How I Lost $5,000 and Counting to This Book
The biggest mistakes I made as a first-time entrepreneur
2020, Christmas time. I just came back to France after two years in New York, and I’m looking for something to do with my life.
I’m a member of this entrepreneurs’ Facebook group called Trends, and someone suggested we read How to Be a Capitalist Without Any Capital, by Nathan Latka. He said it changed his life.
The title isn’t appealing, but the book description definitely is. Latka promises to teach readers how to build multiple income streams and join the “new rich” just as he did. He started when he was about my age, and I’m desperate to reach financial freedom and travel the world, just as he did.
So, I bought the book — and it was one fantastic read indeed.
Actually, I was so inspired that I decided to follow Latka’s exact strategy.
Following this strategy made me lose $5,000 –but the problem wasn’t really the book.
It was me.
Latka’s number one rule: acquire, don’t build
It’s better to acquire a tiny business rather than build one from the ground up: it takes less time and resources. In short, it’s much easier.
This is one of the first things I learned from this book. In addition, Latka provides plenty of resources to find tiny businesses for sale, and I was eager to make my first acquisition. Or maybe I was just eager to make money, quickly.
I subscribed to MicroAquire, a marketplace for small businesses. I found one that seemed legit enough: a promotion tool for musicians. I worked in the music industry at the time and had plenty of ideas to develop this tool.
Unfortunately, the founders passed on my offer, so I decided to follow Latka’s rule number 2.
Rule number 2: if you can’t buy, copy
Okay, so he didn’t actually write that, but there is a chapter on finding ideas worth copying.
Finding a business worth acquiring doesn’t mean it’s a good idea to copy it, and it’s an important nuance that I decided to overlook.
In my mind, copying this music promotion tool was a genius idea. There were plenty of them already, but I was convinced that this one would be the best. I wanted to make it a subscription-based business model and could already picture the number of subscribers growing every month.
After doing literally zero market research, I decided to go ahead and have this tool made. I just assumed it would work.
This was my first mistake.
I hired a developer through UpWork and was lucky to find someone talented and honest. We spent weeks mapping the website, trying to make it stand out from competitors. And there I was, doing something Latka strongly discourages:
Building.
I’ve heard countless terrible tales from people who hired freelancers on UpWork, especially developers. Some ran away with the money and the project, others blackmailed their clients to extort them as much money as they could.
My experience was different. The team I hired was efficient, the communication was good, I felt confident. But, something that I didn’t plan, and again, it was mostly my fault: the project exceeded by far my budget.
Initially, I planned to allot $3,000 to build this website. How naive.
They were many milestones to this project — the first cost a thousand, the next one was a bit more expensive, and then another $500, up until the project was completed and I had paid $4,500.
It’s fine, I thought. But no, it wasn’t fine, considering that I blew up my entire marketing budget, I quit my job, and I didn’t want to put any more of my savings into this thing. Was there another alternative, though?
No. I still believed in this tool, and I was convinced that people would subscribe — and that I would recoup my expenses in no time.
But remember: I didn’t do any market research.
See where this is going?
I failed, miserably
After spending some additional hundreds of dollars in marketing, no one wanted to subscribe.
Not a single soul.
I realized that this all went down to the fact that I ignored the “market research” step. If I didn’t, I would have found out that my target, indie musicians, just couldn’t afford this monthly expense and didn’t think that it would give them any value. They were keen to use the tool, but not to pay for it.
But I didn’t know that, so I just lost my investment. $5,000 might not seem like a lot of money to everyone, but for me it was — and I kept thinking of all the things I could have done with it.
Quite an expensive lesson.
In the end, the money was gone so I figured it was worth giving it one last shot. I sat down with a piece of paper and started coming up with ideas to turn this around.
“Give more than you take”
This is the rule every successful content creator lives by. I remember reading that you should give away 99% of your expertise and sell the remaining 1%.
That’s what I decided to try with this tool.
I would make it completely free — users will only have to provide an email address to access the thing.
Once traffic grows — if it does — I will offer advertising opportunities. In addition, I’m planning to send a weekly newsletter to the users and offer sponsorship opportunities to businesses. Hopefully, this failure will turn into something good.
Am I really made for this?
This is something I’ve been thinking about over and over again. I studied business in college, but this experience made me realize that maybe I wasn’t made to run one. I’m way too lazy for this.
Plus, I’m a creative at heart: I love writing and generating ideas, and that’s pretty much it. Even though I’m passionate about entrepreneurship, I suck at the execution and the admin stuff. Maybe this just wasn’t the type of venture that suits my style.
Now, on to the lessons learned from this first-time entrepreneurship experience.
Lessons learned
1. Do. Your. Research. Don’t be lazy. If your idea doesn’t cost anything to implement, then go ahead and launch — you’ll save time and will lose nothing if it fails. But if you have to invest a substantial amount of money (whatever substantial means for you), don’t overlook this step.
2. If it costs $3,000, then it costs $6,000. Always double the budget you think you need, especially if you have to hire a contractor.
3. Non-tech founders: find a tech co-founder but don’t hire a developer. As the CEO of a tech business, you will rely tremendously on your software engineer. If this person is your co-founder, then they’re involved as much as you are, but if you hired them… you’re pretty much at their mercy so if something goes wrong, you’re trapped.
4. Build an audience before you launch, so you don’t end up with zero subscribers in your first week. It’s discouraging.
5. Try everything. Failing once doesn’t mean the game is over. Take a piece of paper and write down all the ways you could turn your business around, and don’t give up until there’s nothing else to try.
Conclusion
After I decided to tweak my business model, I asked my developer to update the platform, but he couldn’t do it before two or three weeks because he took on other clients (see Lesson Number 3).
I have plenty of other projects on my plate, but I am determined to not give up on this one. Even if it means not making a dime and just helping some indie musicians promote their music. If it helps at least one person, then it won’t be a waste — which leads me to the final and most important lesson learned:
Don’t forget why you started.
Liked what you read? You can hire me as a ghostwriter by clicking here. The process is quick and easy.