Over the past 8 years, I’ve been involved with over 100 different companies, covering everything from start-ups and medium-sized enterprises to the major players.
As a result, I’ve gained substantial experience and insight into what works – and what doesn’t. In other words, I’ve developed a clearer understanding of why some companies fail while others achieve massive success.
I’ve long wanted to share these experiences with you, because I believe this knowledge is truly valuable. When you know what not to do, you can often stay focused on what builds a better business.
Here are my 8 reasons why online business projects (with a high degree of probability) go down the drain.
1. The team is poorly assembled
When reading various investment interviews, the most important factor for investors is a strong team.
Unfortunately, I often see companies that haven’t given enough thought to how to structure their teams efficiently. When launching a business from scratch, it’s common to start with 2–3 friends you want to work with – and that’s fine. You might hire friends or acquaintances because they’re similar to you, and you know where you stand with them.
…But we also have to acknowledge that an effective team is composed of people with diverse skill sets, so hiring those who resemble yourself isn’t always enough.
In online marketing especially, it’s vital to consider the skills within your team because you’ll be touching on areas like programming, marketing, product development, finance/accounting, and customer service.
It’s equally important to leverage the skills available on your team. One person can cover multiple areas early on, and by default, everyone is part of the sales team because the main focus is selling.
Most webshops I consult today were started because the founders had a product they wanted to sell.
They launched a webshop, uploaded the products, and then… nothing happened – which quickly leads to frustration.
#1: Define responsibilities clearly. It’s often much better to have 2–3 partners than to pay for external help from the beginning.
2. They live in a dream world
This point builds on the previous one. Many still believe that you can “just launch something on the internet” and it’ll sell by itself – as they’d say in Jutland.
Sadly, the world doesn’t work that way. The product you’re selling and how you market it are more important than your webshop. But remember: if no one on your team understands online marketing and disciplines such as:
- Facebook advertising
- Big data and web analytics (arguably the most important)
- Google Ads
- SEO
- Email marketing
…then how will you generate traffic to your website? Most people think traffic comes from simply having a website. It doesn’t – so be realistic.
It often takes 1–2 years before your webshop reaches break-even – when you’re no longer losing money monthly.
#2: Be realistic and develop a marketing budget to support market entry. If no one on your team is willing to dive into the digital jungle, you’ll need to set aside money for a consultant – which can come back to bite you later (more on that in point 7).
3. They don’t invest enough in data and analytics
Everything can be tracked today – you get massive amounts of data no matter your field. This data should be used to improve your product and marketing strategy.
You either need to invest in your team’s skills and tools – or do it yourself. You can’t lean back just because you work with branding, because data plays a huge role in everything happening online – trust me.
Whatever you’re doing online, it can be tracked – and user behavior tells you everything about your product’s quality and provides insight into the future.
Most companies spend their marketing budget without looking at data. That’s like buying a car without test driving it. The best thing about having a strong overview of your data is not just getting sharper in business – it also makes it easier to attract investors or venture capital.
If you’ve seen Dragons’ Den, Shark Tank, or Løvens Hule, you might have an idea of the numbers they expect you to know.
FREE PDF with the 20 numbers investors want from you
4. They fail to retain their customers
Most companies are so eager to gain new customers that they completely forget the ones they already have.
Once you’ve sold a product to one customer, how do you ensure that person returns?
In the online world, we use the term retention – the ability to keep a customer.
Three factors determine whether you can retain a customer:
- Experience
- Product
- Need
Experience
Did you provide the best possible experience through your website – or was it mediocre? Why should the customer recommend your product or service?
Product
Is the product as good as you think it is? The quality of the product directly affects how many new customers you gain from a paying one.
Example:
I own a jacket from the English brand Bodaskins. They only make leather jackets (so far), but they are fully committed to their audience. Jackets range from 4,000 to 6,000 DKK, but they’re so reliant on positive word-of-mouth that they go out of their way to deliver top-notch customer experiences. Their website and marketing are unique. They respond to everyone tagging them on Instagram and give thoughtful replies on Trustpilot, where they address reviews in depth.
Need
Why do people switch products? If you sell Rolex watches, customers won’t come back soon due to the high price. But if you sell supplements, personal care, or frequently used items, there’s massive potential because demand is continuous.
Let’s say you get 1,000 customers a month. Only 5% return. You know acquiring new customers via marketing is expensive. If the average order is 500 DKK, your monthly revenue is 500,000 DKK. But since 95% are new customers, you’ve spent a lot acquiring them – maybe 350 DKK each.
Meanwhile, it only costs you 10 DKK to bring back an existing customer (through brand, email list, or similar).
We can agree it makes more sense to increase your 5% retention rate to 20%, rather than raise the budget to buy more customers at 350 DKK each, right?
These calculations are pure gold for any online business – whether you’re in e-commerce, software, or apps.
5. They don’t experiment or A/B test
Another huge mistake. Most decisions are still made based on gut feelings – but why not let data show what works?
Sure, Steve Jobs said: people don’t know what they want before we give it to them.
But online, the reality is different – because data reveals what people want even before you know it. (And let’s be honest – we’re not all Steve Jobs.)
Trick 1: A/B testing
Use tools like VWO to track what your visitors prefer. Do they like a homepage video? Do they click the green or yellow button more on product pages? Let the data guide you. ASOS.com constantly tests their layout to see what performs best – the site might look different tomorrow.
Even a small improvement in your conversion rate (the % of visitors who buy) can result in a significant sales boost.
Trick 2: Call your customers
It amazes me that more people don’t do this. Call both satisfied and dissatisfied customers, and soak up knowledge. Take notes and get smarter.
If 80% of the customers you talk to say your product smells terrible (pardon the language), there might be truth to it. But if people complain about late delivery from the postal service, that’s likely an external issue.
#Tip 5: Don’t experiment unless you’ve set up a system to measure the results. It makes no sense to test if you can’t track performance – especially not if you’re redesigning your homepage or website from scratch.
6. They struggle with change and adaptation
Many of us think: my product is great – the user is the problem. That might be your opinion, but it won’t help your sales – quite the opposite.
All companies in your market are competing with you – and the competition is only increasing.
When Amazon enters your market, don’t throw up your hands and say “Damn Amazon, they’re killing my business.” That attitude won’t help you.
As I have mentioned, it’s not about what happens in your life or business – but how you react to it.
Maybe you could use Amazon’s platform to sell your products? Focus on opportunities, not limitations.
7. They don’t learn from their mistakes
This relates to earlier points: Many companies simply don’t learn from their mistakes. In other words, they don’t “sharpen the saw,” as Stephen Covey writes in his best-selling book The 7 Habits of Highly Effective People (highly recommended).
If you hire consultants to build your online strategy, you’re not learning anything. Same goes if you outsource production.
There’s nothing wrong with delegating work – but the downside is you don’t gain the insight. If you don’t understand what caused your success, or how your mistakes affected the company, how can you repeat – or avoid repeating – them?
8. The competition is massive
Andrew Chen, Growth Hacker at Uber among others, wrote a post about increasing online competition.
The problem is, newcomers still think they’re first movers – but they’re not.
It’s like thinking you’re starting in pole position in Formula 1, only to realize you’re starting 40th or 50th. How do you react to that?
It’s fine to realize you’re not a rock star – even if you thought you were. The key question is: how do you respond?
So: the big conclusion is that success won’t come easy. But if you can do it – and work hard for it – it is possible.
Are you ready to take up the challenge?
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