I’m not sure where I first heard the term, “Fail fast and fail often,” but it’s great advice for entrepreneurs. I recently decided to shutdown YakezieNetwork.com after six months of operation because of the following reasons:
1) 99% of affiliate revenue came from one source and I found a streamlined solution.
2) HasOffers was cumbersome to use for reporting purposes. I’m sure part of it has to do with my incompetence. Although I did receive a couple e-mails from other affiliate platforms who moved off HasOffers and onto InfusionSoft.
3) HasOffers isn’t cheap at $279 a month for a startup platform. I asked for a discount, and they said no. I thought they’d throw me a bone just to collect something instead of nothing since all revenue is profit given the software has already been built. But I respect their decision.
4) My partner found a full-time job, which ended up taking up a lot of her time. I was relying on her to manage everything from signing up clients to supporting users to sending out invoices in exchange for a split in revenues. She needed W2 income as she wanted to buy a house. Going through the mortgage process myself, I completely empathize with her as one needs at least two years of entrepreneurial income in order for banks to consider your income real for a loan nowadays.
5) Accounts payable and financial tracking is not something I enjoy. The bigger YakezieNetwork.com got, the more bookkeeping I’d have to do, which started making me unhappy. The obvious solution is to just hire someone to do it for me, but I decided to just minimize the business instead. Once you’ve tasted a lot of freedom from work, it’s more difficult that normal to get back into doing things that are necessary, but painful.
LESSONS LEARNED FROM STARTUP FAILURE
If I didn’t launched YakezieNetwork.com, I would have looked back with regret, wondering what could have been. So from this stand point I’m happy to have at least tried and failed.
Yakezie has become an established brand in the personal finance blogosphere, standing for blogging quality, collaboration, and community. It seems like an absolute no brainer to try and harness the brand and the community to make our own little affiliate advertising network, be it on CPM, CPA, or something else. But no brainers are seldom easy, and here’s what I’ve learned from my startup failure.
1) Unbridled enthusiasm is necessary. If I was a 24 year old who was hungry to make my fortune, I would be a demon in trying to build YakezieNetwork.com into a massive personal finance advertisement network. But I found myself acting like one of those people who likes the idea of being rich, but not doing everything possible to become rich! I did my part in telling the community about the launch through various blog posts on Yakezie.com and FinancialSamurai.com, but other than that, I didn’t do much at all. My partner was very enthusiastic in the beginning, but after not seeing tremendous progress, the enthusiasm began to fade especially after she found a full-time job.
Without an enormous amount of energy and enthusiasm, creating a successful startup is just not going to happen. A day job is a walk in the park compared to starting a company from nothing. There is an incredible amount of work that goes on behind the scenes. If you are thinking about doing a startup, I do think there are merits to trying at an earlier age. (See: How Much Do You Have To Make As An Entrepreneur To Replace My Day Job Income)
2A) Affiliate income is hard to generate. I’m pleased to say that at least 80 bloggers signed up to give their hand a go at affiliate income. A handful succeeded in making progress, but 90% didn’t. Part of the reason was probably due to not enough relevant advertisers (we had about 35). The other part is that making meaningful affiliate income takes focused content that fits naturally. The biggest reason for affiliate income failure is the continued tremendous temptation for bloggers to just sell text links.
It’s much easier to sit back and put text links in an old post for $100-$200 a pop on average than write relevant prose to generate affiliate income. It’s even easier hiring a direct advertising manager get direct advertising deals for you. So long as there is easy direct advertising money to be made, it’s going to be very hard for many bloggers to become successful at making affiliate income or gain significant amount of traffic because the quality of posts won’t be as interesting, and Google tends to punish a lot of such sites.
