Should you offer new products or services?

graphic image of a rocket that crashed

Recently, we’ve been privy to a lot of conversation from small business owners who are trying to come up with new products or services…. some even considering startups.

No surprise.  The ongoing disruption small businesses are experiencing (Thanks, Covid) has left owners looking for new income streams to replace those that haven’t come back.

An obvious example is restaurants and bars. But any business catering to a downtown corporate market…. or convention trade…. or travel and hospitality industries…. is also scrambling to replace lost income as many workers continue to work remotely.

Over the years, we’ve seen more than a few startups crash and burn before they even got started. Since offering new products or services is not all that different than starting a new business, we want to share what we’ve learned.

Why do businesses fail?

Usually, there’s a simple reason behind a business failure and it’s generally one or more of these 3 things:

You haven’t identified your target market.

I always cringe when someone tells me “everyone” is their target market. Rarely is that the case.

OK, maybe for something like toilet paper…..or water. Necessities that all humans need. And even then, the target market for pricey high-end bottled water like FIJI is not the same as that of generic brands in the flimsy plastic that you pick up in the grocery store. FIJI customers are willing to lay out far more money than someone who shops by price.

For most ventures, there’s a specific audience. Luxury products are geared to different audiences than mass market offerings. Think Versace vs Walmart or Tesla vs Ford. Whole Foods vs Aldi.

The marketing you develop to sell your products —  the language, design and messaging — will change based on who you’re marketing to. That’s why FIJI’s water is “artisan” and comes in a sleek, beautifully designed square bottle. It’s aimed at customers who are willing to pay up for a premium product, not someone looking to save money.

You haven’t verified the need for your product or service.

This reason always makes me sad because I see it far too often and it’s so easy to avoid. You come up with a “great” small business idea — an idea, not a concept because a concept usually involves significant reasoning — and an idea…..not so much.

A doomed-from-the-start startup, on the other hand, usually is the result of someone falling in love with their idea. They’re so sure that everyone will love their product that they neglect to do market research.

The most egregious example I’ve seen was someone who quit a well -paying job (with benefits) to launch a business selling something that not only did not fill a need but few people would buy.

I was astonished.

Had I been able to say something……which I couldn’t because it was a personal relationship and my feedback was not requested….. I would have opened my (rather big) mouth because it pains me to see an eager entrepreneur fail.

But I had to keep quiet while the startup launched, burned and crashed….taking thousands of dollars with it. A pricey lesson that didn’t have to happen.

You haven’t set aside a marketing budget.

We’re website design and developers. We love creating custom sites, and nothing makes us happier than happy clients. But every once in a while, we turn down a project because while the potential client might be able to pay for a custom website, they hadn’t set aside any money for marketing.

Long ago when the internet was in its infancy, you could launch a new business on a website and get away with word-of-mouth marketing or a small public relations campaign to promote your company.

But today there’s no way in hell that can happen. There’s far too much noise….. online and off. We’re bombarded with advertising from a multitude of channels.

That’s why there are influencers on TikTok and Instagram and social media experts to manage your campaigns. Add in email marketing, blogs, podcasts, newsletters, trade shows (yes, they’re coming back!) and other content development and you’re looking at a marketing campaign. And campaigns cost money!

If you stand still and stop promoting, you can be sure your competitors will be waiting in the wings to overtake you. So putting all your money into a website is a really awful idea.

Recently. we turned down a lucrative prospect for reasons 1 and 2. So even though there was a marketing budget, we just couldn’t stomach the idea of participating in a project that was doomed to fail.

Instead, we suggested that they hire us for a few hours of consulting to review their idea and see if we could help create a more feasible option. Because as much as we like making money, we also want to help our clients succeed. 

Next time a colleague or friend tells you about an idea for a new product or service and you’re feeling iffy about it, do them a favor. Share this blog post with them. They might be very grateful.

Resources

Some interesting post-Covid business opportunities.  13 Post-Pandemic Businesses You Can Start Now

Here’s a book to read for more prep work. So when you come to us to build a new website, you’ve already qualified your business concept. 5 Books to Read Before Starting Your Business by Ken Dunn.

5 Things You Can Do Right Now to Help Your Clients.

Read this if  you’re already in failing mode. 5 Tough Steps to Save Your Failing Business by Doug and Polly White.

And if you’ve had to close up shop. Before you beat yourself up, see  what good company you’re in.

