My Top 5 Profit Leeching Online Business Mistakes
Part of my mission here at The Smart Passive Income Blog is to teach you not only how to succeed online, but also how not to make the same mistakes as me. I’m not happy when I’ve learned I made a mistake, but I am happy to share them with you.
Every businessperson and blogger will have their own stories, here are mine. I hope you find them useful.
1. Not Starting Earlier
I’ve said this before and I’ll say it again: every day you don’t have something online for sale is a day of potential profits lost. This may seem obvious, but what isn’t obvious is how much money that could actually be.
I started selling my eBook study guide on my exam prep blog in October of 2008. In my first month, I had earned a total of $7,906.55. Now, please understand that I had this blog up and running for a number of months beforehand, which enabled my site to rank high in the search engines, as well as help build a community of loyal followers.
Anyways, my income kept growing each and every month since the launch. It went from $7,906.55, to $9,782.89 in November, and even peaked in March of 2009, which alone earned me a total of $30,328.48. I felt very lucky to have landed on a great niche and create a product that proudly and honestly served it’s consumers. However, let’s rewind for a second and get into my head.
I had launched my eBook in October of 2008, but it was an idea I had in my head for over 6 months. As soon as I knew traffic was coming into my blog, I knew that I had the potential to write and sell a book for this market – but I didn’t. I waited 6 months to finally do it, and it took 5 of my blog readers to tell me they would pay for a study guide if I wrote one myself. 5 people had to tell me!!! No one should of had to convince me. I should of convinced myself.
Here’s a screenshot of some of those generous comments:
If I had launched that eBook just 2 months earlier, I would potentially have earned $50k to $100k more, just from those two months! Maybe instead of peaking at $30k, I would have peaked at $50k or even $75k in March of 2009.
It’s hard to understand exactly how much more I would have made, so let’s take a look at similar scenario that can provide us with some concrete numbers: compound interest and saving for retirement.
If you’re 25 years old, and you make $50,000/year and contribute 10% ($5,000) a year to a 401k plan that earns 9% interest, you’d have $2.3 million in your account by the time you’re 65.
If you wait just 5 years (what’s 5 years going to do, right?), and contribute the same amount each year getting the same rates, you’d only have $1.4 million by the time you’re 65. That’s almost a million dollars less, just from starting 5 years later.
That’s $456 a day!
If You Haven’t Started Yet – Don’t Worry!
Although I wish I had started earlier, I’m glad I didn’t start later.
The truth is, we can’t go back in time and there’s no use in beating ourselves up over not starting earlier, no matter what it is we wish we did. You are here now, and you have the option to do whatever it is you want.
“The only too late, is tomorrow.”
2. Under-pricing
When my first eBook was completed, I had a hard time trying to decide how much I should sell it for. I was scared of pricing my guide too high because I didn’t want people to be turned off by a higher price point. So, I began selling my guide for $19.99.
There were other guides in the market (all hardcopies), which were anywhere between $50 and $125, so I thought this was an excellent price that would definitely catch people’s attention. Plus, since my guide was an eBook instead of a hardcopy, I figured they wouldn’t be willing to pay as much as a hardcopy anyways. As a side note, I didn’t sell physical products because I wanted to keep my business model as passive as possible. Printing, packing and shipping products definitely is not a part of that model.
I was selling a decent amount of eBooks, but then I received an email from one of my customers saying that he thought my guide was priced way to low for what it was worth. He emailed me to thank me for making the guide virtually free, but he also added that if he were in my shoes he would sell it for more. Again, it took another one of my readers or customers to get me to take action. I immediately updated my ad copy and sold the book for 33% more, for $29.95.
Within the same time span, I didn’t sell the same amount of eBooks – I had sold about 30% more! The higher price attracted more customers, which was a weird thing to me, but it make sense. When people shop, they immediately conceive some kind of value in their head about a product just based on the price alone. If you went shopping for furniture and saw a dresser for $5.00, you’d probably think something was wrong with it, or maybe it was cursed or something. Well, when I raised the price of my eBook, it was seen as having more value.
Pricing is always a difficult subject for people, especially for electronic products that are often free to make. Most physical products are priced based on production costs, materials, labor, overhead, etc., so it’s hard to come up with a price point for something like an eBook. Looking back, I probably lost out on a few thousand dollars before I switched the price. The crazy thing is, I probably could have raised the price even higher, and potentially have earned much much more.
Don’t sell yourself short.
3. Taking the Lowest Bid
Back in late 2008, after my exam prep business was doing really well, my buddy and I decided to go into the iPhone app business together. We had a lot of novel ideas and decided to outsource the development of the applications via elance.com.
We received about 15 bids for our first application, iPopit, which ranged from $3500 to $6000. We looked at all of the individual bidders and read each and every one of their profiles and reviews from other clients. To our amaze, the one with the best reviews and the most feedback was the profile that bid $3500.
