My Million Dollar Mistake

big mistake

As I have mentioned to you in the past, I’ve made a lot of mistakes. Luckily, most of these mistakes were small and didn’t cause much harm to my business or me personally. But on one occasion, my mistake not only brought my business down, but it also almost bankrupted me.

Here is the story of my million-dollar mistake.

The early days

Towards the end of my high school career, I started my first real Internet business. The business was called Advantage Consulting Services (ACS), which consulted small- to medium-sized businesses on their Internet marketing strategies.

At first, like most businesses, ACS struggled. But through blogging, speaking at industry events, and cold calling, my business partner and I were able to grow ACS into a cash cow.

During our peak, we were pulling in millions of dollars with high profit margins. Once ACS started to do well, my business partner and I decided to expand, but we didn’t expand in a good way.

Most entrepreneurs would expand their core business and try to accelerate its growth. But my business partner and I aren’t like most entrepreneurs. We decided we would be different and expand into new ventures that weren’t related to our core business.

The somewhat greedy life

One of our first investments was into a company called Fruitcast. An individual by the name of James Archer from Forty Media pitched us a cool idea. His vision was a market place similar to Overture and Google AdWords in which companies could bid to have their advertisement in certain podcasts.

For example, a company such as GM could go onto Fruitcast, browse our podcast inventory (which we got from publishers) and bid to have their advertisement placed into the podcasts of their choice.

There were a few problems with this:

  1. Ineffective advertising – Fruitcast placed advertisements at the beginning and the end of each podcast. These ads were not effective because they weren’t in the middle of the podcast. We had no way of incorporating the advertisements within the podcasts unless the hosts themselves talked about the advertisers within the show. And although we could convince some podcast shows to do this, we didn’t have advertisers lined up ahead of time.
  2. No ROI – We charged our advertisers way too much. Each played ad would cost them 5 cents. I know that doesn’t seem like a lot, but it adds up really quickly.
  3. We rushed in – The biggest mistake we made with Fruitcast was we didn’t ask James enough questions before writing him a check. When we gave James the money for the company, we didn’t know that he wasn’t going to work on Fruitcast full-time. By no means was this James’ fault. It was ours for not asking him the right questions.

The somewhat smart idea

After failing with our Fruitcast investment, my business partner and I decided to get into the software as a service space.

We didn’t know much about software companies at the time, but we did know a great deal about Internet marketing. So, we decided to create two analytics companies called Siteblimp and Crazy Egg.

Siteblimp was supposed to be a free analytics solution like Google Analytics is today. At the time, our main competition was Statcounter. But a few months before we could launch Siteblimp, Google bought Urchin Analytics, made it free, and then released it as Google Analytics.

Because of that, we decided to scrap the Siteblimp project.

Crazy Egg, on the other hand, was supposed to be an analytics solution that provided a website overlay more detailed than any other. Overtime, the idea expanded to include a heatmap feature.

Like most businesses, Crazy Egg struggled at first. After a few years, however, it started to gain traction. It took a while to get there, but Crazy Egg is still running today, and the company is doing well.

The dumb idea

With all of the money we were spending, sooner or later my business partner and I were getting strapped for cash. Although ACS was doing well, it took a ton of money to keep businesses like Crazy Egg alive. Plus, we wasted a lot of money in ventures like Siteblimp and Fruitcast.

At this point, we started to look for outside investors who would be willing to give us some cash in exchange for a percentage in our business.

We spent around 6 months pitching our ideas to investors and got nowhere. So, we did the next best thing and took money from our family members and the bank.

Once we had a good amount of cash in the bank, we decided to give old Siteblimp one more shot. This time, we decided not to compete with Google Analytics. We shifted gears and concentrated on building a pay-per-click management software.

Unlike with Crazy Egg, we didn’t hire in-house employees to create the software. We decided we would use contractors because it would be cheaper.

We hired a firm out of Portugal called We Break Stuff. Like with our Fruitcast experience, we ran into some problems:

  • Communication – it was hard to communicate with a development agency that wasn’t based in the U.S. There was an 8-hour time difference, impeding communication and slowing down our process.
  • Spreading ourselves too thin – my business partner and I were so busy with all of the other things we were doing that no one was properly managing our relationship with the We Break Stuff team.
  • Laziness – because things moved so slowly, we lost sight of the project, which also didn’t encourage the We Break Stuff team.
  • Ignorance – just like with Fruitcast, we didn’t know the space Siteblimp was in.

Similarly to our other failures, the failure of Siteblimp wasn’t We Break Stuff’s fault. It was ours.

The million-dollar mistake

The ventures I mentioned above (other than Crazy Egg) did lose me money, but they didn’t lose me a million dollars. They were just a lead-up to my million-dollar mistake.

Drum roll, please…

You would think that by then, I would have learned my lesson and stopped expanding into new industries, right? Well, think again. My business partner and I decided to use the majority of our money to expand into the web hosting arena.

Do you remember when Media Temple released its Grid System in 2006? We tried to release the same thing a year or two before they did. We were going to call the company Vision Web Hosting.

