Lessons in Leadership: Learning From Failure (Guest blog)

By Keith Hovland

closed for business signClosing my web site business never really entered my mind. I had recently left a very successful information technology computer consulting firm and was looking for a new adventure. Looking back, the signs for failure may be obvious, but at the time, it looked like I had a great business model.  It was 2001 and a software engineer friend of mine had developed a template for web site development and (with appropriate content and color scheme) could turn out a prototype web site in a couple of hours.  In addition, he had a very low cost model for registering domain names and for hosting web sites.  Another friend was purchasing the names and addresses of all the businesses newly registered with the Minnesota Secretary of State.  He was happy to reduce his overall costs by sharing the names with me for about half the price that I would have paid for the information from the Office of the Secretary of State.

Since I was officing out of my home, my only other start-up costs were registering my business with the MN Secretary of State, designing and building my own basic web site using my web site template, and then designing and printing a postcard to mail to all new business owners each month.  After the start-up costs, my other ongoing costs would be postcards and stamps to mail out the postcards each month, a cell phone, and my time and gas money to go see my new clients.  I would not have to “cold call”, I would simply mail out postcards to offer my services, answer my phone, go see my new clients, help them create the web site content, answer a few questions, and then move on to the next client.

My premise was simple:  almost every new business start-up needs a web site.  If I could be the first to contact the new business start-ups in Minnesota to offer them a quality web site at a low cost, I could establish a relationship with them and then offer them additional services as they grew.

I was hoping to be able to develop 20 to 30 new web sites each month.  If I cleared $200 on each web site, I would be making $4,000 to $6,000 per month (after expenses), plus there was a lot of room for “upselling” merchant account (credit card) processing and many other features as these start-up companies began to expand the services they offered to their customers.

Unfortunately, there were variables I hadn’t considered: when the start-up businesses got the post card offering my web site development services, they were still feverishly working to launch their own respective businesses.  Even though many of them knew that they needed a web site, they didn’t want to stop working to develop their businesses long enough to put thought and energy into developing a web site at that time.

Second, I was totally surprised at the amount of competition for web site development. I had worked in information technology for more than 10 years and knew that there weren’t many (incorporated) companies doing web site development (and especially low cost web site development.)  However, I had not anticipated that a huge percentage of the new business owners had a brother, cousin, nephew or other acquaintance with an interest in doing web site development.  These acquaintances were more than willing to provide a web site for “next to nothing” as a means of gaining experience.

Third, I quickly learned many of the people needing web sites did not understand the basic functions of a web site nor did they have the basic computer skills to successfully navigate the internet. Thus, if I was to get them “up and running” with a web site, I was going to have to spend time teaching them how to use the computer, how to navigate the internet and the basic concepts of web site development.

The final blow to my entrepreneurial enterprise occurred when my life partner became more and more resistant to no steady paycheck, no regular hours of work and the use of one of our bedrooms as an office workplace.

It turns out that my idea was not a bad idea. Other companies such as iPage, WordPress and MoPro took a similar concept of a low cost, template driven web site, made it work and still are in business today. Perhaps I could have been among them if I would have found a way to market my web site development services to a much greater audience, found a way to increase my profit margins, and found a better way to develop web sites without taking so much of my own time.

In a way, my business closed down, but in another sense, this experience was a limited market test of my willingness to go out on my own. Deep down in my belly, I realized that I did not have a burning desire to develop web sites and a company specializing in web site development.

Actually, I was kind of relieved when it was over.  I handed off my ongoing accounts to my software developer friend and stopped sending out postcards.  Fortunately, I did not have any investors or shareholders to deal with. I paid my outstanding bills and filed my tax returns with the Minnesota Revenue Department and the IRS at the end of the year.  The business was over, but there were some excellent lessons learned.

Advice from Keith and Erika at IOLITE Global:

  1. Be passionate about what you are doing.
  2. Make sure your partner supports your venture.
  3. Expect that you’ll discover the unexpected.
  4. It’s probably going to be more difficult than you think – and a little pessimism can be good for the soul.

 

Since 1991, Keith Hovland has been actively involved in the launch phase of six business start-ups: a computer consulting company, a web site development company, a company manufacturing high end chocolates, a lawn sprinkler irrigation and landscaping company, a drain cleaning company and a marketing consulting company.   Four of these businesses are still active today; one was sold to a competitor and one was discontinued.   As a means of helping others who may be thinking of starting their own business, this BLOG is dedicated to sharing some of the lessons that he has learned in working with these six start-ups. Now semi-retired, Keith remains as an active adviser for a drain cleaning company and a marketing consulting company. 

Erika Hovland is the Founder and Owner of the marketing consultancy Keith advises. The apple does not fall far from the tree.

 

 

Lessons in Leadership: Learning From Failure (Guest blog)