After a short interview with the company’s owner, it seemed like we had a great match, so we awarded that company the project. We were so excited to get started.
After a couple of weeks we checked to see how the app was coming along, and it seemed like everything was going well. We saw a video of what it looked like, and it wasn’t close to being finished, but we were totally satisfied at this point. We couldn’t wait to get the final product into the app store for sale as soon as possible.
A month later, we received a completed “beta” version to test out, but it didn’t really meet our standards. We sent the developer a list of features that seemed to be missing and the changes that needed to be made.
Two weeks later – ” still working on it.”
One month later – “we’re almost done, still working on it.”
Another month later – “it will be finished tomorrow.”
Then tomorrow came – “give us one more week please.”
We were so upset! An application was supposed to be in our hands and in the app store 2 or 3 months ago at this point! All I could think about was: every day you don’t have something online for sale is a day of potential profits lost.
Apparently, they weren’t good at going back and fixing things they already coded. It was more complicated than starting over, and I wouldn’t be surprised if that’s what they ended up doing, considering how long it took them to finally get us the application we had specified. We went though a couple more rounds of revisions, but better managed our developer this time, and we were finally able to get a completed app that we were satisfied with – 5 months after awarding the project. Ridiculous.
We learned a a valuable lesson here: You get what you pay for.
If we had awarded the project to one of the higher bidding profiles, the application would have probably been done a lot faster and the end product may have been even better too. Although the team we picked had a lot of raving reviews, after closer investigation, they never completed an application that was quite like ours, with animations, use of the accelerometer, and timed scores. Their low bid came as a result of really wanting to try a more complicated application. Unfortunately, this was at our expense.
If you’re taking bids on websites such as elance.com, rentacoder.com, or odesk.com, be aware of the lower bids. They are low for a reason.
4. Not Testing as Much as I Should
I think I’ve dedicated 4 or 5 posts on this blog just to testing and how important it is. I’m not going to go into detail about testing because I think you get the main idea: in order to optimize your online business or blog, you should be running split tests 24 hours a day, 365 days a year. Just a half a percent difference in sales or lead conversions can add up to hundreds of thousands of dollars over time.
5. Not Adding More Products
This one is huge.
Going back to my exam prep website, you already know I launched a successful eBook. A few months later, I also added an audio guide, which I sold separately and in a package with the eBook at a discounted rate. It was a hit, and it’s exactly what skyrocketed my monthly income to averaging nearly $25,000 the months prior to the new version of the exam coming out.
Looking back, I could have earned so much more if I created videos to go along with my existing products. It would have been really easy too. I could have even used the audio I already had and sync that with a power point presentation, for example. I sold nearly 2000 eBook + Audio guide packages at $44.95. Imagine adding video in there and selling it at $69.95.
Hmm…$90k vs. $140k.
Or how about selling it at $99.95 (to go along with mistake #2)?
Hmm…$90k vs. $200k.
And then adding a webinar and two teleconferences at $149.99?
Hmm…downpayment vs. buying a house without needing a loan.
Get the picture?
There are a couple of important things to know that go long with this:
First, people who buy from you once are more than likely to buy from you again. You can add products to your arsenal, shoot an email out to your existing customers, and you’ve got yourself some sales, for sure.
The second thing is that bundles sell. Combine two or more products together, offer that at a discounted price, and immediately your potential customers turn into actual customers because they notice something is “on sale.”
Not adding more products was a costly mistake.
Mistakes Are A Part of Life
Your business or blog grows with you over time, and as it grows you’re going to make some mistakes, just like me. If you can follow these three rules, you will be successful no matter how many mistakes you make:
- Learn from others so you can avoid making the same mistakes as them.
- Put away your pride and admit to yourself when you do make a mistake.
- Learn from your mistakes so you’ll never repeat them again.
If you would like to share any of your own mistakes that you have made as an entrepreneur or blogger, I’m sure the rest of the community would be grateful to learn from your experiences. Just leave a comment if you wish.
Have a great week everyone!
p.s. if you like this post and wouldn’t mind sharing it with your twitter followers, please click the retweet button at the top! Thanks! Here’s to your online success!
Posted on : October 4th, 2009
Related posts:
- 3 Types of Affiliate Marketing Explained, And The One I Profit From
- How to REALLY Profit From Your Blog
- Pat’s Three Laws of Business and Success: Law #1
- Cool Things We Can Learn About Internet Business From Analytics
- Why You Need A Business Banking Account, And How To Get One
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33 Comments (Click Here to Leave a Comment Below)
Great post. Thank you. You hit the point. Waiting is the worst mistake of all. I also learned this lesson.
