Today’s contribution comes from Joseph Terndrup, a self-described business-phile and lover of startups.
Joseph is a long-time side hustler and reached out with this post that chronicles the different business mis-steps he took before finding success at the helm of his own digital marketing agency, Underdog Life.
Take it away, Joseph!
Yep. I designed bombs.
Sounds more exciting than it was.
I was actually stuck back in a dull gray cubicle, three locked doors away from daylight. I hated it.
Under the dim flickering florescent light, I hatched a dream: to launch my own startup. I’ve always been an entrepreneur at heart.
You know the plot:
Boy dreams dream. Boy works hard. Boy’s startup succeeds, he quits his job, and becomes an entrepreneur.
Only for me… it didn’t work like that.
It went more like this:
Boy dreams dream. Boy works hard. Boy’s startup failed miserably.
Boy dreams dream. Boy works hard. Boy’s startup failed more miserably.
Boy dreams dream. Boy works hard. Boy’s startup failed a little bit.
Boy dreams dream. Boy works hard. Boy’s startup failed (again).
Boy dreams dream. Boy works hard. Boy’s startup had neutral outcome.
Boy dreams dream. Boy works hard. Boy’s startup succeeded (barely).
Boy dreams dream. Boy works hard. Boy’s startup succeeds, he quits his job, and becomes an entrepreneur.
This post is going to walk you through my my journey to become an entrepreneur. Failures and all. The best part however, is what happened at the very end… the final success.
Stay tuned we’ll get there in a bit.
Lean Startup: How to Think About Entrepreneurship
First of all, let me begin with a few ideas about entrepreneurship that worked for me.
If you’re a startup junkie (like me), you’ve probably heard about the Lean Startup methodology based on the book The Lean Startup by Eric Ries.
The book does a great job of explaining the science of entrepreneurship.
If you haven’t read it, let me summarize it for you in one line: Fail fast, fail often, learn from it and repeat.
It’s sort of like the scientific method for startups:
- Create a hypothesis about the business venture
- Run a startup experiment to test it out
- Record your business results
- Then adjust the concept and keep iterating (or trash it and start over)
However, the book is really aimed at tech startups. For us solopreneurs, side hustlers, and small business startups, it takes a few adjustments to the theory to use it practically.
I discovered early on that business plans were pretty worthless unless you’re trying to get funding from investors (or partner buy-in). Instead, a simple series of startup experiments give me all the real world information I need to know about a new venture. Rather than wasting effort guessing, I got hands-on business experience and saw the results of my startup idea.
In short, the best way I’ve found to launch a new project is to break it into a 1-3 month startup experiment (or a series of them). Then run your startup experiment with as little overhead as possible. In order to iterate rapidly through your business concept, answer the following questions up-front:
- Can I make enough money from this venture? How much?
- Does this business match my life goals?
- Does the venture match my skillset?
- Do I like this venture enough to work 60-80 hr work weeks on it?
- Are these the right partners to accomplish the venture? (If partners are included)
I break larger projects into smaller 1-3 month business sprints and continually iterate on the concept until it’s perfect.
Nick’s Notes: Is it ever perfect?
This process of embracing failure makes your business more agile and allows you to kill bad startup ventures before they become your coffin.
Now that I’ve provided a little background theory, here’s the no-holds story of my startup journey.
6 Startup Failures
Startup Idea #1: Ad Revenue from a Content Website
My love of entrepreneurship started back in college when I launched my first business venture.
Initially, my goal was to take something I was interested in, create a website, and make money from ad revenue. Simple enough right?
To achieve this, I launched MemoryMnemonic.com.
You’ll have to forgive me.
Nick’s Notes: OK, I had to check the site. It’s not up anymore.
This idea might sound about as dumb as a bag of rocks (welcome to my life in hindsight). However, I decided to build a website based on memory mnemonics. It’s an ancient practice of memorizing information by encoding it in mental houses (yes there are weirdos like me who still use it!).
I had developed a system of memorizing school lectures during class which worked really well for me. I was also very interested in other rapid learning techniques (speed reading, memory mnemonics, focus exercises, etc.) which I had planned to feature on the site as well.
I took all of this content and put it into my first website.
The big day came to launch the site. I could feel the anticipation building on the project I had worked on for months. My FTP client sent the html files flying across the web and onto the hard drive of a server in some corner of a server farm in Texas.
I was absolutely sure 1,000’s of people would be lining up, waiting to read my content. I waited… and waited… nothing happened.
Rather than the flood of enthusiastic mnemonic nerds, what I got was a tiny trickle of visitors and NO AD REVENUE.