Here is where we messed up:

  • Location – we found 3 talented employees in Rockwall, Texas. Because they were based in Rockwall, we decided to set up base there, which was a bit far from Orange County, California. This made things hard to manage.
  • Clashing partners – two of these 3 people were married to each other. When you have this sort of dynamic, fights can ensue. To top it off, when all of the individuals live in the same house, things can get really messy.
  • Poor money management – none of these individuals were financially well off. Not only did my business partner and I had to support the business, but we also had to pay for their living expenses. This can really add up when you factor in 4 or 5 kids to be fed in addition to the team members.
  • Feature creep – the management team in Rockwall continually came up with ways to improve our product offering. This caused tons of additional expenses, and it delayed the launch of the company.
  • Poor communication – we were running Vision Web Hosting out of a 3,000-square-foot house in Rockwall. Eventually, we found out that these people didn’t own the house. The owner of the home wasn’t happy with the situation, so we had to purchase it from him for around $200,000.
  • We didn’t know when to say no – when you give people a bit, they start asking for a lot more. Sooner or later, we were paying for things like medical treatments, groceries, gas, car payments, etc.

Over a course of 2 years, this all added up to around a million dollars. The worse part about the experience was that our relationship with this team ended on bad terms.

Towards the end, my business partner and I had to tell our 3 partners in Rockwall that we couldn’t keep the business afloat. We were losing thousands of dollars every month, and it was adding up very quickly.

In the end, we decided that we would financially support them for a few months until they found jobs. During that time, my partner and I were selling all of the hardware we had bought for the project to recuperate some of our loses. The kicker was that in error, one of the companies that bought back some of our hardware sent a big check to Rockwall instead of Orange County.

Our partners in Rockwall fraudulently cashed the check, maliciously damaged the house, and left Rockwall without telling us.

Conclusion

Although I hope you won’t make big mistakes like I have made, chances are you will. But what separates the true entrepreneurs from the phony ones is that true entrepreneurs don’t give up.

If I had given up, I would have been a million dollars in debt, and I may have never paid my family members and the bank back. But because I kept on moving forward, things turned out well, and I was able to pay everyone back.

Don’t give up! Learn from your mistakes, and keep on pushing forward!

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Trackbacks

  1. Lessons Learned From A Million-Dollar Mistake | Business Idea of the Day
  2. Why Entrepreneurs Shouldn’t Write Business Plans | Sakib Mahmud Aka Internet Inspiration
  3. Here’s the Biggest Mistake You’re Going to Make… | The Daily Blog Awards
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Comments

  1. Neil,
    This is a well thought out article and very similar to my last post. I think it is important for your audience to believe that big mistakes lead into big take aways. While there is often a financial, emotional and mental cost to these mistakes it makes your future projects that much more likely to succeed.

    Without previous failure and experience how can someone possibly know what to avoid in the future?

    http://thecollegestartup.com/2009/11/09/succeeding-with-failure/

    • It’s a lot smarter for you to learn from other peoples mistakes, but unfortunately it’s never always enough. Sometimes it is just best for you to experience them yourself.

      • The big take away from those experiences however is how do you build on them to make your next venture, your next milestone or even your next meeting work that much better than it would have otherwise worked before.

      • To learn from others people mistakes is the best way to succeed, but when you are try something you don’t have this opportunity. If you made a mistake hopefully you will learn from it and use it for future prosperity.

        • Ideally, you should always try and learn from your mistake. Other people have also probably made the same mistakes, so try and learn from them before you do the same.

          • Exactly Neil! Take a good look at your mistake. Do not ignore it, even if you wish everyone else would. Try to determine the cause. Did you jump to a false conclusion, rely on someone who let you down, experience a communication breakdown, or simply forget? Were you trying to do too much at one time, and hit your limit? By finding the cause, you can reduce the chances of other mistakes as well.

    • Many successful entrepreneurs have made the mistake of jumping into a new venture – merger, acquisition, restaurant franchise or real estate investment – and blowing away the equity value they generated in their original business.

      • Yes, but most entrepreneurs are actually far from achieving that same level of success. It’s just a difficult and grueling process that most people aren’t willing to endure.

    • Excellent point. Mistakes are a part of life but those who can learn from those mistakes are the one’s who succeed.

  2. Good post, its all about the “Eye Of The Tiger”…you’ve gotta fight just to keep it alive….I personally lost $300,000 when I got away from my core discipline, but it’s ironic that my loss was my best lesson…I’m sure it’s one of your best ones too

  3. Neil- Wow.

    That’s some shit.

    One theme I can see through many of your mistakes that is very similar to my experience is communication!
    You can never understand and communicate with your business partners too much. Always be talking. I agree with the mantra that meetings can be time wasters, but without “stay-in-touch” meetings the company can be a life waster.

    Great post.

  4. I had a similar experience when I diverted from my core business and ventured into New one. But you can’t blame yourself for venturing into other businesses, there are many reasons for people to have more than one business. For instance if they rely on a single business there is no way they can support it when it goes down. Other times the new business you want to get into seems to be more profitable than your current business. And this is was the case with me, I was too tempted by the profit margin in other ventures….. and It did yield good profit in the beginning but later it failed miserably because I didn’t have the ability to manage two businesses at the same time :/ anyway Very good post !

    • Other ventures and business will appear in your site, but you should only proceed if you have the ability to juggle several projects at the same time.

    • You are absolutely right that you need to have something in case one business fails, but like Neil said it’s always better to get yourself involved in another business if the one you are currently running it’s not completely stabilized. You might find yourself in the situation when both of them need your immediate attention and you can’t do that. What will you do then?

