My Struggling Startup Bears All: First Year Recap
A deep look at our businesses failures and successes over our first year.
When you see a startup…
You usually see the glory of success.
In fact, the very nature of a business failing means that not enough people were interested.
So naturally you never hear about failure, and people don’t much like to talk about it.
I’m not afraid…
I want to give you a glimpse into the real struggle of our first year of business, and hopefully give you some insight, and maybe a little bit of hope, for your own entrepreneurial future.
I’ll show you some relatively big financial mistakes, when we made a crucial pivot, and what traction channels we’ve been using to establish our business.
Pre-Journey Sidetrack
It’s worth mentioning that until March of 2015 I had been playing poker professionally for over 10 years…
Yes, I was a professional poker player.
Just like in Internet Marketing, anyone can claim to be a professional poker player, but I was a pretty damn good one.
I wrote a book, coached thousands of students through a few online training sites, and had a regular column in Cardplayer magazine.
That’s all I have to say about that right now, but I am writing a book called, “Play Your Business Like a Poker Player,” which should be out in early 2016. Pre-release signups will be available soon.
The Start of the Journey
About 18 months ago, in June of 2014, I started helping a local casino build a new website and try to drive some business online.
I didn’t know much, just enough to get me into trouble.
But to them, I was an internet guru, simply because I knew how to build a website in Wix (that’s right, I was using Wix! #fail).
So I built them a terrible website, and drove AdWords and Facebook traffic using my relatively new understanding of those platforms.
It wasn’t the worst…
But it certainly wasn’t the best idea.
In the end, I do believe my efforts had a positive impact on their business.
We saw a lot of people interested in “casino san diego” click through, and their casino foot traffic went up during that time..
However, I hadn’t tracked anything and couldn’t prove the boost in business was due to my efforts… in any way, shape, or form.
And it turns out, business owners like to take credit for any results (uh, any positive results, of course…) that their business sees.
Aside from my failures in tracking my efforts, I was also dealing with extremely antiquated business practices.
No customer management software.
No marketing budget or team.
Not a strong managerial structure.
Really no strategies other than, “We have a casino license, so we will just print money.”
So needless to say, my first client wasn’t my best client, and we decided to completely part ways with them after we realized that some businesses, some people just can’t be helped.
(And I do appreciate them and their business, they aren’t bad people, it just was never going to work out.)
So the beginning of a digital marketing agency was born. Little did I know what it would morph into over the upcoming months…
Time elapses…
In November of 2014, I’ve been gaining some experience and have grown a much deeper understanding of a plethora of digital strategies.
I’ve taken a handful of online courses, gotten certified in all the traditional places (AdWords, Analytics, Hootsuite and others) and I am ready to officially form the company.
That’s when I brought in my wife, as she has great creative talent, as an artist and graphic designer.
We decided we would try to help small businesses in San Diego grow their “online presence.”
Hence Splash — Online Presence Management was born.
We thought we could help mom and pop shop owners really turn their business around using the power of the interwebs.
Again, we were wrong…
Our business tagline for those first few months was actually:
“A San Diego Digital Marketing Agency”
I mean how terrible is that?
We picked up a few clients through some referrals and a stroke of luck and start plugging away for them.
I would say my skills back then — Jan - Feb of 15 (literally 10 months ago) — were pretty good, but not great.
Funding
I knew that in order to invest in the right tools and education, and take my own personal skills and brand, as well as my businesses to the next, I would need to quit playing poker and focus on this business full time.
And to do that, I would need money.
Now, I made a lot of money playing poker, too much really… As I ended up spending it about as fast as I made it, leaving me in a relatively weak financial situation.
This isn’t uncommon in poker and is one of the reasons I advocate not becoming a professional in my upcoming book, “Play Your Business Like a Poker Player.”
So, I went over to a friends house — a successful email marketing company owner — to play some cards and drink, as well as pitch my business idea and lock in an investment.
We got a little sauced…
I believe there were many beers and a few scotches on the rocks…
Then we headed into the hot tub, where I began my pitch.
Very professional, I know.
