching style in the first two years.
After a lot of research, I have found out that web development was the most promising and easy to start field in computer science. So I taught myself web development, then I started to take clients as a freelancer.
Fast forward to 2008, I started to resell web hosting services to my existing clients. Then, I launched a web hosting service, until I admitted the failure of the whole idea in 2016.
I made many mistakes during my first 14 years in business. They were easy to avoid, if I knew beforehand what I am going to share with you in this article.
Are you excited enough? Let’s do this.
Never skip planning
If you start without planning for success, growth and even for failure, you are wasting time, money and resources.
When you are young, you tend to take quick impulsive decisions. And you normally have no patience to plan ahead, and wait for long term results.
And that was the case for me as well!
I had no plan when I took my first client. He was a friend of my dad, as they were both university professors. He wanted a website for his organization, and I was very excited to start my own project, even before graduation.
After completing the project, I didn’t look back. I wanted to continue my college years, and my main goal was to pass them like any normal student.
However, the idea of starting a business kept itching, and I couldn’t resist registering my first domain name in 2002.
And without planning, I have created a website, with no clear purpose or goal. Then later I took another website development project, which came to me through word of mouth.
After graduation, I thought that if I rent an office and sit in front of a desk, then make some cold calls, everyone will order my services. I even paid for a classified ad in a local newspaper, and I almost got no calls.
After a lot of struggles, I got a couple of clients. The revenue didn’t cover even one month of rent.
Finally I had to leave the office, pause everything and find a day job.
I know NOW that if I planned well, I would know the feasibility and profitability of my business idea before spending a penny on it.
Planning allows you to have an exit strategy after failure. For example, you can set a duration of which you have to pivot if your business idea wasn’t a success. It allows you as well to set SMART goals, that will eventually lead to future success and growth.
Actually, Pat Flynn has provided a simplified business idea validation methodology in his book “Will it fly?”. He takes you through a coaching session-like journey in the book, and provides actionable steps to reduce the likelihood of the failure of your business idea.
Another methodology that I follow myself, is the lean planning methodology . You can use lean planning to remove the unused portions of the traditional business plan, and efficiently create a plan that is actionable and updateable.
Take your time to plan using whatever tool you want, just don’t skip planning.
After planning well, it is obvious that you have to focus on the plan. You have to move towards your goal without hesitation or distraction.
Don’t make my mistake!
I kept following trends. From providing all types of web hosting services to my customers, to focusing on shared web hosting only and finally VPS hosting. I was copying what I thought was working at that time, until I realized that I totally lost focus.
My brand was cluttered everywhere, and wasn’t known to be good in a specific service or to a certain niche. No one will buy from an average brand in web hosting market, everyone wants the best service to rely on for their business or even personal website.
However, you should know that I wasn’t changing the focus for no reason. I was doing so because I wasn’t succeeding, and I thought that following the newest trend will help me make some profit. Obviously its didn’t help!
Because I didn’t plan ahead, I didn’t know that web hosting is not a server and some IT background. It is a very competitive market, where brands compete on a huge pile of features with 24/7 high quality support and almost no downtime.
Compare this to a one man show web hosting company, with a maximum of three servers and everything is managed remotely with no physical access. There is no chance to succeed in this market with these very low resources.
Planning only would have told me that I shouldn’t move forward, and waste more time and resources.
So as you can see, without planning I lost focus and became very distracted with no chance to succeed.
You will lose in price wars
In order to get more resources to help your business to win the competition, you need to make profit first. That’s obvious!
So, if you think that you will get more customers by only competing on price, you will eventually fail to provide a good service to them and lose the competition..
Why? Because normally your established competitors have enough money and resources, and they can hire more people and buy more tools.
One of the main reasons that I didn’t make it for 14 years, that I was competing on price. I wasn’t able to provide higher quality service or better customer support. There weren’t enough money and resources to offer that.
So, I was doing my best to keep the service running, while providing the lowest possible price to get any customers.
Of course I got some customers looking for the lowest price, regardless of the quality of the service. And when I tried to go a bit higher with pricing to cover my expenses, and have a tiny profit margin, almost everybody left.
That was expected!
Because people looking for quality service, wouldn’t come to me in the first place. Why they would pay higher if they can go to a top web hosting company for the same high price?
How I could avoid that? With planning!
Did you get bored? I know that planning isn’t fun, but it is rewarding.
If you plan well, you will be able to research the market and competition. And decide if you can offer your service for a price that can make you win the competition on quality as well, or not.
Relying on Paid Ads vs. Content marketing
If you have a good plan, enough resources to help you succeed and you know your competition well, that’s great. But how will you get customers in the first place?
Throwing money on ads was the easiest thing for me. I had some money from my day job, no wife or kids and no responsibilities. So why not pay for ads to get quick results?
It was one of the biggest mistakes!
I thought that ads will get customers no matter what. Maybe you think that I was very naive. But it is not a secret, I already said that I had no clue at that time. So I was just following my gut without any previous experience.
Long story short! I lost a lot of money on impulsive paid advertising decisions, and I didn’t get enough customers to cover even the monthly costs.
Most people buy from places or brands they are already know and trust.
For example, they can buy from any brand on Amazon.com if it has good reviews. But if you sell on your website with an unknown brand, you will find it very difficult to sell.
So how to solve that?
I believe you guessed it! With content creation and marketing.
Potential customers are all over the internet, some of them already have the buying decision and others are still trying to find a solution for a problem that they have got.
You can’t compete with well known brands for customers in the buying decision, if no body knows you. Instead, look for customers who are searching for solutions, and try to help them with valuable and high quality content.
Educate them, and let them know and trust you. Then guide them through the process until they buy from you.
This is what we call a sales funnel. But I will come to that later.
Value first approach
Again, Pat Flynn, one of my online mentors, always recommends to serve your audience first then sell to them. I go beyond that and advise you to provide value first. Not just service.
By providing value I mean helping your audience to see true results. You need to provide solutions “for free” that should help them to find the path to success and actually see some wins along the way. Then offer them more advanced help when they use your paid service or order your product.
Gary Vaynerchuck wrote a book “Jab, Jab, Jab, right hook“, which talks about how to ask your audience to buy from you. You need to check it out.
I am not telling you to serve all the time without getting paid, but you should not sell before helping your audience see true results after consuming your free content.
So providing value in exchange for trust and loyalty, leads eventually to future sales and great success.
Creating the sales funnels
One of the main tools that should help in avoiding small business failure, is sales funnels.
Why sales funnels help?
A Sales funnel is a method were you provide content that solves a problem for a specific audience. Then, when they find that your content is really valuable, they will join your email list.
From there you can keep providing more value, and nurture your email list audience until you can offer them your paid product or service.
The advantage of using sales funnels is focus!
You focus on a specific audience and provide true value to them, and have a system or process in place to make sure that when you start offering your paid service, that they are ready to buy from you.
Compare this to just putting paid ads somewhere in front of people that may or may not need your service.
Sales funnels definitely win!
People don’t know you, so how they can trust you?!
If you want to avoid small business failure, be patient, create valuable content and create a well planned and efficient sales funnel.
Let me wrap up in a short paragraph. What is the best way to avoid small business failure?
The best way is to plan ahead!
Take your time planning, know your audience problems, and provide content that should solve these problems for them. Then nurture them in your sales funnel, understand what they need from your future products or services, until you are able to offer them exactly what they want.
This is how you can provide fail-proof solutions to your customers, which will help them and eventually help you to avoid facing a small business failure.
If you like what you have just read, have some thoughts to share or even do not agree with me, just share some words in the comments below. I will do my best to reply on every comment.