One failure does not make you a failure.  It makes you a little bit wiser for the next opportunity. Just ask Mark Cuban.  13 Business Leaders Who Failed Before They Succeeded by Lynn Truong.

If you’ve been mulling over starting a new business or launching a new product and having second thoughts, call us. We’re happy to brainstorm with you. Maybe we can save you some money. And grief.

 

Leave a comment

when startups fail

Jumping on the startup bandwagon is not for everyone. It’s certainly not for the risk-averse. Because starting a business is a bad idea if you’re not able to accept failure.

It’s also not for someone who can’t develop or follow a plan. Startups need structure. Processes and procedures don’t just happen. They need to be created and implemented.

According to Small Business Trends, “A bit more than 50 percent of small businesses fail in the first four years”.”

Actually, we thought the number was higher. Maybe because we’ve been doing this long enough that we’ve seen more than a few startups fail.

Sometimes you know upfront.

You get an inkling that something’s off. Often it starts with a whirlwind of excitement and big plans. Really big over-the-top plans that seem wildly optimistic.

Now we have nothing against excitement and having a positive attitude is hugely important. But so are plans – especially when you’re starting a new business. And if the plans aren’t based in reality, you’re looking for trouble.

That was the scenario a few years ago when we were hired to build a website for a new music and light dining venue. The concept looked good on paper. A sophisticated, casual night spot in an area that could easily support this kind of entertainment. The client was over-the-moon-excited. She was commissioning pricey artwork and spending freely on interior design. The excitement was contagious and we were all looking forward to the opening.

Then reality kicked in. And we realized that under all the glam and excitement was…..well, nothing. No business plan. No marketing plan. No roadmap on how this business was going to run. They couldn’t find a decent chef because they hadn’t allocated enough money for one — unacceptable in an area where people expect top quality food.

A few months into the launch of this project and the red flags we’d noticed were looking bigger and bigger. One thing after another went wrong until we realized there was no way this venture was going to fly.

In hopes of helping save other startups, here is what went wrong for our client and the six warning signs you need to heed if you’re launching a new business:

Six Red Flags

  1. Ignoring the competition
    Our music venue client disregarded a successful venue down the street because it was really a restaurant. But they did have music one night a week.  Fast forward a few months, the competitor’s weekly music night was drawing crowds. Because they had terrific food and longstanding customers. Never underestimate the value of customer loyalty. And always understand the competition.
  2.  Failing to prioritize
    Rather than allocating marketing dollars to communication tools to let people know they were opening and build some buzz, the venue owner spent money on all sorts of pricey premiums and custom artwork. Social media was minimal. PR was non-existent. Huge oversight! We still have some of those premiums — they lasted far longer than the club.
  3. Skimping on the essentials
    Serving food? Better make damn sure it’s good. Saving money by hiring inexperienced (or poor) chefs will be your demise. That’s what happened to our client.
  4. Not listening to the experts you’ve hired
    Savvy entrepreneurs know they can’t do it all. That’s why they hire professionals to handle what they can’t. If you’re paying someone to help you build your business, listen to their advice. Otherwise, save the money and do it yourself. It’ll be less of a loss when you shut down.
  5. Not listening to your customers
    If one table sends back food with a complaint that it’s cold, that’s easily fixable. If more than one table has the same complaint, pay attention. You’ve got a problem in the kitchen. Ignore the problems and you’re never going to make it.
  6. Falling in love with your product or service
    The A#1 mistake our client made was falling blindly in love with her venture. She was so convinced that this was going to be a success that she did little due diligence. And once things started to fail, she ignored the warning signs.

As entrepreneurs, we’re passionate about entrepreneurship. We like to see others succeed. And we love being involved in success stories. Building a website for a company that didn’t even last a year made us feel pretty bad. Especially since we loved the website!

Because we give a damn, there’ve been times we’ve suggested that a potential client pull back instead of moving forward with a new website. Rather than see a startup fail, we’ve suggested that they go back to the planning table and rethink what they’re trying to do. Once all the pieces are in place, we’re happy to build their website.

Lest we discourage anyone who’s eager to start a business, here’s an article from Inc magazine on 15 reason why it’s a good idea to start a business.

If you’ve got a clear plan and aren’t afraid of making mistakes (they’re part of the learning process), go for it.

Leave a comment