Starting a new business is no walk in the park.
Yet it seems that everything we read about startups are announcements on TechCrunch about how a pre-launched startup raised millions of dollars from Venture Capitalists.
Let’s be honest here. No one really cares that a company they’ve never heard about raised a million dollars. It doesn’t serve them or teach them any valuable lessons.
What we don’t see enough is startups sharing the mistakes they made along the way. Why? Because it’s not sexy.
Making mistakes should be embraced. Mistakes are what helps you build a better business, because it means you’re one step closer to finding the right solution. I can frankly admit that we’ve made more mistakes while building Rype than in all of my awkward teenage years combined (and I made a lot of mistakes in my high school days).
The good news is, we’ve learned some valuable lessons about the early stages of building a business, and we hope you’ll take away some golden nuggets to apply in your own business.
Here are the top 5 lessons we learned while building Rype (so far).
1. Focus on Return on Investment, Not Cost
It’s perfectly normal for start-ups to conserve as much cash as possible when they first get started. We’re a bootstrapped business and although we have been profitable from day one, it’s not like we have millions of dollars of cushion to depend on from VC’s. Nor are we seeking VC capital.
The biggest mistake when we first started out was not understanding the difference between cost and return on investment. In some cases, ROI is obvious. You put $50 into a Facebook Ad campaign and get a $200 return.
That’s a great return on investment, because you’re paying a $1 to get $4.
But in other situations, it wasn’t so obvious. For example, we were using Youcanbook.me for our scheduling software, and it worked perfectly fine.
There were better choices out there, which provided a smoother booking experience, but we chose cost-effectiveness versus user experience.
It wasn’t until we started interviewing customers one-on-one, that although it was a good booking experience, there was over 5 steps involved to book a lesson. It turned out that those extra 10 seconds prevented students from booking more lessons, which meant less engagement, which led to higher churn (a big no-no in any subscription business).
Once we switched to a more expensive scheduling software that allowed students to book a lesson in less than 15 seconds, the number of bookings per student increased by over 64%!
Lesson #1: Being a successful entrepreneur requires you to think like a successful investor. You’re allocating your limited resources (i.e. capital, employees, time) to what will give you the best return on investment.
Sometimes these decisions aren’t clear, but most of your answers can come from just picking up the phone and talking to your customers.
2. Don’t Quit After the First Experiment
Eric Ries, the author of The Lean Startup, popularized the concept of lean experimenting for start-ups to get to product/market fit faster. While I’ve read the book several times over, and even had the opportunity to interview Eric on my podcast, I didn’t realize how powerful it was until I implemented it for our own business.
As an early stage start-up, we’re always experimenting everything from our Facebook ad campaigns, email headlines, pricing — the list goes on.
The problem with having so many things to experiment is that you start to become impatient.
For example, we launched a free course on how to learn a new language in 90 days, hoping to bring a lot of value first to listeners, then share how we can help them reach their goals faster with Rype. Unfortunately, it didn’t convert like we expected because people weren’t sticking around until the end. After a few more tweaks, we moved on to another distribution channel.
Then a few weeks later, I joined a live webinar and saw something that I thought we could add to our course. It was incredibly simple, and I had no expectation of it improving the conversion rate.
All we added was the following as our headline above the video course.
The result? 22% of listeners stayed until the end versus 8%, and it nearly doubled our conversion rate. Who knew, right?
Lesson #2: Don’t quit after the first few experiments. This was an eye-opening lesson for us, because we literally lost thousands of dollars in revenue by giving up on experiments too quickly. Today, if we’re confident that something has the potential to work, we do at least 10 to 15 experiments before we move on.
3. Don’t Build a Faster Horse
The truth about startups that no one talks about, is that no one knows what will actually work — no matter how experienced you are in the industry. It’s how billion dollar companies like Kodak, Barnes & Nobles, and Blockbuster, who had industry veterans on their team, failed to innovate.
“No Business Plan Survives First Contact With Customers.” — Steve Blank
It’s why most companies are only building a faster horse.