I agree waiting was the worst of my mistakes. Another one is the lack of perseverance for me. I’m working on it and progressing everyday.
Great list post, see you around at pb.com
Thanx for a nice post. I can relate to not starting early and not testing enough… I need to start split testing things on my blog too..
BTW, I really think you should invest your 10 percent into something different than 401k plan. I’d be more risk taking and go to stocks (esp. NOW, since it’s time for the rise of stocks).
I have actually invested in virtual stocks, and I’m now almost 70 percent UP, and half a year ago I was like 40 percent DOWN.
Or you could invest in businesses (like a venture capitalist, small scale though, you could invest in online projects you think can work out and take a stake in it)…
Whatcha think?
Cheers
Hey Adrian,
I’m currently investing in a Roth IRA, as well as individual stocks and mutual funds as well too. I hit it big this year with some of the banks, BAC to be more specific, and I’m pretty much up 400% since my investments. Of course, everything I invested a couple years back is down, but I got time so there’s no need to worry or sell.
There’s definitely a lot of ways to invest money, but I think the best thing you can do is invest in yourself and your education to get you to where you want to go. Cheers!
Thanks for another quality post. You have shared some great information learned through your own mistakes, which is always the best way to teach others. In particular, this post made me wake to the fact that I need to try some split testing on my own blog!
Dustin, thanks for your comment. I’m definitely not perfect, no one is, but I just wanted to show everyone that anyone can get to where I’m at with just some quality information and some persistence to back it up. Please keep me updated on how your tests go!
Thanks for this post, Pat! It’s extremely relevant to my current situation since I’m on the verge of getting into the scam-ridden, seemingly oversaturated and quite frankly daunting world of making money online. I have been researching the subject for a while now but I guess it’s about time to take the plunge.
There’s definitely a lot of scams out there, so please be careful when selecting a “system” or something that may seem kind of fishy. When I was starting out, I really listened to Sterling and Jay from internet business mastery podcast until I felt like I could trust them to provide me the information I needed to succeed. If there’s not real people that are putting themselves out there behind the “system”, I’d be weary. Good luck!
Thanks, this was a kick in butt. I have been dragging my feet on really launching a new product and now I have the fire lit to finish it.
Doooo it!!! Glad I could help, you’ll get there, just stay focused and keep chuggin’
Hi Pat,
These are great tips for any business owners. I love it and I got to start applying some of them to see the results.
Cheers,
Vincent
I actually went through #3 in the past few months. I hired out to a developer to develop a customized theme for my site and everything was going along great. That is until I needed some things fixed after it was completed. Six weeks later, the developer will no longer respond to any of my emails.
PFI, sorry to hear about your experience. It seems like it’s either hit or miss these days with outsourcing. If you find the right people, it can help your business SOOOO much, but if you find the wrong people, it can be a real drag and time waster.
You absolutely get what you pay for when you hire through bidding sites. It’s sad to see all of the buyers wasting their time and money on cheap bids that will give them junk content that will make their sites look ridiculous. I’ve never been the lowest bidder and I never will be, but luckily there are enough buyers out there who recognize that the lowest bid isn’t the best bid.
Great post, Pat. The poet Rainer Maria Rilke said that “Fear is the dragon that guards our secret treasure.” That probably covers at least three of your top five, but especially under pricing. It’s hard for most people to put an accurate value on what they do. During my days as a professional musician it took me several years before I had the guts to ask for more money when booking a gig. Nine out of ten times the response was, “No problem.”
Will, I never heard that quote before, but it’s awesome. Thank you for sharing it with us.
Wow Pat , Totally awesome!
I’m planning my first paid eBook for sometime end of this year, already working on rough drafts and ideas and I’m going to make sure it’s going to be great. I like your idea of price and what a difference it can make. I think I’ll probably do something along the lines of makin it cheap for the first 50 copies and then the price goes up.
I know about design costs for applications, a friend and I are having one made , the first quote was 13500$, the next one $6000 and the one we chose to go with is $1500. Neither of us have the kind of money for the other quotes, so it is a bit of a gamble, but it seems they are brining their side so we will see how things turn out.
Thanks for the post!
Cheers
Diggy
Diggy, one tip I just heard from somewhere – don’t feel like you have to make your eBook PERFECT before you sell it the first time. If you try to make it PERFECT, it will never get done. My eBooks weren’t perfect, but with the feedback from my customers, it became a perfect product in the end that all of my future customers could enjoy and benefit from.
Tops marks for this one, Pat. There’s a lot of relevance for my field (translation services) too, even though it’s quite different from what you do. It’s really sad to see the results of web site, product brochure and user manual translation by the low bidder. The old saying “you pay peanuts, you get monkeys” usually is true. Sadder still is the reluctance of many to ask for the real value of their service in payment. The mentality on the bidding sites is so bad sometimes that I have seen someone submit a low quotation, miss out on a contract (because the client didn’t want a cheap monkey) and then go even lower next time because the loser figured that the problem was the price being too high. I have found that the demand for services often increases sharply with the price, or at least their is much less discussion about the money and more focus on requirements. Good all around.