      • Right, you get what you focus on so the energy you spend should be used VERY carefully. The time you spend should be monitored closley. You don’t get that kind of stuff back.

  5. well that was a costly lesson to learned.

    Today are you still outsourcing far away from your home base?

  6. Wow. That’s some crazy stuff to go through, and I’m glad to see that you pulled through and are doing well :)

    It’s interesting to look for common themes in the different decisions that didn’t turn out well. Like Ryan G., I see communication issues being one big one, but I think it’s also about picking the right folks to work with. I’ve had communication issues much worse than the ones you describe here that had great outcomes in the end because the people were rock stars, but I’ve worked with people on projects where no amount of communication could turn an impending failure into success. I guess you probably could have figured out sooner to cut the cord, though.

    Anyway, glad you didn’t give up, and thanks for sharing this; I know it’s not easy to admit failure.

  7. wow! that sounded like a stressfull situation to say the least.

    I have considred venturing out into other things, but my arugement is always ” what if I put that time, money, and energy into my current business? I already know this business makes money. who knows what will happen in the new venture”

    • No one really knows the answer to that because it’s something you will just have to experience yourself.

      • Its the old thing. what if I try it and it doesn’t work? but waht if you try it and it does.

        sometimes you have to just go for it.

        • Exactly, so you just solved your own question :)

        • You have to feel when is the right time to try something new. You can’t do when it pops out in your mind. Take a time to think about it and do the actual step when you feel ready.

          • Create a plan. Preparation is key!! If you don’t prepare yourself, prepare yourself to fail.

            • Build a solid foundation on which to launch your business search by doing the research and preparation first. Knowledge is potential power, but it needs to be organized and intelligently directed to achieve the best results. As Henry Ford once said “Before everything else, getting ready is the secret of success.”

              • Prepare yourself or prepare to fail. That’s exactly what you’ll need to do to build something into a potential success.

                • Whenever you are starting a business you have to take into account the possibility of failure. There is no guarantee that your business will succeed, but everything depends on you. If you have a solid plan before starting a business and if you are mentally prepared in the eventuality that you will fail I think you will do fine. Is better that you have a backup plan and from my point of view is not wise to invest ALL of your money in one business because in the case of failure you have nothing left to try something else.

                  • There is never a guarantee to something working or not. You have to put in account you process to succeed and the chances of failure. What’s most important though is you ability to come back.

            • If you’re not planning your business, you’re leaving it up to chance!!

              Why would anyone gamble their business instead of working their business> the choice is totally up to you!

  8. The early days? When was that, 4 yrs ago lol? Its inspiring to watch how you keep punching away at things.

    I would have done the same thing though if I was in your situation. Looking for ways to leverage my cash cow into new opportunities instead of expanding what works.

  9. What a really great lesson for all of us. Yes you will make mistakes and yes you will do the opposite to what people tell you, but the only way to really learn is make those mistakes and then get back up and keep moving forward.
    Most people don’t become a success first time, but if you listen to the messages and advice you will hopefully not make a bigger mistake than you could have.
    Thank Neil really great post!

    • Sometimes people will have to fail over and over again before they see even an ounce of success. The sad but grueling truth in life.

      • Neil, that is well and true, but there comes a point where persistence becomes obstinance. Any suggestions on how you decided to keep pushing on? What went through your mind?

        The fact that you were in debt to the tune of $1M and worked your way out of it is most impressive. Many thanks for sharing.

  10. The secret of success is to carry the spirit of failure until the end of life …… anyone can give up it’s the easiest thing in the world, but what makes life worth living is knowing that one day you’ll success.

  11. Neil

    Failures are beauty of life. Without failure, life would be dry. You are fortunate that you have tasted both failures and success.

  12. You make me think about some things of my life. Thanks!

  13. Anand Srinivasan :

    I have decided to stay off from employing people unless I can make more than decent cash. I think when you have employees in a company, it becomes a liability to keep growing. It is a good thing, but for a bootstring budget company, there is no guarantee..

    So, my strategy has been to keep outsourcing and take a lot of operational stuff myself for the time being till I make cash. And no, I hate VCs..It has to be my company all along..

    • Unfortunately I have to say I agree with this more and more. It’s just easier and cleaner to keep things very lean and mean, pay RentACoder or ODesk people to build specific pieces, integrate them myself, and wait until the business is generating good cash flow to even contemplate hiring anyone. And when you do hire, add resources as incrementally as possible– in the none-core functions that are eating up your time so that you can scale in the important areas. For example, hire stay-at-home moms to handle customer support and keep them as part-time contractors.

      • Yes, you can absolutely do this, but to a certain point. The challenge is always the communication you have between these people. Just make sure you can stay on top of them.

    • I can see your position, but don’t completely rule everything out. Be open to other ways to grow because if you don’t your ego will begin to dominate you.

  14. I’ve heard it plenty times: failure is a lesson you need to make before you can have success.
    And although I know it to true from experience in other aspects of my life I hope my first business (which is almost 1 year running now) won’t ever fail.

    But the important thing is: I’m enjoying the journey so far :-)

  15. What happened to the partners in Rockwall that fraudulently cashed the check, did you ever hear from them again.

  16. really great post and thanks alot for sharing your exprience, I think that me too going through simillar phase, it’s really inspiring for me

  17. You are right. We alll will suffer setbacks but persistence always pays off in the end.

    • That’s why when you see the runners of a marathon pass the finish line, the top 10 or 20 are kind of staggered while the rest is a big pack left behind. Stay ahead of the pack and keep pushing forward.

