According to the latest research statistics from the Small Business Administration, thirty three percent of all new startup businesses fail during their first two years of operation. During the first four years, the number of business failures increases to 56%. The primary cause is that most businesses take several years before they show a profit and investors seldom want to wait very long to see profits, so startup businesses often run out of operating capital and cannot weather the initial trial years. These are usually brick and mortar stores with a physical presence, inventory, and employees. Failure is also caused by wrong locations, poor management, bad timing, insufficient advertising, and fluctuations in the market.
For Internet businesses, the numbers are even worse. Regardless how long a business has been operating, if the owner is not getting paid a salary, producing profit and generating positive cash flow enough to pay taxes, then it is not a successful company. Here are the main reasons why 97% of the people who try to make money online fail.
- Limited Time – Many people simply don’t have the time to dedicate to starting and operating an online business. Most beginning marketers have day jobs that provide the necessary income to pay their bills and they have to take time away from their families and obligations during their “leisure time” to work on the Internet. Some actually rob themselves of sleep and work online well into the early morning hours. Working a business a couple of hours in the evening and on weekends leaves very little time for anything else and the conflicts created by this results in many people quitting or failing.
- Unreal Expectations – Many marketers believe that if they build a website, the customers will come flocking in. They believe they can get rich quick with little or no work. They have believed the lies about “set it and forget it”, “done for you”, and “autopilot” business models. The truth is a new online business needs to devote at least half its resources, i.e. time, labor, and capital, to building their customer base. Too many businesses spend all their resources on building their product, which leads to collapse at the second-round funding period. Investors back out when the profits fail to show up.
- Lack of Commitment – Starting a business online requires commitment. People have to stay with it in order to achieve results. There is a learning curve that goes with any job and the Internet demands that marketers constantly must read and improve their knowledge and skills in order to succeed. Those who think they can casually work a business in their spare time when it is convenient seldom achieve positive results or earn much money. Like any business, you get out of it what you put into it.
- Distractions – Succeeding online in any business requires long durations of concentration and sustained thought in order to complete projects and campaigns. Finding the uninterrupted hours necessary to do this conflicts with most people’s lifestyles. Most beginning marketers work day jobs and come home to a myriad of chores such as mowing the lawn, preparing meals, cleaning, taking out the trash, doing laundry, and spending quality time with family members. Even those who can sneak away to a home office find it difficult to work without phone calls, family noise, pets, and other intrusions. Too many distractions cause a loss in focus and limit progress.
- Lack of Focus – Too many beginning marketers buy too many programs and business opportunities and never give any of them their fair share of attention or a decent chance of working before moving on to the next sure deal. Having too many irons in the fire means that a marketer cannot concentrate their complete attention on one or two campaigns that will make them money. When their energies are deployed over too many projects, then their energy is weakened and their efforts in any one of them become limited and ineffective. Successful marketers learn early on to concentrate their focus and attention like a laser beam on only a few carefully crafted campaigns that will make them money. Quality of effort is much better than quantity of interests.
- Lack of Technical Knowledge – For many marketers starting out, the technical requirements for creating websites, blogs, and even participating in simple giveaway programs is intimidating and daunting. If they don’t know HTML or how to FTP files to their website, or how to configure their email client or autoresponder, then they are limited in their ability to make money online. Finding the right tutorials and having the time to study all the technical aspects for Internet marketing often is so overwhelming to beginners that they quit before they ever get started. Many could outsource every technical task they need done, but they chose not to do it.
- Information Overload – Perhaps the single biggest reason many marketers fail is due to information overload. There is just too much information available, and much of it is misinformation which causes confusion. Too many marketers buy every “shiny object” that comes their way, and they seldom even read the material or give the business opportunity a decent try. They fill their hard drives full of eBooks and reports, but never find the time to read them. So many would-be marketers get stuck in buying information instead of selling it and they collect information, but never read it.
- No Business Plan – Even the most basic business plan can serve as a useful road map to wealth creation. Every marketer needs a plan in order to know where he or she wants to go with their business. A good plan helps the marketer identify all the things that are relevant to their purpose and niche market, which helps to eliminate waste, make better use of time, minimize distractions and digressions, and to stay on track. A business plan is also necessary to raise operating capital from investors. The old saying, “businesses that fail to plan, plan to fail” is especially true for Internet ventures.
