Today I’m baring the soul of one of my (several) startup failures, in the hopes it will save some of you out there from becoming a statistic like me.
I’ve talked before about the CB Insights research, looking at the reasons startups fail. They analyzed more than 100 failed startups, doing a detailed port mortem. While the reasons businesses fail are probably inter-related,they concluded a whopping 42% of startups failed because there WAS NO MARKET NEED.
This was BY FAR the largest reason stated for business failure. 29% said they ran out of cash. I would have thought this was the main reason businesses failed, but that actually happened in less than 1/3 of the cases. 23% failed because they didn’t have the right team.
Now, almost HALF of businesses failing because there was no market for their idea, their services, or their product is a pretty discouraging statistic. Especially because it means that we as the entrepreneurs got too excited by our own idea. And, it’s usually the most easily fixable thing. Market research & market testing can often be done pretty inexpensively, if there’s a will to do it & be objective about it.
But many of us are blind anyway. And that was me several years ago, when I decided to pivot my offerings at Globalocity, my little consulting business. I had previously focused on international expansion assistance, especially with helping companies find & manage foreign distributors. But business was slow. And meanwhile, I had connected with someone who had spent his entire career on indirect channels to market, but was at an inflection point [note: in hindsight, I should’ve asked a lot more questions about that inflection point…]. We struck up a friendship, and he suggested we collaborate together and go to market with a comprehensive “indirect channels to market” consulting offering.
We knew we had the right expertise with our combined experience. And we were convinced there was plenty of demand. After all, we knew anecdotally that lots of companies were unhappy with their current distributors, and there was lots of research showing this as well. Plus my new partner had consulted with many companies over the years, helping them improve their distribution programs.
But what we NEVER established was (1) whether people would pay to have someone come in and help them improve their distributor network, or whether it was just a minor irritant that they’d rather just leave alone (2) if they would pay, how that offering needed to pitched and packaged (3) who our ideal clients were (were they startups? Big companies? Global companies?) & in what industries? (4) how to make our combined expertise seem like the “go to” solution and (5) how to find these ideal clients.
But while we had lots of leads and discussions, we could never close on any significant engagements.
So, we committed the cardinal sin I mentioned earlier – we never established there was a market demand for OUR services as we went to market with them.
And In looking back, we also both committed another couple of cardinal sins – the wrong business model and also the wrong team.
I realize now I was counting on my new business partner — with his long career of working in this area and having many, many successful consulting engagements – to be able to help answer all these questions and find clients.
But that turned out to be a bad assumption, for 2 reasons: (1) he had never sold these services directly, and (2) he had no real interest in selling these services directly.
His business model over his long career was to align with a very large consulting firm, and do all their training and workshops on distributor management.
They organized all these trainings, and my partner showed up, delivered the trainings (which were quite popular), and then the consulting company was nice enough to let him scoop up any consulting engagements that followed from the trainings.
It was a VERY successful biz model for him for a long time. But it wasn’t a sustainable model. The big consulting company found the workshops harder and harder to fill as corporate travel & training budgets dried up, and eventually, they got out of that business altogether. And they were out, my biz partner was completely out, too (hence the inflection point in his career that I should have explored further).]
I also had not realized how very different that business model was. For one, he had the cachet of the big consulting firm’s name behind him.
Second, they invested all the time and resources into organizing these workshops, allowing him to show up, collect a nice fee for the training, and scoop up any business that was generated.
And, their lead generation process and the high cost of the seminar ensured that these people were pre-screened to be most receptive to making further investments in ther distributor network.
Best of all, it allowed him 3 days (for which he was already paid good $ as the trainer) with these clients to help them fully understand all the work that was needed to implement a good distributor program, and positioned him as the natural go-to expert.
We had none of that infrastructure. We tried doing lots of blogs and webinars and podcasts, but it wasn’t enough education to push people over the buying hurdle. We didn’t have the cachet, and instead of people primed to pay, we got a lot of people who mostly wanted free advice . And ultimately, my partner really didn’t pull anywhere close to his share of the load, because he never wanted to be on the selling & marketing side – he only wanted to be on the “doing” side.
You might wonder why we didn’t go to another training company, and we did think about it. But the large conference/workshop industry is a shadow of what it used to be, and these companies no longer allow their trainers to scoop up any consulting opportunities that come out of the training.
And, my new business partner was firmly convinced that we didn’t need them — that his name and experience and success landing great paying clients would translate out on his own. Unfortunately, it didn’t. He could convert the leads once they were in his class, but it turned out he had absolutely no idea how to find and nurture leads along a pure consulting pathway.
Eventually, we ran out of cash and ideas. And so, we feel victim to ALL of the top cardinal sins I mentioned earlier.
It was a wonderful learning experience, but was a financial disaster, and was very discouraging to boot.
And all of these were preventable, if only we’d done some market testing, and if we had both had a clearer definition of roles. May you learn from my mistakes!