  18. Neil,

    The part about having management that can’t live without a paycheck piqued my interest.

    I’m curious how you would structure an investment where you have this situation:

    a) founders/management will get paid $70k/yr when they could be making $100-$150k in a traditional corporate roles

    b) you’re investing $500k in the business and about 1/4 of your time, but not getting a paycheck.

    c) everyone believes that the business will generate enough profit in 1.5 yrs to start paying founders/management a “normal” salary (whatever is fair by that point).

    Do you treat the founder’s sweat equity/opportunity cost (which they perceive to be worth $45k – $120k over 18 mos) as 1:1 equity on par with your cash (assuming cash buys preferred stock)? Or do you do something else on the sweat equity, like discount it or make it tied to milestones? Or do you just tell the founders, “look, you’re pre-money valuation covers your opportunity cost and $70k is a reasonable salary for this stage of the company so you aren’t getting any additional equity.”

    I’m curious what you think about the risk that the management doesn’t perform, yet has earned all this equity. Do you just figure that you shouldn’t invest in them if there’s any concern, or do you structure things to buy a margin of safety around the possibility that they’ll need more money.

    • 1. You compensate founders through shares in the company, which they should already have. For this reason, they should also have lower than market value salaries.
      2. Management should get shares. The amount should be negotiated between the founders and management. Ideally you wouldn’t want to give more than a percent of the company, if that.
      3. I would tie equity/bonuses to milestones. I do with with managers in my companies and it works well. This is also why shares vest over time.
      4. As for your investment of 500k, I would consult a lawyer. I am not sure how that should be structured.

  19. I really can’t understand these people, what makes them to do things like that? Parasites …

    It makes me think to choose only close friends as business partners. Like you said: “A business partnership is like a marriage”, it makes a lot of sense.

    People can change their identity, what they really are when they’re in a public or for a short period of time, but eventually everyone take their masks off.

    Now you made me to question everyone, thanks for that :P Good thing I’m surrounded by a lots of good and knowledgeable friends.

  20. u have been blogging a lot.. are u jobless…
    mind if i hire u.. just joking… i dont have a company.. i plan to own one..
    one significant thing.. i noticed among succesfull people are.. that they tend to take calculated risk..

    • Blogging can be very difficult for me at times since I have my hand in so many other cookie jars ;). It comes down to doing your research and choosing your options carefully.

  21. Hey Neil thanks for sharing your experiences. I hope not to make the same mistakes during my own ventures. Your posts have always been a pleasure to read, even if it’s not always been a pleasure for you to write about the bad times. Thanks again.

  22. I think the best way to learn is on your own mistakes.It makes you stronger.

  23. Thanks for sharing your mistakes so candidly on the blog. I can’t tell you how much of a learning experience reading your blog has been (I am a long time reader…not an avid commenter though :)

    Btw, are you still with ACS ? And was Pronet different from ACS or an arm of it ?

  24. I am glad I read the whole post, from first glance I was expecting your million dollar mistake to be that you got married and she took you for a cool million. LOL ;)

  25. Thanks for sharing Neil. For me, your post couldn’t come at more appropriate time. 2 months ago I hired a contractor based outside of the US to create a SaS web application. I didn’t spend anywhere near the money you did, but I got to see a working demo of the app yesterday and the best word I can use to describe it is: craptastic.

    It wasn’t the contractor’s fault though. I realized I made many of mistakes you had made. I didn’t ask the right questions in the beginning, and due and the 10 hour time difference and my own laziness in picking up the phone, communication wasn’t great.

    I was also trying to do things “on the cheap”, which isn’t bad in itself–but requires a lot more due diligence to make things work.

    Even though I’ still dealing with the results, comparing notes, I somehow can’t help finding my mistakes hilarious. Thanks for the inspiration.

    • That’s the problem when your outsourcing your work… you need to have clean and clear communication. Especially if you’re looking to build something extremely specific, which most people are.

  26. That is quite a lot of experience packed in quite a small amount of time. And expensive one too!!
    I have had issues with outsourcing my development work to third party. But then it allows me to get my work done at low cost. If you want full control and want things to be done under your supervision , then one should hire programmers in US.
    But does a start up without any funding has that much money ?

    Finally it comes down to combination of hard work , perseverance and luck.

    • Luck will be something you’ll automatically see during the process in your journey. Don’t expect it and be surprised when you see it. You don’t need funding, but if you’re looking to do a big project, you might want to consider it.

      • If you add luck and attitude together, you will find success. But people who really stand out achieve their success by knowing the right time and the right way to take advantage of their luck. Successful people are not ones already blesssed with good luck, but they are the ones who know how to turn bad luck into good luck.

        • People can get good luck any time and any where. The people who actually get the good luck are the ones who continuously expose themselves to and with the right people. Most people don’t get themselves out there which is why they don’t necessarily experience that kind of luck. It’s like a numbers game.

  27. Great post. I can definitely relate to a lot of what you went through. I’m a serial entrepreneur, and I find it difficult to stay focused on the business that works. My business partner and I are constantly cooking up new businesses. I try really hard not to give into the urge of a new idea, but it’s part of my makeup as an individual.

    Thanks for making me realize that I’m not alone.