- No Mentor – Most people don’t have a mentor or coach because they can’t afford it during the beginning phase of their online business development, so they try to do it all on their own. This is a big mistake because the learning curve takes so much longer than if they hired someone with knowledge and experience to guide them and show them the proper way to do things. As a result, many beginning marketers get overwhelmed with information, wrong information, and so many business opportunity offers that they get confused and lose focus. A good mentor can shave months off the startup phase of any online business and help marketers become profitable sooner because they have been there and done it already. Marketers should find someone who is successful and copy them.
- No Support Community – Most beginning marketers lack the support of a community of like-minded people who have already gone through the same learning curve and are willing to share their knowledge and be supportive. The lack of constant support creates a lack of confidence and belief, which are major motivational factors, and this often results in a loss of momentum, confusion, loss of focus, and burnout. Once this happens, many marketers start grasping at straws and frantically reaching out for every business opportunity that comes into their inbox. This is called the “shiny object syndrome”, and it usually signals a downward cycle which leaves the marketer chasing empty promises and running in circles. All this could be avoided if the marketer would join a forum in their chosen niche and regularly participate in discussions.
- No Business System – Many people fail online because they are not sales people. They lack the knowledge and skill to present products or services and close deals. They don’t know how to research their market and sell, yet they try to run a business which is based on sales. How crazy is that? People who try to sell and get rejected over and over again often quit because it is too painful and frustrating. Successful marketers recognize this and try to acquire an automated system that does the selling for them. Those who have a working system in place with an effective sales letter, a sales funnel, a product delivery shopping cart, and a successful way of driving traffic to the sales page will certainly earn much more money than those who don’t. The online marketplace is all about targeting well-defined niches. Marketers must learn to define their potential audience with precision and select strategic ways to approach them with appealing offers.
- Limited Financial Reward – Most beginning affiliate marketers don’t select products or services that pay high enough commissions to produce profits very fast. Most commissions from Amazon are only 4% – 6%, and although Clickbank pays 25% – 75% commissions, the initial paychecks are usually spread out and small, which diminishes the financial reward and incentive to work hard at this business. Making money online often takes a lot of sales and a lot of time, and in the beginning, it can be quite disappointing for those who need instant gratification.
- No Effective sales funnel – Most beginning marketers don’t have an effective sales funnel in place because they haven’t learned how to put all the pieces of the puzzle together yet. A good sales funnel is vital to any online business because it does all the selling for them passively; giving instant and residual income, which continues monthly from high “backend” sales. Many marketers struggle to earn money online, yet they fail to create effective sales funnels right away which produce the income they seek.
- Weak or Complicated Offers – Many customers can’t tell what benefits they will receive by doing business with certain marketers. Either the offer is too weak and fuzzy or it is too complex and incomprehensible. Some offers are confusing, intimidating, and scary. Marketers need to articulate the reasons why anyone should buy from them and keep their offers simple, clear, and strong. The terms and conditions and user information should not be so overstated or protective as to scare customers away.
- Pricing, Packaging, and Delivery – Marketers need to test their products in order to sell at the right price point. Most products online today are grossly over-priced based upon the value of their content and the greed factor of the marketer. The sales funnels offer huge down-sell discounts as the customer leaves the site, plus expensive up-sell one-time-offers which come across as high-pressure sales techniques to many customers. Some marketers over-deliver, which tends to undervalue their products; too much for very little. If the marketers themselves don’t know what a product is worth, then how can the customer derive any sense of value about it? When the prices fluctuate so much from one marketer to another and one product to another, what real market forces are shaping the price point other than the subjective inflated prices marketers pull out of their hind pockets as a result of over active greed glands?
- No Metrics / All Metrics – Online businesses can be measured in more ways than any other kind in terms of their dynamics and performance, yet many marketers do not take the time to track data on their websites. They don’t monitor visitors to their websites or study their behavior while on their sites in order to tweak their business to increase sales. Some companies are just the opposite and base all their business decisions on data and analytics alone. What is common to both extremes is that most marketers lack the skill and knowledge to interpret their numbers properly. Metrics are a valuable tool in the right hands and can lead a business into higher profits and greater success, or not. Marketers need to continually test their business to verify compliance with their assumptions and strategies. At least 10 – 20% of the budget should be spent on testing and adjustments made according to the results.
- No Customer Satisfaction – Any business must operate with their customer in mind or face extinction. If an online business cannot deliver their product in a timely manner, or if their product fails to perform as claimed, then the marketer will experience huge refunds and possibly complaints to third party payment processors. In order to maintain a good reputation, it is imperative that the entire product delivery system be in top working order to avoid any technical problems and to ensure customer satisfaction. Marketers should provide a ticket system or contact form so they can gather feedback from their customers in order to avoid errors, resolve disputes, and enhance their customer service.