For starters, we broke a stack of the same rules we were teaching:
Rule #1 (from the Third Paycheck website): “If you can’t bootstrap it, then it’s not worth doing.” Instead, we pushed investment money into the business instead of making it pay for itself as it grew. EPIC FAIL.
Rule #2: “Create a profit quickly.” Instead, we were willing to invest while the company made very little money for a long time. EPIC FAIL.
Rule #3: “Launch canoes, not warships.” In other words, run lots of small marketing efforts that cost little money until you find one or two that rock. Then, double down on the winners and sink the losers. Instead, we built a small warship with employees, computer programming, a slick website and the works. EPIC FAIL.
Natalie Allen took a bullet for all of us who participated in the downward spiral of Third Paycheck, a small business coaching company, by interviewing with Micro-business Fanatics to reveal what she’d learned.
Third Paycheck was conceived to provide micro-business coaching to folks interested in starting a small business – not coincidentally, it’s the same business model as Micro-business Fanatic. The coaching itself worked famously. The clients were generally thrilled with the quality and impact of the coaching. But Third Paycheck just couldn’t get their marketing off the ground. They failed to get their message out to enough new clients.
As Natalie unpacks the “black box” of Third Paycheck, she talks about three major lessons:
Lesson One: If your marketing’s not showing promise in 90 days, move on!! If you aren’t having success with your current marketing strategy in 90 days or less, you’re chasing a loser and you need to dump the marketing strategy, dump the business or both.
Lesson Two: Be careful investing any money until you know your marketing works. It’s super-easy to pour investment money into a business even though the marketing isn’t showing signs of life. In eighteen months, Third Paycheck substantially tested three marketing strategies: internet pay-per-click, email marketing and seminar marketing. None of these showed any signs of being able to generate a decent return on investment. Yet, Third Paycheck plowed forward for a whole stack of months, burning cash.
Lesson Three: Don’t chase the megabucks win. Natalie talks about going after smaller wins with bigger chances of success instead of shooting-for-the-stars. She compares it to the difference between video poker games and megabucks slot machines. The video poker games don’t promise huge wins, but they have the potential of building up to a nice return on your gamble. The megabucks slot machines, with the rolling jackpots, offer millions of dollars against zillion-to-one chances of winning. Natalie compares long shots like Third Paycheck to the megabucks machine. Play video poker, Nat says. Forget the long shots.
I’d quibble with Natalie a little about categorizing Third Paycheck as a big-win long shot. It sounds like that business just needed to find its Big Marketing Invention for it to turn a nice return. But compared to the business that Natalie and her husband Jerry are now driving, Synccreation, I can see what she means. Synccreation has taken a known product and applied the internet marketing savvy of the Allen couple. Their risks are minimal and their returns build nicely, one-sale-at-a-time. But that’s a show for another day.
Third Paycheck was a relatively unknown business model, too. Natalie talks about how it’s uncomfortable, and usually unnecessary to wade out into the unknown, inventing a brand new business model. That reality left Third Paycheck doing two things at once: developing a new business model from scratch AND looking for a Big Marketing Invention. No wonder it failed.
If I could wave my magic wand and get a do-over for Third Paycheck, I would push the company to hold off on developing its interactive coaching program until they nailed down a couple of hot marketing strategies. Pour no money into the company until they had an advertising approach that worked. Provide the coaching caveman-style – do it all manually without the high-tech bling of an interactive computer system.
And, I’d push the company to radically increase its frequency of marketing. Try at least five or ten new marketing strategies EACH MONTH until some winners emerged. Instead of trying three things in eighteen months, try sixty things in six months. With numbers like that, success would be unavoidable.
Yet, this coaching exposes the Catch-22 of the Micro-business Fanatic mantra: you have to market like a banshee but hold off on building your actual product until the marketing starts to hum. How the hell do you market something that’s not fully built?
Granted, it takes some flexibility, but if you can master that maneuver, you will have a shot at micro-business greatness that will inevitably lead to macro-business wealth.
Or am I missing something? Let’s hear what you think.{jcomments on}