  28. Glad you learned from your mistakes Neil

  29. Awesome post. Thanks for the insight and transparency. Also, I would love to get some insight from you on how you were able to take ACS to a cash cow. I currently manage my web consulting business part-time in addition to working for a large corp. I do ok with a handful of clients, but my goal is to grow it and run it full time. Any advice would be helpful. Thanks! ~ Mike

    • I spoke at a lot of conferences and did a lot of cold calling. Something most people aren’t willing to do. When you do the things others wont do, you’ll have the things others won’t have.

  30. Great insight Neil! As a young entrepreneur it is nice to see the mistakes and the nitty gritty before it happens to you!

  31. Neil,

    This is crazy, i wonder how you were able to cope during, i mean the pressure must have been crazy with the bank and all,maybe not too much with your family members.

    But i think even though we all learn and try to avoid mistakes like this, the fact is that we are probably still going to make a mistake in our entrepreneurial journey that will be costly because i personally think it is the entrepreneurial mindset, the ability to see an idea and stick to it, sometimes it works, sometimes it doesnt, we just have to keep going or moving.

  32. Neil,

    Thanks for sharing – awesome insight. Honestly, I’ve done the same. After getting Spheric going (same deal – cash cow) I started my hand at “Angel” investing.

    After 2 years and a few companies just “not working out” – all said and done (so far) – I’ve lost over $100,000.00. Here’s what I’ve learned.

    1) Ask “Who’s the Entrepreneur” – cause it’s not me (they need to be hungry, disciplined and focused).
    2) Get quality deal flow. I invested in friends within a small geographical area. Deal flow sucked – so did my investments.
    3) Invest in yourself. I get 50x my investment reinvesting in my current venture (Flowtown.com) or other companies that I’ve invested in w/ traction and growth.

    Long story short – I’m not doing any more deals (high risk equity) [after this month that is ;-), leading an Angel round right now, closing this week)] and instead focused on hard cash ROI ($ in, $ out).

    my2cents.

    DM

    • Thanks for the input Dan. It’s just weird how somethings work the way they work. Sometimes it’s hard or even difficult to imagine the amount of success that comes out of something that was such a failure.

  33. It depends on what you venturing in, but obviously in this digital world, you will not be successful without a successful web marketing…

  34. Neil,

    Oh man, I’m sorry – I couldn’t help switching between laughing and having an ‘Aww’ moment!

    I have to say though, good on you for keeping on going. It’s usually just after crossing a point at which most people stop and fail that those who are successful find what clicks and works!

    I was VERY taken with your first issues with Fruitcast.

    When I started outsourcing I was almost too nervous or worried of offending to ask the right questions – how much time am I getting for $$$ per day and who else are you working for. Once I got over the issues of how much money I was wasting, I changed my approach totally. Now, although friendly and fair – I drive a hard bargain and demand daily logs of what’s been done by those who work remotely from me – it’s the only way to ensure they keep up a steady flow of work!

    Keep on stepping forwards Neil!

    SAT

  35. But Neil, because of all this experient now you’re a success. Give thanks to the guru of learning by mistakes. Ours! we may be going in the same troublesome process too! To be success like you now is still far away.

    • It’s a journey I’m sure, but that’s exactly what you should cherish. You’re learning experiences that you’ll be able to have for life. Stop and smell the roses once in a while during the road to victory.

  36. Hey Neil,

    I have a question for you…

    How do you deal with losing that kind of money?

    I know you’re supposed to keep moving and go into the next venture but damn dude a million dollars down the drain…

    Please give me some advice on how to deal with losing money in ventures, keep it moving, and what you did about it?

    Thanks again for this post!

    • It sucks! People would want to save themselves from loosing money rather than push themselves to make more. The way you deal with it is by keeping the end in mind. The reasons why you’re doing it. Use leverage from what ever you’re motivated by.

  37. Another great post, Niel. As an entrepreneur struggling for every inch of market terrain, I also found it inspiring.

    In the future, would you consider writing a blog post about Crazy Egg, and how that business was hatched (pun intended) over the course of a “few years” as you briefly mention in this post?

    I’m sure other readers and I can learn as much if not more from your successful businesses as from your business failures.

    Thanks for writing this,

    Matt

  38. You know what they say Neil; what doesn’t kill you makes you stronger. I’m sure you came out of that experience a wiser man three times over. You seem to have bulldozed your way through your problems with nothing but sheer determination to succeed against all odds. There’s a lesson here for all of us; wonder if we would need to lose a million dollars to learn it….

  39. Awesome and I have been burned but on a much much smaller scale. What I liked most about the post is that you kept the weight on yourself, that is the measure of success. I still want to point out how this guy did me wrong etc but the real GEM is to see what role I played. Excellent thanks

    • Right, and it always comes down to how you react to the event. Everyone gets burned sooner or later, but if you have the ability to react to it in a way where you can still move yourself forward, well then you’re on the right track.

  40. PCB Layout Services :

    In PCB business for example, you need to follow up with customer for at least couple of years before your potential customer sign up with you.

  41. Mine was over a quarter million dollar mistake. Outsourced programming to an incompetent team that had never built an application in flex (http://almerblank.com), my lack of experience, and getting into business with friends.

    It all adds up to an expensive MBA without the certificate. But it did not stop me from losing another $40K the following year on another software startup! I thought I had learned enough lessons but apparently there were a few more I needed to notch on my belt ;)

    You gotta keep plugging away despite what people say!

