How I LOST $10,000
 

I'm 20, so my life isn't full of much experience like many of the posters here, but I'd like to share how I lost $10,000 in the past few years from a failed business.

When I was 9, I used a modem for the first time.

I was taught how to by my brother Dien, way back then in 1989.

Back before the internet, back before the WWW, back before Sowpub.

So what did people connect to back then, if there was no internet to connect to?

I connected to things called BBS's -- bulletin board systems -- that were computer systems you could log on to, have an account on, and mail other users and do other things.

Some had multiple lines, so you could talk to anyone else logged on.

You had to pay money to log on to most BBS's with multiple lines.

Anyhow, I grew up with these things, and continued to log on to them for most of my life after 9.

In highschool, I decided I really wanted to run one.

Problem was, I was a highschool student, and these things cost a fair bit to set up! (well, for a highschool student)

There's the big computer costs, the software, the telephone lines, all the modems....

But eventually when I reached 1st year of University, I gathered the money to start it.

$10,000 it cost all up. I borrowed some, and convinced some friendly family members to enter into a partnership.

I thought it was great. I had done the analysis before hand, I had been diligent.

I worked out all the costs of setting it up, all the costs of keeping it running.

I looked at how much other similar places charged, put my prices just under theres, and realised that with the number of users I had, I could make a good profit.

And I did.

The first month it was up I pulled in $1200 in subscriptions, which was around $800 after monthly costs.

$800 in one month is pretty good on a $10,000 investment!

Or at least I thought it was.

The next month the profits went down.

And then down again.

And down again.

I was losing customers! But why?

The reason was, I had entered the market and gained customers by undercutting the prices of my competitors. And since then, they had lowered their prices more.

I had to lower mine to keep up (we were all running similar systems, with no competitive advantage).

After around 6-12 months of doing this, all the BBS's I knew of were losing money, and I was amongst them.

But I persevered. I kept going on, trying to attract more customers, and I kept on losing money.

It took me a good year before I finally shut the system down.

By that time, I had lost roughly $10,000 from the venture.

And why? Because I never looked into the future when looking at the investment from the beginning.

I never tried to look at what competitors would do and how it would effect my pricing and my profit.

I only looked at the HERE and NOW, and not the FUTURE.

So what's the moral of the story?

(1)

When looking at business situations, don't just look at how much you'll make TODAY, but look at how much you'll make TOMORROW also.

If you're making high profits, what's to stop someone else doing the same thing for lower cost and eliminating your profit?

It generally helps to have some competitive advantage -- whether that's in lower costs, higher skills, a strong brand name, or the like.

And look at all your business and investment decisions in this light.

This is useful both for your personal business endeavours, and I find it very useful also for analysing stockmarket investments.

(2)

When you realise that you're losing money and it's unlikely that it will change, then CUT YOUR LOSSES.

I failed to do this when I let the system run at a loss for a year.

Simple maths would show that even if I gained more customers, at the current prices it would be very very unlikely for it to turn a profit.

And with the market environment, it was very difficult to raise prices.

So, I should have gotten out earlier.

Anyhow, hope you enjoyed the post :)

- Thomas.

Re: How I LOST $10,000
 

Hello Thomas,

thank you for taking the time to share the information and direction with us. It is appreciated, trust me.

I recently learned to not differentiate based upon price.

A lower price does not equate with higher profits or better market position or share.

All it seems to do, from what I have seen, is to condition your prospects and existing customers to expect youo to always have lower prices than your competition and as soon as you do not then you lose them as customers to your lowest priced competitors.

Strangely, prices are the first thing many many business owners cut in trying to salvage a losing situation.

I think price is the last consideration in positioning oneself in the marketplace, unless your price is going to be high.

As far as cutting your loses, I noticed you mentioned the stock market.

Years ago, I traded some of the slower markets because I love what I saw.

I learned alot but I think the best lesson I learned came from world class trader Paul Tudor Jones.

(I think I still have a video of him trading in his lucky sneakers and sweater.)

Mr. Jones stated that the market moves on two things and two things only.

Fear and greed.

I see this happening even today.

When the markets are up this simply means there are more buyers than sellers. When the market is declining this simply means there are more sellers on that day than buyers.

I agree.

I hate paper trading too.

The markets are pretty simple to figure out once you really study them for some time. The players that make it are in emotional self control and have a balanced view of themselves, their goals and lifestyles, etc.

As for cutting loses, though, Mr. Jones beleived strongly that in any endeavor you undertake, you must make money coming out of the gate. As in trading, your position must be right in the beginning.

If your position is incorrect initially then you were just plain wrong. I feel this is true in marketing also.

Well, I think I have babbled enough, again we thank you for your insights.

Taylor


Marketing Guidance Like You've Never Seen Before

Great true story Thomas!
 

Thomas, great story.... Very educational, thank you! :)

As they say, you learn more from your failures than from your successes....

If I didn't see it for myself while you were growing up, I wouldn't believe that someone could be so entrepreneurial at the young ages you were trying things at.... :)

(And this was one of your *later* stories!)

Thanks :)

Dien Rice

Re: How I LOST $10,000
 

Hi Thomas!