I was seeking $50,000 for 5% equity in our relatively new / nonexistent business that had very little in the way as a differentiated strategy.
I knew I was mainly pitching myself, and my wife — 2 hardworking entrepreneurs driven to succeed.
But if you look at me on paper, I was/am a smart guy that wasn’t an expert at internet marketing (maybe I was calling myself an expert, but only to people who had trouble logging into their email).
I didn’t have any experience working for other agencies or success in the field in any way.
I didn’t have a network in an industry outside of poker.
And I’ve never held a corporate job (and never will).
Sounds like a joke really, but trust me, I’m good at what I do, and more importantly, I am GREAT at learning what I need to do (a great talent I picked up from poker).
So, we are sitting in the hot tub, and we’re all pretty sauced up, and my potential angel investor, Seth, countered with 15% for $50k.
He said he doesn’t like the business idea all too much but he believes in me and that I would figure it out.
I knew enough to not make a decision on the spot, so I pondered the decision through til the next day, when I had a wicked hangover…
Early the next morning, I talked it over with Seth, said there would have to be some stipulations about being able to use his expertise and network and some time requirements on his part, and we made a deal.
I went straight from the handshake to the bathroom and puked for about 20 minutes…
And that’s how we were able to get enough funding to really start a strong push.
Lean Startup for an agency?
I got my seed, or possibly even pre-seed investment and really thought of this time (around Feb-Mar 15) as my time to implement all the strategies I learned from Eric Reiss, Brant Cooper, Steve Blank, and Jeremiah Gardner.
I got customers.
I had a working MVP/MVS.
I implemented the services and listened to my customers needs, then adjusted.
I think it was a relatively strong interpretation of lean methodology used for slightly different purposes than the traditional “tech-lean” business.
Side note:
Just yesterday, I was at the American Marketing Association conference: The Art of Marketing, where Jeremiah Gardner, creator of Lean Brand and Lean Entrepreneur, said something that really stood out to me.
It went something like:
“We are all [speakers, experts, leaders] still figuring this out, no one has figured it all out.”
This was particularly true for me in the early days, where I knew just enough to help other people, but also knew there was a lot more to learn.
Early Days of my “Expertise”
So how about an example:
With one of our early clients, I was able to use pretty simple tactics to massively increase their on-site conversions.
The simplest one was adding a “contact us” button on a “dead end” product page, to massively email inquiry conversion.
After implementing that, I then drove traffic via remarketing campaigns, AdWords campaigns, and Facebook campaigns.
They were low-budget campaigns, so not a ton of traffic, but were converting like mad.
So I was excited.
I grabbed their past years data for comparison and wrote what I thought was a “game changing” report.
I showed them that conversions from last year to this year have doubled! Or more!
(It’s a cyclical business so we compared to the month of the previous month)
Here are the actual numbers (scrubbed for spam and other false positives):
We started helping them in late January
Game changing right?
So I give them the report, and we set up a meeting in the office to talk about next steps and…
I get politely let go…
I got fired for the first time in my life (or at least the agency equivalent of getting fired).
They believe the uptick in results was unrelated to my efforts (despite me being able to tie conversions directly back to Facebook and AdWords campaigns).
So what did I do wrong?
A lot.
Most importantly, I didn’t set how I was going to get credit for results.
I should have said, regardless of anything that happens, for every conversion I track, I get $X of “credit.”
I was actually in the process of setting up better tracking and attribution in the talk in which I got let go (so I knew my error and was trying to correct it, but it was too late).
Another thing I did wrong was try to help them all the way through to sales.
I wanted to track my efforts by $ROI, when I should have just kept it at “here’s a list of email addresses I got you.”
Another mistake stemmed from the fact that I had learned internet marketing from internet marketers…online. The form of lead collection I was used to was just an email address and typically drove people to an “awareness email funnel.”
This client didn’t have an awareness stage to their funnel set up and they really only wanted screaming hot leads to come in. Leads that give you their name, phone number, dimensions of their fireplace, and info on what they are looking for.