    Thanks for the post…

    • Yeah, you’ll probably loose much more, but as long as you can motivate yourself to keep pushing yourself forward, you’ll eventually make a ton more to out weigh your losses.

  42. This is Hiten, I am Neil’s partner in crime.

    We went through these failures together and the number one thing that helped me get through the really “hard” times was the fact that someone else (Neil in this case) was also in the same boat as me and feeling the same things, at the same time.

    Therefore, each time we failed we were able to hear each other’s perspective, learn from the experience and get the courage to move on.

    Hiten

    • It is clear now that Neil why Neil was able to succeed in business. He has the perfect business partner. Once you are able to support yourself in these kind of situations everything will be fine. I am glad for you guys.

  43. Great post, Neil. Just came across your site and I will be back. Great insight into your experiences and the challenges that you have faced. A lesson in perseverance and determination for us all. Also admire your your activity on your forum here. Gives you a lot more credibility in my eyes as someone who cares about what he is talking about, and not just throwing something up to drive traffic. Thanks!

  44. True entrepreneurs do what ever it takes to become success and then never give up, because they have to succeed. They put it all on the line and have nothing to fall back on. Here is an example of what I mean by this. It takes place back in the time of the Roman Empire. The Romans would travel to other country to conquer them. They would land their ships on the shore and then unload everything. The generals would then order, that all the ships be burned. This was done to send a message to the soldiers. The massage was, your either going to die here fighting or conquer the opposition in order to go home. This is the same way you have to view your online home based business. There is no other answer but to succeed.

    • The do whatever it takes motto is easier said than done. If you can go ahead and actually incorporate that into your mindset, you will find yourself in a position that helps you succeed. Remember, that’s not all it is though…. there is the whole actually doing it part.

      • To improve your rating for these principles, set a goal for the improvements you need. Develop a plan and take action on it right away. As you change your mindset, you’ll quickly see your business results, your daily schedule and your lifestyle being transformed as well.

  45. Thanks Neil for sharing your mistakes, not everybody has the courage to expose them, but let’s move further: learning from the mistakes of others can help you to avoid them, but I’m far more interested on how you made it to come out of that bad situation. I mean, which was your attitude, your mindset ?

    Thanks in advance

    ciao
    alexander

    • Alexander… great question. It has to do with focus and consistency. If you want to be successful at anything, you need to be consistent. You need to work hard. Even when times are tough and you’re in one shit of a situation, you need to allow yourself to let yourself focus on the end result. Keep pushing forward, even if you’re continuously being pushed back.

  46. Yap, keep on pushing yourself and don’t even stop if you see small road block here and there, cross over it and do it smartly.

    • In any journey you decide to take on, you’ll encounter a few if not several different road blocks in the way. Don’t resist or try to force through the blocks, figure out a way to go around them.

  47. Never say stop until you get your desire target!!!

    • Exactly! That there is basically the definition of someone who is persistent. A keen and observant business person knows the level of persistence necessary to become successful.

  48. All of us make mistakes. What I appreciate of you Neil is your openness towards them. Analyzing our mistakes and learning from them is a big step towards success.

    • Making a mistake can be a splendid learning experience. Sometimes we have to mess up to learn something and have a reason to ask for help.

    • Well it’s just like when you test out new things on your blog or website, you’ll have many many failures. Things that are supposed to work but don’t. Do you just stop and quit or do you keep on testing to see what sticks. In the bigger picture of your career, it works the same way.

  49. did you take legal actions against your former employees in Vision Web?

    You have a good partner because you stick to each other despite everything. Or is he?

    • We both share the same interests and goals and we both lack something the other ones has a strength in. Two qualities that can make one hell of a partnership.

      • Good for the two of you! But then again, with all the ups and downs you’ve been through, it’s admirable to see both of you still doing things together.

        And before I forget, the BIG MISTAKE image above put a grin on my face.

  50. Jonathan Kelero :

    Very Interesting Article! Just curious, how did you get started with your business? It seems like from all your business you’ve started, your consulting business seems like the cash cow and what made you rich. Am I correct?

    • The consultant portion of my business was definitely something that put me on the map, but if it wasn’t for the multiple speaking arrangements, meetings, conferences, I wouldn’t have gotten to where I am at today.

      • Jonathan Kelero :

        What kind of speaking arrangements, meetings, conferences did you get involved in? And what is the best way to get involved in these? How do you get started? I am sure you met a lot of new clients that way.

        • Start going to any and all conferences you hear of. Talk to the speakers, the people that put on the event and network yourself. Figure out what you can provide an audience that others can’t.

  51. I guess more exposure and more involvement into these kind of activities are definitely helps

  52. Great Article! I really like the design of all your sites including AES SEO, KissMetrics, and CrazyEgg site! Who developed the sites?

  53. I like your post! It really opens up my eyes. What do you think of affiliate marketing? Is there a lot of money to be made? Do you or your business focus on making money through affiliate marketing online? I hear there is a lot of money to be made, but I am not sure how.

  54. As the saying goes: “Success consists of going from failure to failure without a loss of enthusiasm” This is really true for you Neil. If you had lost all hopes at the moment these incidents happened, you would never have been able to be in the position you are at the time being. The one thing which i find extremely negative is that the people whom you gave a work, a place to live and even supported financially turned out to be real frauds. This shows that money can indeed turn people into sad human beings. Anyway, as usual, this is a superb post.