I’d heard of so many people striking it rich by launching their online businesses, but instead of a goldmine I found myself in a crowded marketplace without a bull horn.
Simply put: website traffic is hard to get.
At the time, I wasn’t a student of traffic generation (Ana Hoffman has some great content for anyone focused on traffic growth). Nope, that didn’t come until after my second failure, but I’m getting ahead of myself.
Failure #1 complete. Oh well. I was a college kid and I had a lot to learn about the world!
Time to move onto my next project.
- Cost: $500
- Time: 6 Months
- Revenue: $0
- Rating: Failure
- Ad revenue requires A LOT of traffic to make real money.
- I also learned a lot of technical knowledge about servers, websites, and custom coding html.
Startup Idea #2. Selling an Online Course through a Website
Ok… so ad revenue wasn’t going to cut it.
What if I created a course to sell online? Passive income! I’ll be living the 4 hour work week in no time flat!
My next project was to create and sell my awesome peak learning system as an online course. I repurposed the content from my last site and launched a new site: MemNem.com.
With my new domain name, I changed over from a custom coded html website to a site powered by a CMS.
Here’s what I did:
- I recorded a course on audio.
- I put together a series of Flash web applications to practice improving your memory.
- I created a payment system so payments could be done automatically.
- I launched a new website with a new logo, new graphics, and new content.
- I created an awesome Memory Card Web Application.
That was A LOT of work.
Sadly, only 1 person ever bought my course. Perhaps I should have taken some of the great advice out there for launching products.
Honestly, at this point in my entrepreneurial career I was entirely focused on the product. I learned Flash programming and made some really cool little Flash apps. However, I assumed everything would fall into place after I made my awesome product.
The other stuff would surely fall into place…. NOT!
- Cost: $5000
- Time: 3 years
- Revenue: $30
- Rating: Epic Failure
Nick’s Notes: 3 YEARS!!?
1. Build it and they won’t come: This venture was my single biggest failure to date. I wasted 3 years developing a product that didn’t have a market. It didn’t matter how cool my app was or how interesting my content was. Without demand for my product there weren’t any sales.
This is one of those lessons that sounds cliché. I had read it countless times in books, and I thought I understood what it meant. Regrettably, this is the same mistake I see repeated by many other new entrepreneurs.
It took me a few painful gut punches to learn the lesson that only building the product will not produce customers. The hardest part is making sales.
2. Technical Skills: This project allowed me to learn how to do in-depth custom website development. I learned php, flash programming, and mysql programming for databases.
3. Sales Funnel First: Another important lesson from this failure was that I needed to learn how to move quickly on projects and get feedback from the market up-front. At this point, I realized that sales funnels are the most important element of a business because without sales there is no business.
Startup Idea #3. Developing a Content Marketing Sales Funnel
Here’s my final pivot for MemNem.com.
After realizing that my website wasn’t going to sell courses by itself, I took the next 6 months to learn everything I could about marketing.
I launched a blog and experimented with a number of different ways to get links (the main component in organic search). However, after developing my blog, beginning outreach, and going through the process of market research, keyword research, and competitor research, I learned that the market was too niche.
I also figured out that content marketing would likely require 6+ months of serious investment to achieve enough links to generate real customer traffic.
After a complete analysis of the venture, I reluctantly decided to scrap it and move on to a new project.
A Few Resources For All You Content Marketers:
- Cost: $900
- Time: 6 months
- Revenue: $0
- Rating: Minor Failure
1. Lean Startup: At this point I was introduced to the Lean Startup Methodology and my perspective on business development entirely changed. I realized that wasting time was one of the biggest failures entrepreneurs can make.
Instead of keeping 1 project in development for years before getting market feedback, I was going to rapidly launch and get quick feedback from running smaller entrepreneurial experiments.
2. Marketing Technical Skills: I also read everything I could find on link-building, pay per click, content marketing, and other marketing options. Learning and practicing these marketing tactics laid the foundation for my future success.
Startup Idea #4. Car Flipping: Launch an Investor Fund and Use Other People’s Money to Make Money
Well, it was time to start over from scratch.
For my next venture, I reached out to a small group of investors who were interested in pooling their money to launch new business ventures. With 3 investors, and a lot of ideas, I was ready to launch my next project. I got together a list of about 30 ideas for different ventures and had all of my investors vote on the different investing projects.
Which brings me to my next venture…
The top idea we came up with was buying and flipping used cars.
I learned everything I could about car flipping. After I felt ready, I started hunting. What I did was search Craigslist each night looking for cars that were listed considerably below their blue book value (KBB.com).