I was able to remedy that one pretty quick after having a better understanding of what they wanted, but again, another error of mine that speaks to my incredible ignorance at the time.
Now looking back, it’s a no-brainer — email collection vs qualified lead collection…
Moving On
So, as we moved forward, we struggled to prove any sort of traction for these small businesses. We weren’t utterly failing, but we weren’t getting amazing traction.
It felt like the problem was with the type of business we were working with, the type of business owner we were working for, and the misalignment between our strengths and our clients.
All the while, during this time, I am starting to get more heavily involved in the startup scene.
As a lifelong entrepreneur, I’ve loved startup life / startup culture for a while and really enjoy the community here in San Diego.
So it clicked.
Why am I working with mom and pop, when I can work with young and hungry rockstars in startups?
I’d get to do more of what I love, be involved in a community I love, and make a difference for companies that are constantly on the verge of either greatness or utter failure (companies just like mine!).
“Truly nothing makes me happier than when something I say unleashes a spark inside another entrepreneur.”
-Derric Haynie
The Pivot
The idea became a goal, and the goal became a list of tasks.
We had to rebrand, change our voice, our message, how we got customers…Everything.
We moved from being a generic Digital Marketing blog to calling it a Growth Marketing Blog — SplashU.
We got a better business tagline.
SplashOPM — helping entrepreneurs start something.
We gave our blog its own tagline.
SplashU — know how to grow.
We changed our content marketing strategy and keyword goals.
We got a new event banner to match our new message.
We stopped being generic!
Thanks to Content Marketing World 2015 and the great Ann Handley, we were really able to unleash our voice, define our content tilt, and push forward in a new direction.
We partnered with Startup Socials — a global events company — to run local events here in San Diego designed to foster the startup community.
We took over a ~1400 member collection of Meetup Groups — San Diego Digital Marketing Experts — and started running weekly events.
We stopped focusing on local small business strategies and dove deep into growth marketing strategies, traction, and the problems of early entrepreneurs (which we technically are as well).
The Winning Moments
There were a few key moments in the last year that changed our business for the better.
Foundr Mag Podcast interview — this happened back in April or May, but didn’t air for almost 3 months, which was after we had pivoted our business ironically. Talking with Nathan Chan and Matthew Michalewicz helped me shape my 1 year business goals and give great insights into what it would take to reach those goals.
Startup Socials Partnership — taking over Startup Socials SD has allowed us to become a real pillar in the startup community. We are positioning ourselves as a leading agency for helping startups and soon we will be the go-to for SD based startups.
Growth Marketing Conference — our partnership allowed us to get to know Vasil and Startup Socials better which led us getting a booth at this conference, which will get us a ton of exposure directly in front of our target audience. This event, on Dec 2–4 will likely determine the outcome and direction of our business. We will be sure to give you a breakdown of what happens next month.
Rebranding — My wife and I really dove deep to get the best message and brand that we could out there. We wanted to be ourselves, but still identify with our audience, and we think we bring a unique approach to digital marketing and growth marketing with our blog, the way we talk in our emails, and in our videos. We received a truly great honor at our Startup Socials mixer when a startup founder came up to us after reading our new event banner and said, “It’s as if you are talking directly to me.” That’s when you know you’ve got a solid brand message.
Taking over SD Digital Marketing Experts — meeting Josh Fechter and the gang at 22Social was huge for us. They are amazing contacts, rockstar marketers, and great people. Josh had built quite a following with this group, but couldn’t dedicate the time to it anymore, so he handed it over to me. Acquiring an audience is much easier than building one, let me tell you. We were honored to be able to further his mission of keeping San Diego a source of great digital marketers.
Funding — obviously locking in funding was crucial to getting the business off the ground. While some businesses may favor the “no-strapper,” (agencies are generally in this category), there isn’t a single early business that couldn’t benefit by starting with an extra $50k. You need to invest money to make money, and in the early days, those long term investments are what get you to success faster.
Digital Marketer — this site made us phenomenally better digital marketers. Both the Content Marketing course and the Customer Acquisition course really took us to the top of the game. We used to walk into a room and be slightly above average digital marketers, but now it seems like we are on the cutting edge of everything.