  55. Neil, Thanks to Twitter because otherwise I wouldn’t know about you. Reading your story is very motivating. Sounds like things are going well for you now and I hope it stays that way :)

    All the bests,

    Arsham Mirshah

  56. I got greedy too! I invested in HYIPs a few years back and gotten burned by them. They were backed by great testimonials from lots and people and have “strong financial background”. In the end, its just another fly by night company. From then on, I’ve learnt to exercise caution and do due dilligence.

  57. We all make mistakes. If we are lucky the consequences are not so rough to us, but if luck is not with us… Well. You know yourself what can happen. But it is impossible not to make mistakes. In my opinion we all do act not as well as we could.

  58. Neil,

    The real mistake is none of the above. As you could not have known now what you now know because of confidence or overconfidence. The problem is the lack of networking with people who could have given advice just like your last post of being born a Patel.

    Thus if you were really wise you would have made your mom your chief adviser on all investments and make a well thought out calculation even if she knows or knew nothing about the business. What she does have is what we call common sense here.

    Thus when I reach out to a blogger, it is because I see or feel something that can play a critical role in a new project. Thus energy.

  59. We learn from all our mistakes. But one million, it’s an expensive lesson :-)

  60. Lamination Montreal :

    Wow, that is one harsh story and I’m suprised you stayed positive throughout the whole story.

  61. Online Profits :

    It’s refreshing to read a balanced view of life in business. We will all make moves, which in hindsight we would do differently given the chance, but “you can’t make money and excuses at the same time!” It’s about taking the positives from those situations and moving on as you rightly say… Many are afraid to admit their failures even to themselves, let alone write about them for all to read, so I commend you on this… My view is that success and failure are two sides of the same coin, both are currency…
    Thanks for a great read.
    Brye

  62. I was litterlay in a meeting yesterday about htis same issue my client wanted to go in a direction 180 degrees. They were conserned about the current market and were afraid that the market isnt there for textbook rentals anymore. So they wanted to start selling widgets. I couldn’t believe it, dig in and look at your ROI I said.

  63. Seeming like expanding into different ventures was your main fault. I am a true entrepreneur and never give up even though I am not that successful. I keep trying new things.

    But this is a good lesson to learn because I always said as soon as I start generating a cash cow I would expand into another venture.

    Good article my man.

    Thanks,
    Brian P

    • It’s always good to try new things Brian, but you should focus on building and making your 1 thing super successful. Slowly dip into other avenues as you begin to reach a return.

      • I agree. Concentrate on thing at a time since their are so many distractions out there. Once you master this move onto the next project. No harm however, making notes on potential projects that you would like to do in the distant future.

  64. Hi Neil,
    I like your post……..its really interesting and eye opener for many new entrepreneur.
    As i have understood we must all do Risk management before taking any decision. Mistakes then have a less impact and it will be much easy to overcome these issues.

    Best Regards
    Chandrakant from India

    • Mistakes may or may not have less impact… but you shouldn’t focus on that. The idea is to fail forward as fast as you can so you can just do it and make it happen. The quicker you move forward, the faster you’ll come across success.

  65. Great insight Neil! As a young entrepreneur it is nice to see the mistakes and the nitty gritty before it happens to you!

  66. Thanks for the honesty. I suspect that very few true entrepreneurs ever did well without making mistakes in both judgment and finances. To a point, I think it kind of comes with the territory. I know I’ve certainly made my share of mistakes (not a million dollars, but probably several hundred thousand over the last 10 years).

    The trick is to learn all you can from the mistakes and prevent it from ever happening again.

    • The idea is to learn from other people’s mistake so you won’t waste time. It doesn’t always work that way, but at least understanding someone else’s mistake allows you to understand how you would be able to recover.

  67. When i read your headline above and saw the photo, i thought that your big mistake was to get married as the photo includes a couple getting married.

  68. Hey Neil,

    I think we can both agree that mistakes are just a part of failure, but what’s interesting about you is that you made them and moved on quickly.

    Many people make mistakes and never move on. I know from experience that’s happened in my personal life. Just wanted to say thank you. I’ve read most of your recent posts, this was the best one yet!

    Sincerely,
    Jay Jalodomisa

    • This is true… too many people spend way too much time dwelling on what it would be and only if compared to just moving forward and making it happen.

      You’ll begin to notice that being what separates you from everyone else.

  69. Sağlık haberleri :

    I had a similar experience when I diverted from my core business and ventured into New one.

  70. We can all learn from this article. I believe you have improved yourself tremendously.

  71. Hi Neil,

    Interesting perspective on your ventures. I know it is not always easy to learn from the mistakes, especially in the startups domain where every other challenge is new and different. Consciously writing down what went wrong and hoping to learn from it never works (at least for me). The learning has to be at the sub-conscious level. If you do enough mistakes, learning will catch up automatically!

    -Paras Chopra

    • Usually the biggest mistakes you make are the ones that make or break your career… if you can bet past it, you can make a huge leap forward. Fail, and you’ll hit rock bottom very hard.

  72. Neil,

    As always, great post and thanks for sharing with the community. Certainly, learning from others’ mistakes is the essence of knowledge.

