This is Part 2 of a four-part series. If you have yet to read ‘Our Story and Business Adventure Part 1: The Beginning‘, please do so before reading this article.
You, me, or nobody is gonna hit as hard as life. But it ain’t about how hard ya hit. It’s about how hard you can get hit and keep moving forward. How much you can take and keep moving forward. That’s how winning is done!
Rocky Balboa
2004
MRS WOW
On Boxing Day 2004, the world witnessed the deadliest tsunami in history. The disaster hit without warning, taking a staggering 230,000 lives across 14 countries. In life, we are lucky if we get warning signs of trouble ahead, but I wonder how many people ignore them until it’s too late. Sometimes, it’s not a warning sign, but a feeling of doubt or an unanswered question. We dismiss it because we desperately want to be right. Don’t, because it will come back to haunt you.
‘Where did you say you’re going again?’ asked my sister-in-law.
‘San Francisco. We will be there for three weeks to sign the contract and attend the train-the-trainer programme,’ Mr Wow replied with much enthusiasm.
‘Are you guys sure there’s a market for this? Accelerated learning sounds interesting but how many people would pay money for such a course? There’s also no recurring business. Your customers will only take the course once.’ It was my father’s-in-law turn to fire questions.
I gave Mr Wow the ‘let me answer’ look.
‘The programme has several components and can be customised to suit both students and working adults. For example, students will pick up memory and study skills, which are obviously very useful to them. Parents will see the value and pay for it. And we don’t need recurring business to survive. Funeral parlours don’t have recurring business too. Their customers only die once.’
Everyone at the dinner table burst into laughter…
Actually we did consider the lack of recurring business when we were doing our business plan. Mr Wow was the one who brought it up. Nevertheless, the numbers looked good (too optimistic in hindsight), so it didn’t seem to matter. We had spent nearly four months doing our due diligence and we felt confident.
One week later at another dinner table, my dad (usually a man of few words) made a comment, ‘It’s possible that there’s hardly any competition because there’s no demand.’
His words hit me like a ton of bricks. I didn’t dare to admit that we hadn’t considered that possibility. Were we too eager for it to work that we missed the obvious? How stupid and careless of us! Mr Wow and I looked at each other for a brief moment. We were clearly bothered but we didn’t address the issue. Mr Wow had already quit his job then and we would be flying to San Francisco in two weeks’ time to acquire the master licence. There was no turning back. But as I said, if you ignore a nagging doubt or an unanswered question, it will eventually come back to haunt you.
To cut the long story short, we worked really hard but the business failed in less than two years, mainly due to lack of demand. My dad was right and so was my father-in-law. The recurring revenue model is very important in maintaining a consistent stream of income, especially if the sale price of your product or service is low. Funeral parlours might not have recurring business but everyone is a potential customer because all of us will die someday. Death is not optional but signing up for an accelerated learning programme is. I was naive. I eat my words.
The recurring revenue model is very important in maintaining a consistent stream of income, especially if the sale price of your product or service is low.
MR WOW
As mentioned in Part 1 of our journey, Mrs Wow and I eventually decided to join forces and become business partners. We would be unstoppable! We whipped up the best business plan we could muster and after doing our due diligence, decided to purchase the master licence (for Singapore, with the first right of refusal for the rest of Asia should we expand in the future) of a successful, time-tested and well proven US-based accelerated learning programme. It was a gift from heaven! Why didn’t we think of this earlier? If it works in the US, why not in Singapore?
After quitting my full-time job, Mrs Wow and I flew to San Francisco for training and to sign the licence agreement. Once training was completed, we immediately returned to Singapore. We were firing on all cylinders. It’s amazing how much energy and enthusiasm you have when you are young and motivated. It didn’t matter if it was a weekday or weekend. We would sometimes lose track of which day of the week it was. Both Mrs Wow and I were juggling countless tasks: meetings with suppliers and contractors, office/centre renovations, sales, marketing, recruitment, training and product re-development (or rather localisation). Day and night, we toiled non-stop. The pot of gold at the end of the rainbow was just ahead.
Two months flew by and D-Day finally arrived! We were so excited! We launched our marketing campaign as planned and the phones started ringing off the hooks. We followed the sales script as rehearsed and closed our very first sale! It worked, hooray! Then came another and another. Before we knew it, we had formed our very first class of trainees.
Business was pretty good at first. We were running about four to five classes a week. Cash flow was more than decent and we had no problems covering our overheads and paying ourselves a humble salary just to cover our basic expenses. Besides generating leads from the public, we partnered up with other educational institutions to co-market our short courses as part of their extra curriculum (all part of our marketing plan). We even scored a corporate deal to train 120 employees from a local bank. We were on a roll. Everything was going according to plan.
But… here comes the but. Business started to dwindle quickly after the first year. Eventually, the hype died down. The phones hardly rang. Maybe we were not advertising enough? Maybe we were targeting the wrong market? Before we knew it, we deviated away from our original plan. Our marketing budget exploded and we began to bleed cash month after month. On top of that, we had other nagging problems with human resource and our landlord.
We now clearly understand why about 20% of new businesses fail within the first year, 50% within five years and 65% within 10 years. This is according to the US Bureau of Labor Statistics. The overall failure rate is estimated to be about 70%, thereabouts. Some argue that it’s a lot higher in reality. Whatever the actual statistic, one thing is certain — running a profitable business for 10 years and beyond is a daunting task. Of course, there are many reasons for a business to fail. Here’s an example: Why Some Businesses are Doomed to Fail from the Start.
We now clearly understand why about 20% of new businesses fail within the first year, 50% within five years and 65% within 10 years.
Soon the inevitable happened. We were almost out of cash and if things didn’t turn around soon, we would not be able to make rent in two months. We had to think of something fast. I will never forget what happened next.
It was as if a dark cloud was hovering over our office that day. Morale was rock bottom. Mrs Wow and I held a meeting that evening after our one and only full-time staff had left for the day. We started the meeting by mapping out all our options on the whiteboard. It essentially boiled down to whether we should raise more funds (essentially borrow money from family since no bank in their right minds would give us a loan) or call it quits. After about four hours, we came to the same conclusion — we would cut our losses. I was actually quite surprised at how decisive we were. Looking back, it was indeed the right call. If we had decided to continue, the business would have certainly black-holed us.
It was as if a dark cloud was hovering over our office that day. Morale was rock bottom.
It was a painful lesson laying off our staff (she was a really nice lady), losing our rental deposit, liquidating whatever we could and after the dust settled, facing the world again. All in, we lost about S$60,000. It could have been A LOT worse. I always joke that Mrs Wow and I earned our MBAs from our first failed business venture and we actually got a really good deal out of it. The 60k ‘tuition fee’ was peanuts compared to how much we had gained from the experience. We will definitely blog more about our ‘MBA experience’ and hope others can grow a little wiser and avoid the pitfalls we encountered.
Intelligence is the ability to learn from your mistakes. Wisdom is the ability to learn from the mistakes of others.
Anonymous
Although we took the setback in our stride, our compass was broken and so began the next part of our business adventure: the lost years.