Which brings me to my theory of learning sidetrack and minor brag:
If my estimations are correct, you can see that I was able to go from just above novice to a pretty advanced expert in digital marketing in about 6 months time.
Now, for other people this will likely take longer. I learn FAST.
And I went all-in on learning — spent $1,000s on courses and conferences, read 20+ books, 100+ blogs and 1000+ blog posts, and I spoke with experts on a regular basis to pick their brains.
I actually explain the process a bit more in detail in this talk I gave on How to Become a Digital Marketer in One Year (sorry for the poor lighting).
What probably helped the most was that I was actively teaching just as fast as I was learning, sometimes even teaching on subjects I had learned in the same day.
Over those 6 months, I went from hearing great advice and saying, “I should be doing that,” to hearing great advice and saying, “Yeahp, been doing that for 3 months now.”
And now, I rarely hear anyone mention a digital marketing or entrepreneurial best practice that I’m not actually using on a regular basis. That isn’t to say that there aren’t more things to learn and get better at, just that it will happen less frequently than before.
I like to think that I went from about 25% to 95% in the last 6 months, and if this is anything like poker, that last 5% is extremely hard to obtain. The people in the top 1% are the real gurus, the guys that have been doing it for years and have massive followings.
And in order to stay in the top 1%, you have to be learning and practicing every single day.
So my goal is still to get to that stage, but it will take a lot longer to progress than it did to get to where I am at right now.
The Big Mistakes
When anyone gets a bunch of money, they have a tendency to spend it.
I have a lot of experience in this and knew that I needed to invest my money as best as possible, yet I still fell into this trap quite a bit.
My goal with the money was to:
a. Attend a lot of events / take a lot of courses for education and networking opportunities
b. Establish myself in the local community as a white-hat agency owner
c. Drive strong online traffic to our website and blog to “drink our own Kool-Aid”
d. Test all sorts of online tools and services that could further our business, find out what works for us and our clients and use them
I wouldn’t say anything went wrong. When you’re running a bunch of different tests, you are bound to run into some failures, but here are some mistakes I could have avoided and I hope you can avoid yourself.
Wordstream.
This is a service that improves your AdWords campaign keyword strategies.
In the beginning, I thought I would just pick up a ton of AdWords clients and run $5k-$15k in campaigns for them.
This wasn’t what happened.
I liked the service and saw some value with it, but jumped into a 6 month contract for $350/month WAY too early.
This was almost a complete waste of money…
It cost $2800 to be exact (or almost 6% of my pre-seed capital).
That’s $350/month for 6 months, and an additional $700 because of the way they formed their contract, they were able to milk more money out of me.
And, worst of all, I wasn’t even running a single AdWords campaign for a decent portion of those 6–8 months, let alone logging in and using their service.
I’m still fighting those charges right now and believe what they did is just a terrible business practice… milking startups out of money and structuring contracts in a way that nearly guarantees an additional month be billed.
Getting locked into a contract killed me, and it might kill you to. So the moral of the story is “avoid vendor contracts.” This should be your businesses best practice.
Eventually you will have to do a contract with someone, but avoiding the contract should be your go-to move.
Conferences
We spent nearly half of our investment on going to conferences and events. I don’t think this itself is a mistake. We made invaluable contacts, learned cutting edge strategies, and came away better people every time.
But…
We should have spent a little bit less.
There were a couple of events that we shouldn’t have gone to. Maybe they were outside of our industry, too much in travel costs and hotel, or just too much of a hassle.
We needed to lay out a conference budget and strategy ahead of time, only attend the leading conferences in our core competencies, and lay out detailed networking agendas for each conference.
This is all obvious looking back, and we couldn’t have known that some of these events would be mistakes, but in hindsight, they were. I don’t want to bad mouth any conferences, since they were all truly valuable. It’s just that I should have been a little bit more strategic with where I spent my time and money.
