Why Businesses Fail
Hello to newbies and veterans alike! You might remember me from a four part series that I wrote a couple of years back called "Single Model Pay sites: A Gold Mine..." Anyway I am here today to talk about the main reason why small businesses fail, whether they be Internet based or brick and mortar…
Plain and simply put, the reason is because the owners of the businesses lose control of expenses, or more eloquently put, expenditures.
I know with a little common sense managing your expenses sounds easy enough, and will be no problem right? I’m not so sure about that, as all businesses, especially in the online adult industry, it's not the main expenses that empty your money clip, it's almost always those "hidden" and seemingly small ones. That’s what I’m here to tell all you newbies about.
I have been saying for years that to succeed in this business you have to treat it like it’s just that; a "business." Now that the dot-com gold rush is over and all of the idiots are pretty much weeded out from the adult industry, this business has become like any other legitimate business. Unfortunately now you have to actually WORK for your money. SO if you entered into this business thinking that you're going to get rich overnight then you're in for a huge surprise.
First let's look at the foundational expenses: web hosting, web billing and content fees. Now hosting and content can and do fluctuate, and they are usually the biggest bill adult site’s have to pay. When it comes to hosting and content, having good math skills and a good business mind are essential. Critical in fact. Revenue, by definition, is income minus expenses. Whatever is left over, if anything at all, you can consider profit.
The best thing you can do as a newbie is to start small in this biz; don't just jump into a pay site spending thousands of dollars on content and a dedicated server and sit back and hope that the sign-ups come rushing in, because in all likelihood they won't, and then you’ll be stuck with debt, and you’ll have achieved the exact opposite of what you wanted in the first place. What I recommend is that you start with a free or AVS site or a portal. Learn the ropes and then go from there. The reason for this is if you don't know what bandwidth really is or how much it costs then you’ll get slammed in no time at all.
I can't tell you how many times that I've seen a newbie buy $2,000 dollars worth of content, a domain name for 70 bucks, a dedicated server plan for around 6 or 7 hundred, and then he/she pays someone another thousand to design a site for them. Then, when they are all done building and preparing they go live, and are usually very surprised that nothing happens! You see, they just don't understand the basic ins and outs of the biz, and so they get crushed! Think about it, in my example above the potential webmaster had put around 4 grand into the site and now he’s 4 grand in the hole, and by the time he figures out how to really make a pay site function and do well, he’s already gone under because he can't pay the hosting bill. I know this story very well, because I did exactly that 4 years ago.
It is actually quite ironic because I had been reading The Adult Webmaster before I put my site up and time and time again, Stephen Yagielowicz constantly said in his articles not to do what I planned on doing, he said to learn the basics first, then slowly build from there. If I had only listened to “big Steve” in the first place my pocket would have been 4 grand heavier today! My experience should be a wake up call for all you new webmasters out there, because as they say people who don't learn from history are doomed to repeat it.
If you've already learned the basics and have a good idea of how traffic works; how to get some of it, and how to turn it into sign-ups; and now you want to try a pay site of your own, then go ahead. Just remember to try and gauge how much your hosting and content is going to cost each month, and take into consideration the fact that you could get bigger and better by the day and the more money you make, the more you will have to spend.
Running a pay site today takes a lot of time and money. What I did was ALWAYS look for ways to cut corners no matter what the expense was. For instance, instead of buying my content I decided to research how to shoot my own and what I needed to do. I also laid out on paper how much it would probably cost to do so.
Then I bought myself a brand new Nikon digital camera, studio lights and put an ad out in the local paper for "models wanted." After about 3 months of doing that, my content fees were down almost 60%! Not to mention I was also making more money by shooting my own content because it was exclusive and good quality - a double bonus for me!
Then what I did was price out about 30 different hosting companies until I found one that not only could handle the workload that I was pushing on my current server, BUT left room for as much growth as I could master, AND one that was almost the same price as I was paying already. So after a few simple changes, my entire net worth was actually on the plus side finally. Now I could concentrate on running the site instead of figuring out how the fuck I was gonna pay for it.
Now 3-4 years later I have a whole different animal to contend with, the "hidden expense." These really suck because they can eat up paychecks fast. 20 dollars here, 50 dollars there, man that shit really adds up at the end of the month. So what I did was sit down one weekend and list EVERY single expense that I had, from the absolute least significant (ie office supplies etc.) to the really big ones. After I did that, I was amazed at the amount of money I was shelling out every pay period for things that can easily be redirected or eliminated altogether. Don't wait until you’re broke to list this stuff, do it NOW! The more you can gauge now what you’ll have to pay later, the more money you will likely save. Talk to other veteran webmasters and see what they pay for their site(s), then you’ll have a good idea of where you will be at in the future.
Anyway, I could go on and on forever about this, but I think you've gotten the basic idea. The more business minded you are now, the more money you will make down the road - that is a guarantee. I’ll be writing more articles in the near future so drop me an email, and tell me your views; I would love to hear them. Ciao! ~ Jim Nesbitt