How fantastic to "meet" another member of Dien's family. I can tell by what by the "Brothers Rice" that Mr. and Mrs. Rice are model parents indeed...maybe you two could suggest an info product on raising children with an entrepreneurial spirit? Hmmmmmmmmm.........

I read with interest how you "lost" $10,000. I beg to differ with that perspective. Looking at my education, for example, it cost a substantial amount MORE than that, and the lessons I learned were SOMETIMES this beneficial and sometimes not.

The $10,000 would be "lost" if you continued to do the same exact thing, losing money over and over and over. Instead, your $10,000 investment taught you A LOT! Most folks in your age group would not have a CLUE about what you have learned!

Remembering myself at 20, I was spending a lot of time at parties, dancing til dawn, drinking *gasp* while making some great friendships. And yes, I went to classes and by the time I got to my Junior Year I actually got serious about my studies!

Congratulations on getting a fantastic return on your $10,000 investment....it is terrific to meet you!

With Purpose and Passion,

JULIE


My Siblings Have Never Even BEEN to my website! :-)

How to buy a business education.... :)
 

Julie,

I bet my parents will love your comments! :)

> How fantastic to "meet" another
> member of Dien's family. I can tell by what
> by the "Brothers Rice" that Mr.
> and Mrs. Rice are model parents
> indeed...maybe you two could suggest an info
> product on raising children with an
> entrepreneurial spirit? Hmmmmmmmmm.........

Heheh.... :)

Well, we have one more brother who's more of a socialist, so there you go.... I don't fully agree with all he says, but his intentions are good.... :)

But we all get along pretty well even though we have differing opinions on various things.... :)

I guess our parents raised us to mostly be independent thinkers and make up our own minds.... and I think they succeeded in doing that!

I agree with you fully, though, Julie.... Of course, the aim is to *make* money (not lose it), but even if you lose it, it's good to think of it as buying an education....

Many people spend many thousands of bucks getting a degree.... I see this as the same sort of thing, except the kind of education you could get from trying out a business venture in many cases is more practical than what you learn in a university degree.... :)

> Remembering myself at 20, I was spending a
> lot of time at parties, dancing til dawn,
> drinking *gasp* while making some great
> friendships. And yes, I went to classes and
> by the time I got to my Junior Year I
> actually got serious about my studies!

Heheh, for me at 20 I was off philosophizing about what I *really* wanted to do with my life, and exploring radio (I used to do a public radio show -- on PBS-FM in Melbourne, Australia)....

It wasn't the highest-rating thing on the radio dial -- the time slot was 2 am to 6 am! But it was a great experience anyhow.... :)

Those late nights though made my university classes pretty tough the next morning sometimes.... :)

Thanks Julie for your great thoughts....

I think it's good to think of any failed business as just another class in your business education. :)

Dien Rice

Parenting Independent Thinkers
 

Hi Dien and everyone!

> I bet my parents will love your comments! :)

I was thinking about how my mother cracks up looking at how different (and wonderful) all her children are with one thing in common: we all have our own minds which we are more than happy to express at any given time.

My eldest brother is a member of the Greens Party, for many of the same reasons I am a member of the Libertarian party....the "Big 2" here are so similar (and so ineffective!) we register in other parties in protest.

One of my favorite things about my eldest brother is when he was Vice President of an Insurance Company he turned his Corner Office into an employee room and he had a Cube just like everyone else. He figured why should he have anything different?

My second brother says he is a Libertarian, but I will not say what party he is in. He was the first brother to start racing cars at two weeks over 18...you had to be 18 to compete you know.

My sister is a very liberal democrat, and a radical Pro-Choice advocate...to the Nth degree. Why? She gave the ultimate gift: she had a baby at 19 which she gave up for adoption and when she heard the Anti-Choice people say "Oh, JUST give your baby up for adoption" she rebelled. She also didn't speak to her siblings for 3 years when she realized she was the only democrat left (we at one time had all been) because se thought we were all judging her.

Y'all know about me.

John has Down's Syndrome. He is really a lot like my eldest brother in mannerisms.

Joe, my youngest bro, was a promising athlete in high school. Three sport, all around excellent sportsman. When his football coach (and head of the athletic dept) asked him to "Stop bringing his brother" (JOhn) "to the games, cause his presence is so distracting" *GASP!* Down's syndrome people living amongst us?!?!?!?!??!!? Joe stopped competing for any Dana Hills sport. Broke my Dad's heart, but Joe never told him why. This brother is also the only person to break down and weep in my arms at my daughter's funeral. *What a guy*.

My parents allowed us to all embrace our very essence...and this is what I try to do for my kids.

Its funny, Mom subscribes to one of my ezines. She emailed me yesterday and said, "I am finally getting to know my daughter!" after nearly 40 years!!!

Thanks for listening....no clue WHY I wanted to write all this, but I did.

Have a great day!

JULIE

Re: How I LOST $10,000
 

Thomas,

You have a wonderful "real world" education at age 20 that's far beyond your years.

Almost every super successful person has had similar experiences to yours in their early years. The difference between them and most people is that they used what they learned to do better the next time.

Keep up the good work, stay in the game and I look forward to seeing your success story.

Ron


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