2B) A CPM based model is probably better. Let’s say the Yakezie Network of bloggers has a total monthly pageviews count of 5 million. If I could somehow sell the entire inventory at a $20 CPM, that’s a healthy $100,000 a month which would mostly go to the bloggers after I take an undecided percentage. All I’d have to do is come up with a code for various ad sizes that is given to all members to place above the fold and start filling the inventory. When there is unsold inventory, a Google Adsense code can be embedded to take its place or some other advertisement so the blogger doesn’t have to do anything.
CPM advertising is very popular among big brand name companies with multi-million dollar advertising budgets. But given they have huge budgets, they also require huge sites or networks for efficiency purposes. The more I think about this, the more I realize having a CPM based model is the best way to go. The only problem is that there is still a lot of bookkeeping to be done.
3) You need a partner with different skill-sets. I don’t think any successful startup can succeed with just one person. It’s important to partner with people with different strengths that all have one undeniable goal in mind. It’s very easy for a team to break apart because someone is less motivated or isn’t carrying his or her weight. I bet many startups fail not because of a bad product, but because of the wrong management team.
4) You’ve got to do something you really enjoy. When you’re working on a business that is not generating a lot of revenue relative to your current revenue stream, you begin to question your use of time on the startup. I love to write, and every minute I spent creating an advertising network meant time away from doing what I love. If the startup begins to take time away from your friends and family, then you will start resenting your startup as well. We all have to be the optimizers of our own time, especially if we have 100% discretion to do what we choose thanks to financial independence.
5) Fail fast, and fail often. Pulling the plug after six months may seem premature, but I knew after the third month that this undertaking would be much larger than I expected if I wanted it to succeed. I was and am still on my passive income mindset, and starting your own business is anything but passive. Given 99% of the revenue came from one affiliate, I created the easy solution to keep the market leading payout structure, and have the top affiliates from YakezieNetwork.com become my sub-affiliates.
The biggest hurdle I have is comparing all new business that I might start with Financial Samurai. Financial Samurai is fun to operate and easy because there’s just me. Starting a business that involves a lot of guidance, interaction, and problem solving for other people is very difficult in comparison. YakezieNetwork.com was profitable after a couple months, but the profits were not large enough to warrant the time. Every single minute I spent on YakezieNetwork.com was one less minute I could spend on Financial Samurai. It didn’t feel right.
6) You feel more bad for others than you do for yourself. Although I’m the one who spent the time and money and failed, I feel more bad for the bloggers and clients who put in the initial effort to sign up and give YakezieNetwork.com a go. It feels like getting a friend into a stock idea with the best of intentions that ends up performing badly. You could be losing your shirt with a huge position, but you feel more bad that someone else is losing even a tiny amount of money because of you.
My whole idea was to share with all the bloggers who signed up my affiliate strategies in the Yakezie forums and help everyone generate more affiliate revenue via YakezieNetwork.com in the process. At least I didn’t lose anybody money.
ALL OR NOTHING MINDSET
Although my net worth is diversified, I tend to go “all-in” on things which are working. For example, instead of building many niche sites I focus most of my efforts on Financial Samurai, and the remaining time maintaining Yakezie.com for the next generation of PF bloggers. I’ve also decided to get back into the real world 25 hours a week by doing some consulting for a financial tech startup, which so happens to be a great affiliate partner as well.
Nothing good lasts forever, so I think it’s important for everybody to identify rocket ships and ride them until the destination is reached. I’m not sure what type of new business I’ll try next. But I know I will try again.
If you’re thinking about starting a business, I strongly recommend you start one on the side while you have a steady paying job. Continuously test your business model and see if it holds for a long enough period of time. Many startups I know go through many different iterations before they finally find “the one.” If you can get VC funding for your startup, which allows you to pay yourself a comfortable salary, then go for it. Even if you fail, I don’t think you’ll regret the experience.
Have you ever build something only to see it fail? Did you ever keep a company going for longer than it should? If so, why? What are some lessons you’ve learned from failing at a business? Check out this post I wrote on Untemplater entitled, “Two Years After Quitting Your Job And Dying Alone” where I chronicle three other people’s entrepreneurial journeys.