Kevin, I’ve experienced the same thing with low bidding on the bidder’s side. When I was working at an architecture firm, when there were very few projects going on, we bid on some projects at half or even below half of what we would normally charge, just because we didn’t win the last project. A higher price will probably show that you do better work. Very nice comments Kevin, thank you!
It’s nice that you reveal your experiences so that we don’t have to go through the mistakes.
I had though some ideas similar to you but how an amazing feeling it is to know that somebody else thinks the same. It justifies being on the right track. I am sure everyone feels the same.
This post is amazing Pat!
Thank you for sharing your mistakes. You can often read what works, but less often what doesn’t. I started my business two years ago, and while it is going to the right direction, I had lot’s of mistakes. And probably the biggest one was that I didn’t ask small business owners about their own mistakes when I started out. I only concentrated on the how-tos, which was useful too, but to me more important was to learn how not to.
Great post Pat,
Those are very important lessons you’re teaching us.
Hey Pat,
Great post, thanks as always.
Regarding the split-testing, do you split-test on the blog? Not sure how you could split-test non monetized content like that where there isn’t a really straight foward measure of conversion. Bounce rate, maybe?
I just got up a niche website/blog up that I’m running some tests on to examine the viability of an ebook I’m thinking of writing. I’m wondering what your conversion rate is like for Green Exam Prep Academy? Not sure what conversion rate would give me the green light to go ahead, buckle down and write the thing.
Julia
Hi Julia, I actually do a little bit of split testing on the blog, and yes it’s with bounce rates, and placements of certain items like the newsletter sign up box and stuff like that. I don’t do it much here on this blog, yet – but we’ll see.
It’s hard to put a NUMBER on conversions because it’s going to be different for each niche. For the people who visit my actual sales page from my blog, the conversion rate is about 1.5-2%. I’ll be testing some different types of landing pages soon, because even just a half a percent difference can add up to HUGE earnings in the long run.
Thanks for the info – I think that the 1%-2% conversion rate seems to be pretty standard across the board. Strange how the majority websites convert somewhere around that range, regardless of niche.
One thing I’m concerned with is traffic. The keywords I’m targeting have about 30,000-35,000 monthly searches total. When we’re talking about selling a $30 ebook, I’m concerned that’s not enough traffic to become profitable.
Do you see tons of traffic on Green Exam Prep Academy in order to generate all that great ebook/ebook+audio revenue I see in your monthly reports?
Hoping I haven’t picked too small a niche!
Testing has been the big one for me. I really need to test more. I think not starting earlier is in all of our mistake bags. If only I would have gotten in the game in 2000 I probably still wouldn’t have tested things much but I think I’d be in a better place today.
Talen, I agree – everyone can say they should of started earlier, but this is just a way for me to get people to take action instead of just wait for something to happen.
Now I wish I was starting blogs back in 1998, but again we can’t think about that. We’re here now, and we have the opportunity to do something now, instead of waiting 10 years from now and saying “I wish I did something in 2009!”
Cheers mate!
Great list post. I’ve subscribed to your blog and know I’ll be spending a good deal of time here. I’ve been in direct sales for 17 years, and it’s been a good run. But I need a change and a new challenge and blogging seems to be what I’ve been looking for. My sales business brings in a healthy passive income — just not sure I want to continue to do what I need to do to get that money every month.
Im a newbie in Online Business and i am still reading a lot on the internet about how to manage an Online Business
Great post Pat, thanks.
Number 1 in particular opened my eyes completely to the subconscious self-imposed barriers and hurdles I’d been erecting to prevent me from properly getting started on my own project.
I’ve found that when I’m a little unsure or nervous about putting something ‘out there’, as opposed to just getting on with it and benefitting/learning from the subsequent feedback, I’ll instead purposely bury myself away making needless tweaks and changes to the blog. The self-imposed illusion of everything ‘having to be just perfect’ before I can possibly start producing content has been the biggest thief of my time over last month or so.
In fact, the more I think about it, the more obvious become the various needless hurdles I’ve put. Time to start shooting from the hip a little more…
Thanks Pat!
Yes, I can see how #3 created a huge loss for you. I was involved in a similar situation where I hired a developer to design a software for the construction company I was working for and for going with the lowest bid, it actually created greater problems in our system which we ended up having to pay another company to fix the whole mess. So, lesson learned: Don’t always go with the cheapest bid. Complete the due diligence!
i am pretty sure that Online Business would be the next trend. With growing number of internet users, setting up an Online Business could give us more extra income.