  73. Neil,

    Business knowlege is something that many people don’t aprecaiate but that is the knowlege that keeps you out of jams. It may not help you so much in the day to day stuff but it will help you make sound business decisions…

  74. mma pound for pound :

    thank’s for the sharing neil, i will learn from your mistake, it will help me

  75. accepting mistakes is one way of reaching the success as soon as possible. thanks for sharing this experience. keep sharing…..

  76. One of the biggest challenge after a mistake is getting back up again.

    ” and we took money from our family members and the bank.”

    Were you confident (at the time) that it was just a cash flow issue (i.e the company had solid biz model)?

    Or was the goal (for the new funds) to fund new ideas like siteblmp?

  77. Wow, now I really can understand what “learning the hard way” really means.

    The important thing I guess is that you bounced back to become more successful then ever.

    • It’s always your biggest and worst mistake that ends up helping you move forward. Then after you make your mistakes, it’s how you relate that mistake to your head…and how you’re able to leverage it to push into the right direction

  78. I had heard about you from around the web Neil but didn’t know that you struggled like this to get your start. Thanks for the share.

  79. thank’s for the sharing neil, i will learn from your mistake, it will help me

  80. brandon alan scofield :

    wow, great story, but I really hope you describe the detailed of your investment, I really want to know, how much money to spend to contract software developer, how much money to set up server business etc , well that would help us if we want to found such business. :)

  81. Looking at your post’s picture and then with the phrase “BIG MISTAKE” is rather funny. Somebody having commitment issue? LOL

  82. Wow when I saw your previous posts, I never realized that you had a lot of mistakes under your belt that you’ve learned from. I’ve learned from my mistakes too. I guess when one of my businesses goes big, I’ll write about my mistakes too to help everyone else like you did. Thanks Neil!

  83. True entrepreneurs do what ever it takes to become success and then never give up, because they have to succeed.

  84. Inspiring Post Neil. Enjoyed it very much. I am originally from Royse City Tx which is just a few miles outside of Rockwall. Sorry for the luck. If it makes you feel better, Rockwall nerds have been getting beat up by Royse City rednecks for years. Used to be fun to watch growing up in the 90’s!

  85. After reading this post…this has lifted my spirits..

    You know what…I have been in a very similar situation……but now already in the mode of recovering….

    But yes you have to keep trying….not let yourself go down….

  86. Great insights!

    Being a noobpreneur, I somehow feel the more I know, the more I fear taking the initial steps.. isn’t knowledge really fragile; and what really matters is to never quit?

  87. A great 45 minutes thinking about your post, story & writing talents! Nice way to start the holiday weekend.

    Now for a glass of wine and to ponder… any way I can avoid the BIG mistakes?
    NO!
    They are an indicator of where my skills are deficient in ways needed to BE the successful me, successfully living my life every day.

  88. Preventing features to come onboard and keep delaying the launch, knowing when to say enough is enough, no, cut your losses and start over is one of the greatest assets. If you’re going to fail better fail fast.
    I learned this the hard way with 400K loss last year myself…. damn people who are morons and won’t accept it lol

  89. Interesting post. Its hard when you’re trying to start a biz to not feeding from the tree until its been allowed to blossom for a while.

  90. Mistakes are part of business as nobody is taught how to do business. You learn only through trial and error. I have also made some foolish blunders in business and also paid the price for those blunders. Business is all about learning from mistakes and not repeating them. Kudos to you as in your case as you have not looked back and continued working towards your passion despite making some serious blunders. I salute your entrepreneurship !

  91. Yeah that’s right we learning from our mistakes and we should not give up.

  92. this is great post eva … we said in urdu ( “Girten hain shah sawaar hi maidan- e- jung mein, Wo tilf kya girenge jo ghutno ke bal chale hain”)

    Means :those who ride the horse to fight in the battle field have a chance of falling but how will those cowards fall who walk on their knees only.

  93. Hi Patel,

    Thanks for a great informative post with such vital information. I am gleaning from it. It certainly provides me some decision making ideas.
    Thanks for the post!

  94. Another problem that us small guys have a hard time competing with firms especially as big as Google that have unlimited funds and one move by them can slam our projects-businesses.

  95. You can never understand and communicate with your business partners too much.

  96. Hey Neil,what gave you the drive to keep on gong forward when hit with adversity?
    It’s a very interesting subject to know what drives people when others just give up when it’s too hard….did you just know you would eventually be successful?
    Thanks

  97. It all goes back to a simple proverb: If you chase two rabbits at once, you will end up catching none.

    But that doesn’t mean you can catch only one rabbit in your life.

    Chase 1 rabbit, catch it and then chase another one.

    What can I say, Man is greedy. The utopia of having both the rabbits doesn’t leave the mind even when you chose to chase just only one. It comes down to knowledge, experience, discipline and will power.

  98. Ankit Neerav :

    Hey Neil, I am a college student from India. I keep getting amazing ideas, one after another– really good ones– and that keeps me from concentrating on One thing at a time, I keep jumping from one great idea to another.. does it happen to you too? How do you/should I handle this?

  99. Dear Neil, thank you for sharing your story with us. I had similar problems, like you had. But the main point as you said is not to give up.
    I’m still looking for some ideas. We have a good development team. And will glad to work with someone with a good idea.
    Would you recommend any website to find such partners?

    I didn’t find any post about finding good idea. Do you have such posts?

    • Roman, I don’t know of any websites that can accomplish what you want. I think the best strategy would be to reach out manually and create a large network of individuals that would be willing to help you out in your endeavors.

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