Then I followed up with the different car owners until I got a hit.
My first hit was an incredible deal… I could make $3,000 – $5,000 off this one Jeep!
I emailed the owner. Apparently the Jeep belonged to a military member who was shipping overseas and needed to unload it quickly…
Long story short, it was a scam! Thank God I did my due diligence and fact checked everything.
Be careful out there.
Okay, whew, close call. Back to looking…
My next hit was a little less impressive, but the numbers looked good.
It was a 2007 white Chevy, offered for $3k under the Blue Book value. I contacted the owner and that night arranged a test drive. I drove out to the meeting place with my friend riding in the passenger seat. We met the owner at 9pm under a dim flickering street lamp, in an abandoned parking lot.
Nothing sketchy about that.
He was a hillbilly from Alabama (+$400 to transfer the truck’s title to my state, Florida). Still, he seemed like a nice enough guy. I went through a 12 point car inspection that I had learned from the Internet over the past few weeks.
Ten minutes later, we were driving the car, and running it through a series of turns and acceleration listening for anything that seemed off. Then… Thump, thump, thump… Dunk.
The best I could determine, there was something wrong with the transmission. We negotiated for a little while, but ultimately I ended up passing on the truck. From going through this process, I realized that I wasn’t interested in fixing cars, and I didn’t have the right expertise to do it well.
That’s what I get for letting investors vote on what business I’d start.
I went on a few other car runs, and after a 1 month trial run I killed the venture to move onto my next investment project.
Although it wasn’t for me, if you’re interested in learning about car flipping, check out Side Hustle Nation’s awesome post on it to learn more.
- Cost: $0
- Time: 1 month
- Revenue: $0
- Rating: Minor Failure
Interest, Expertise, or Partnership: This may seem obvious, but it takes a lot of time and hard work to start any business. Make sure that you’re interested enough to stick with your business until you see it succeed.
Also, if you don’t have the expertise for a project and you don’t want to take the time to learn it, then partner with someone who does.
Finally, be careful when you give your investor’s a democratic vote on your business venture. I figured I’d be happy in any business that could make money, but I was wrong.
Onto my next failure…
Startup Idea #5. Tourist Art Classes in Destin, Florida
This was a project that came together after connecting with a local artist in Destin, Florida. She was teaching art classes for someone else at the time, and absolutely hated her job.
Since we lived in a huge tourist area, I saw a potential for selling art classes to tourists. My goal was to help out a local artist and turn a few bucks of income as well.
After talking through the idea, we struck up a partnership to test it out.
First, I met with a restaurant owner and worked out a deal for them to sponsor the art classes. Next, I setup a website with online payment processing, and I hired some people to spread fliers across shopping center parking lots all across Destin. After a few weeks of hitting it hard, we were able to fill up a class of 18 people at $50/person. Great margins too!
We did two of these classes back-to-back, and everything was working out great! However, it wasn’t long before we started getting angry managers calling from the local shopping centers. They weren’t very happy that we were littering their parking lots with our fliers.
I guess I could have seen that coming.
Overall, the entrepreneurial experiment was initially a success.
Sadly, it fizzled on me after my partner didn’t return my phone calls. Although we had a promising entrepreneurial experiment, the project died as we lost our momentum and tourist season ended.
- Cost: $1335
- Time: 2 months
- Revenue: $1023
- Rating: Minor Failure
1. Partners are Important: My partner wasn’t an entrepreneur. Be careful what partners you start a business venture with.
Everyone likes the idea of owning their own business, but few people have the perseverance to do what needs to be done to make it work.
Many people want to work like an employee, but own the business. They don’t understand their responsibilities increase with ownership.
Find a partner who’s as committed to a business as you are. This simply wasn’t the case for me.
2. Reusable Marketing Channel: We were using fliers to paper 5 major shopping centers in the area. This allowed us to keep our advertising costs low and margins high. However, the shopping centers got mad and started complaining to the restaurant that we were working with.
I believe this barrier could have been overcome with a pivot into a targeted Facebook advertising campaign.
Nick’s Notes: Plenty of other advertising channels and strategic partnerships to consider for a business like this as well.
Startup Idea #6. House Flipping
The next project I tackled with my investor group was house flipping.
I connected with an entrepreneur who was interested in working with us to flip houses. He met all of my criteria for partners based on my past lessons:
- Expertise: The entrepreneurs were a husband and wife duo with a passion for house flipping and experience in flipping a handful of homes successfully. The wife had also worked for a well-known house flipper in the area handling renovation projects.