They see an existing solution, and simply try to make it better, not different. As Peter Thiel, co-founder of PayPal and investor at Facebook, states in his book Zero to One (must-read for any entrepreneur), “you can either be 10x better than your competitors, or be different.”
“In a super competitive market where you’re not that different from your competitors, you have no choice but to ruthlessly ‘squeeze out every efficiency.’”— Peter Thiel
When we first introduced Rype, we were just like every other language website out there, and this led to competing on price, not value. It was only when we made the risky move to go Unlimited, that we immediately stood out from the rest of the pack by providing true value for our customers. Being the first mover to introduce this model was a risky move, with no certainty of it working out, but this level of risk-taking is also where the biggest rewards are.
Lesson #3: Don’t try to just be better, be different.
A useful framework to use when you’re trying to differentiate your business from the industry standard, is the strategy canvas. You can set this up by putting the 5 distinguishing features/benefits of the industry on the X-axis, and the strength (from 1 to 5) on the Y-axis.
Here’s one that illustrates how Apple differentiated their business from the rest of the industry.
Notice how other than the attribute(s) that shouldn’t be compromised (i.e. speed), Apple chose to do everything opposite to what the other players in the market were doing.
4. Be Careful Who You Listen To
This was a hard lesson to swallow.
All throughout our lives, we’ve been taught to listen to others, and get advice from people who have achieved what you want to achieve.
While I’m all for getting advice, there is such thing as too much advice.
“For one year, nobody knew what I was working on. Don’t share your idea for validation, share it with people who will help the idea move forward.”
— Sara Blakely, Billionaire and Founder of Spanx
The best entrepreneurs I know have a deep-rooted vision and inner confidence, that only they can understand. While they seek advice from others, they’re very selective in who they ask. And even after, they follow their own instincts to make the final decision.
From our personal experience, whenever we followed someone else’s advice rather than listening to our own guts, it was the wrong decision.
Lesson #4: Don’t let someone else alter your vision. The truth is, no one knows your business better than you do. You’re the one that stayed up until 2AM brainstorming new ideas for the business, and you’re the one that spent hours talking with your customers over the phone.
When you ask for free advice, you’ll get free advice.
At the end of the day, it’s up to you how you use it.
5. Build a Relationship With Non-Customers (Even if it’s unscalable)
One of my favorite articles on entrepreneurship is, Do Things that Don’t Scale, by Paul Graham. In summary, he emphasizes the importance of early startups to embrace doing everything you can manually, even if it’s not scalable.
One of the biggest mistakes my previous team members and I made at my previous startup, was trying to scale too quickly. We scrapped hundreds of thousands of “users” and tried to onboard them onto our platform, instead of building a relationship first. Big mistake.
When no one knows about your business, you can’t afford NOT to build a relationship with everyone. Some businesses only choose to build a relationship with customers, and I think this is another mistake.
The problem with this approach is that you’re only learning about the people who have bought or downloaded your product, when you should be learning from the people who haven’t yet bought or downloaded your product. There’s a lot more to learn from the latter, and a lot more money to be made for that matter.
One way we’ve solved this at Rype, was to prioritize collecting visitor’s email first, before anything else. From there, we’re able to reach out to people who are just looking to learn more about Rype for now, and try to create as much value for them.
This allows us to know:
- Who our interested customers are
- What their motivations are for using our product
- Why they’re not ready to commit yet
- What are they using as an alternative method
- & so much more golden nuggets
Sometimes, we go as far as scheduling a personal one-on-one call to dig deeper, because there’s only so much information you can reveal in an email.
*Note: we have now automated this sequence to start the conversation, but we personally email back each and every person that responses to build the relationship.
Lesson #5: Build friendships with everyone that comes across your business, not just customers. Studies show that 96 percent of first-time visitors of your website are not ready to buy, which means you’re missing out on a massive opportunity by only serving the 4 percent.
We hope you took away some golden nuggets that you can apply to build a more successful business, and we encourage you to share your valuable lessons below!
The world of entrepreneurship will advance far faster if we’re willing to help turn our valuable lessons & mistakes into someone else’s opportunity.
If this inspired or helped you out in any way, we’d love it if you could share it with someone else 🙂
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