Moral of the story: spend a little more time up front strategizing about your conference strategy and you will save a little more time and money in the long run. Really this just goes for anything, conferences, content marketing strategies, online advertising strategies, whatever.
Vetting Prospects
Your time is very valuable, and so is mine.
People start to realize just how valuable it is and may want some of it for free from ya.
Giving free advice is my specialty, but when you start giving someone an hour phone call that will drastically change the course of their business, your giving a free consultation, which is OK every once in a while, but should probably be paid for most of the time.
I had more than a few people who contacted me and said they were interested in my services.
Before vetting them as a qualified lead, I booked meetings or phone calls with them.
This led to a waste of time, most often for both parties.
While I was always able to give away some great advice in the meetings, I could never do business with these prospects, they just weren’t ready.
Moral of the story: vet your prospects, even when they are telling you they want your services. Develop a method for determining their current needs and budget (!!!), and then determine how you can best help them. Your time is valuable, especially when you are on a runway towards broke.
While there are some other mistakes we made, those are the biggest 3 by far.
Traction Channels and Strategies
In the beginning, I don’t think we had any clue how we were going to get customers. We figured we would build a blog, drive traffic to our website, etc. We are digital marketing experts after all.
But we hadn’t yet identified our channels.
In the beginning they were:
Local marketing
Referral
Networking events
But after our pivot, they are:
Live Self-Hosted Events
Conferences
Inbound Marketing at our Blog — Splash-U
We find that when combining these together, you get a powerful personal and local connection, amplified by the internet to build a bit more of a national audience.
The first two aren’t highly scalable, but they get us to the next level, at which point we will likely change to:
Webinars
Heavier inbound marketing
Speaking at events
So for the various stages of our business, we’ve got a pretty solid strategy on how to gain the traction we need to get to that “big-time” level in a couple of years.
The Results
Well, it’s too early to say it’s been a great success, but since moving to a slightly different category, improving our messaging and writing style, and really becoming ourselves, we’ve seen significant increase in on-site sign ups, website traffic, and all the generally good key metrics.
Also, we’ve picked up some consulting work and potential clients.
I truly believe it’s the start of something powerful, and it took us about a year to get there, which is why I would say now looking back, that $50,000 investment was a pre-seed investment into us finding ourselves. Thanks Seth for believing.
We aren’t big by any means. I’m about to show you some pretty poor numbers… but we are still proud of them.
And by this time next year, I promise to have some impressive results.
Email subscribers to date: 121
Lead Magnet Downloads: 25
Meetup subscribers: 2029 (we don’t “own” their data)
Startup Socials SD Members: 225
Straight from our balance sheet year to date 2015:
Revenue: $19,321.57 Expenses: $52,948.94
Profit: -33,627.37
Some notes:
About $12,000 was spent on software, web hosting, tech, and I think conference costs are tied into this somehow as well.
We had to start taking a reduced salary in July, just to keep the lights on, so far we’ve taken $15,000 in salary.
We’ve got over $30,000 in personal and credit debt accrued over the last 12 months due to no or little income while we get our business going.
We just hit over 1,000 unique monthly active visitors.
The Good News
We’ve scaled back expenses and are closing in on a profitable business.
Whether we reach profitability before we run out of money remains to be seen, but we are confident we can always reach out for another investment if needed, and may even lock in some capital for scaling up employees and web traffic in the near future.
We’ve got fans and friends supporting us. Entrepreneurs are identifying with us and the community we have been trying to build is really taking off.
Our email list is growing much faster than before and people seem to be resonating with our new brand and direction.
We’ve launched some small products and services and will be filling out a whole slew of offerings within the next few months, hopefully this leads to having very solid inbound marketing funnels setup long term for the business.
So while we made countless mistakes and have yet to prove profitability, the destiny of our business is hanging in the air (seemingly) over an upcoming conference.
We remain confident in our success, both personally and professionally, and are looking forward to growing together with you, and our entire community.
So, what do you think? Not impressed? Me neither?
I hope my struggles and insights can help you become a better entrepreneur. Feel free to reach out with any (non-trolling) comments and feedback.
Derric Haynie