- Committed: They were as committed to the project as I was. Initially, they jumped in full-time and were willing to accept their pay from what was made by the venture. With skin in the game, I knew they were committed enough to see this through.
- Trustworthy: This may go without saying, but I also knew the couple’s character, and I could trust them with my money and investor’s money.
After pitching the idea to a lot of people, we were able to grow our group of investors to about a dozen.
With our funding in place, we setup the partnership and split ownership in an LLC and Limited Partnership.
This venture started off promising as we were able to get the capital we needed quickly, but the honeymoon period didn’t last long.
At first, we looked for the best deals we could find on the market. We found three good properties, purchased them, and started work. The house flipping venture took place in Houston, TX, while I lived in Destin, FL.
For this project, I was basically taking a back seat: managing investors, auditing every few months, and talking through projects on the phone.
After 1 year, our venture had turned negative. We had to tell our investors that we lost $24,351.
With $15,000 of my own money in the venture, I had thousands of dollars.
Let me tell you… it absolutely sucks fielding the phone call where your friend tells you how he lost you and your investors’ a lot of money. It sucks even more seeing how he slaved over a business that didn’t pay him anything only to run head first into failure.
Business is unforgiving.
Even though we had initially lost a lot of money, this project has a happy ending. We took our licks, found a mentor, and got back off the ground to land a $43,000 profit on our next house. This paid back all the losses and generated enough earnings to still beat the stock market soundly as a passive investment.
Although we didn’t hit a home run in our first year, real estate has proven to be a solid investment over the long term. You should definitely consider it as side hustle.
Nick’s Notes: We’ve discussed real estate investing from a couple different perspectives on the show. First on the wholesaling strategy and later with a more traditional rental property strategy:
- Getting Started in Real Estate Investing for Less Than $100
- 7 Houses at 27: Building a Real Estate Empire on the Side
- Cost: $15,000 investment
- Time: 1.5 years
- Profit: $2,500
- Rating: Minor Success
1. Find Mentors Early: Although our entrepreneurs had experience working for others in the house flipping business, they didn’t have experience running their own business.
After going through the gauntlet and losing a lot of money, we reached out to a mentor who had been flipping houses for 10 years. He shared his spreadsheets with us, and gave us the knowledge and confidence to find our home run house.
2. Be Careful: Entrepreneurship has its ups and downs, and using other people’s money is a bigger burden than you may realize.
Startup Idea #7. UndgLife.com – My Internet Marketing Firm
Eventually all the experience I had gained working with these various ventures (and helping out many small businesses not listed in this article) gave me the guts to go sell website services and Internet marketing to small businesses.
I took the plunge, and left my depressing cubicle with all its safety and perks in favor of an entrepreneurial adventure.
It started simple enough.
I went door-to-door talking to business owners and making appointments to sell website development and marketing services.
I actually landed 1 large client my first week out! However, I had to put in about three months before adding my next 4. Then each month I was able to add more… and more… and more…
My first year in business I made $51,549. Although this was a large pay cut, I was still able to provide for my family while launching a new business.
By my second year I was able to match the income I had made at my secure government job.
Today, I live every day on my own terms. I’ve built my business to allow me to work from anywhere in the world.
Also, I’m able to invest time and money in projects I care about with people I believe in.
No more cubicles for me!
- Time: 1 year
- Revenue: $51,549
- Rating: Life-Changing Success
Let me bring this all together…
Although I faced persistent failure, everything I learned across the different projects I tackled resulted in my ultimate success.
- I learned website development from launching my first two websites.
- I learned programming, databases, and servers from creating a web application from scratch.
- I learned internet marketing by having to market my own products.
- I learned how to align my skills and interests with my business goals by trying out car flipping and changing course.
- I learned how to hit the streets to sell services by putting fliers on cars and selling art classes.
- I learned how to negotiate contracts and connect with investors by launching a house flipping venture.
Each failure brought me skills that took me closer to my final success. Keep working hard, and in the end you’ll see the patchwork come together into something awesome!
Nick’s Notes: Action breeds action. Even if you don’t see the result you want right away, it IS getting you closer to success–just sometimes in a roundabout way.
Learn from your failures and go conquer the world.
I’ve been brutally honest about my failures. I think it helps other people when you pull back the veil and show them that they’re not the only person who deals with failure.
Now it’s your turn.
Take a moment and tell us about your failures and what lessons you’ve learned from them!
Nick’s Notes: Here are a few of my side hustle failures.
Check Joseph out at UndgLife.com.