The following guest post is from Eric Greenspan, Founder and CEO of MakeItWork, a consumer facing, in-home tech support service. Entrepreneurs are inundated with success stories, but far less is written about ventures that do not succeed. Success has many fathers, failure is an orphan.
Most entrepreneurs do not have the guts to publicly discuss a venture gone awry. However, Eric recently posted the following insights on his blog. Much can be learned from success, but much more can be learned from failure.
11 years and 8 months of commitment, my life savings, every available dollar on every credit card, line and loan, and a promise to my children of a future, gone. The real story behind Make It Work’s demise isn’t exciting. It’s simply about a team of dedicated individuals that failed. We failed because the industry we were in changed over the years. We failed because the economy has drastically fallen since 2008, particularly in the consumer sector. We failed because Apple invented the iPad and the Genius Bar. We failed because Microsoft finally got Windows right. We failed because we tried. We gave it everything we had and it in turn, it took everything we had.
Make It Work was an amazing company. With over 38,000 cult-like testimonials, one cannot dispute the company delivered a valuable service in a way like no other company has come close. Sadly, it will probably not be remembered this way.
As Make It Work’s co-founder and CEO, I take responsibility. In doing so, I will assume all of the personally guaranteed loans and lines granted to the company. I personally guaranteed these loans, because I believed we could not fail. I was wrong.
Make It Work sold its services in pre-paid hours, at a discount from our pay-as-you-go pricing. Our customers benefitted from this and saved thousands over the years as a result. They received priority service, convenience and savings. They bought these pre-paid hours over and again.
Since 2008, the company has been forced to lower it’s prices, from $120/hour to $80/hour. Additionally, over the past four years margins got smaller and eventually, stopped making sense.
The company achieved many milestones along the way. From a marketing partnership with Verizon, to producing our own radio shows on CBS and ABC and finally, a Costco rollout; the company’s management worked tirelessly to find solutions to maintaining growth and profitability, critical components of any business.
The company was always seeking capital. As an entrepreneur, my greatest lesson learned here was how difficult it is to find capital for a services business. Venture capital firms have a distaste for the smaller multiples earned by services businesses, along with the challenge to scale such a business. As a result, the company was always under-capitalized.
From 2008 to 2011, the company paid its own bills, we were cash flow positive and we believed we could maintain this trend indefinitely. But later in 2011, new customers slowed, appointment bookings slowed and average appointment time dropped. The company raised some capital to supplement, shifted its business model, reduced its overhead, and sought new lines of business. During this period, the greatest opportunity in the company’s history came into play. In November 2011, the company launched its pre-paid service offerings inside of 20 Costco locations. We expected significant growth and anticipated the company to emerge as solvent, profitable and wildly successful. This didn’t happen, but it also wasn’t the end.
After our initial Costco rollout, our pallets were removed from Costco, but all was not lost. Costco wanted to launch us online, on costco.com. The launch would be larger, broader and was to be supported by marketing to Costco members. Finally, it seemed as though we were going to fly.
In May of 2012, sales dropped drastically. After a solid April, we figured this was just the cycles of business. We sought capital just in case. Then June came and the downward trend continued. We continued to seek capital, launched aggressive discounted promotions and forged ahead. Then, we got a verbal yes on a decent capital investment. We worked towards closing it. Sales remained sluggish during this period, but we were not giving up. We’d been here before, but never with an opportunity like costco.com sitting in our lap. We were certain the funding would come through. Days went by, we stayed focused. Meanwhile, we were working on the Costco launch. We were so close to getting the funding. We needed it badly. The leasing company wanted a payment. In a few days, payroll, that had never been missed in 11 years, was at risk. Friday, our insurance lapsed and we were forced to ground the fleet. Then came the weekend, our lease payment and payroll was due Monday. On Sunday, around noon, the investor backed out. We immediately informed our board and shareholders that we were forced to halt operations. Monday came and the leasing company arrived to take our fleet. We missed payroll. It was over.
I immediately called every press outlet to be proactive in telling our story, changed our website to inform our customers and our few remaining staff fielded calls and emails from our customers. There wasn’t much more we could do.
Did we make mistakes along the way? You bet we did; plenty of them. But we learned and we grew and we fought against the current. At the end of the day, I’m not sure it would’ve mattered. The trend of self-healing, DIY installations and solid state devices will only make matters worse for our competitors. Apple changed the world.
Written on a beloved Apple iPad. (Of course)