In June of 2011, I was very close to quitting this business, shutting down both sites, and deleting everything.
You’ve mostly read about success so far: overcoming obstacles, launching products, and yes, even surviving the occasional Korean girl who kept showing up at my apartment unannounced to steal my tomatoes.
Today, though, my story is about failure.
That is the part of entrepreneurial stories that never gets publicized, which is tragic – because it’s also the most representative of what it’s really like to run a business.
I made several huge mistakes from 2010 to 2011 that almost led to a complete shut-down, and today I’m going to cover all of them.
- Why I decided to leave Asia and never come back (or so I thought at the time) after living there for close to 2 years.
- Why creating the industry-specific modeling courses was ridiculously difficult, and how I made the biggest mistake with the easiest part of the process.
- The real reason(s) why our partnership with Wall Street Oasis fell apart, and why you should never rely heavily on external partners.
- How a visitor named “Raj Verma” misinterpreted one statement in a course outline and then blackmailed us, causing a gigantic mess known as “Raj-gate.”
Out of the entire series, this part most closely resembles The Social Network.
The Winklevoss Twins may even make an appearance if you’re paying close attention.
Did You Just Make the Dumbest Decision Ever?
Here’s where we left off if you’re joining this series midway through:
- I launched the site in late 2007, gained a lot of traction in the first year, almost quit after the Wall Street collapse in September 2008, but then saved the site by the end of the year with the interview guide I launched.
- I had met a female who claimed she was a professional drug dealer at a speed dating event in Beijing – and, obviously, I decided it was smart to follow her to Korea, where I had lived for almost a year by the middle of 2010.
- I spent the 2009-2010 period trying really hard to kill myself by working like crazy on video production and ignoring everything else in life – it was sometimes fun, but mostly just highly productive.
- And I had just re-launched all the modeling courses successfully… only to see everything fall apart in the aftermath as sales and traffic both fell off a cliff, partially because we split a single course into multiple courses.
The new course format was too confusing and there were too many sign-up options: what had been 1 big course was now split into 3 separate ones (Excel, basic modeling, advanced modeling) and 6 different sign-up options (3 * 2 * 1).
It’s not necessarily “wrong” to offer options, but you still have to guide people in a specific direction.
Too many options without a clear direction leads to indecision and lower sales – just ask Dan Ariely.
Too many readers were signing up for the Excel course because it was the cheapest, and because we didn’t make it clear that mastering Excel was NOT the same as mastering financial modeling.
So we changed that around, removed the standalone Excel course sign-up, and cut the sign-up options down from 6 to 3: the Excel and basic course together, the advanced course, or a bundle with both of those at a discounted rate.
That didn’t change things overnight, but it did make the sign-up options less confusing and it led to more sign-ups for the bundle package in the long-term.
To his credit, Patrick from WSO suggested some of these things when he saw the big drop-off after the launch finished in April 2010.
“Ah,” I thought, “this partnership is going so well! It’s great to have someone else also thinking through these issues and making good suggestions.”
So far so good, right?
Those changes, plus waiting a few months for recruiting to pick up, solved my major problem at the time: a complete drop-off in the business.
But then 2 other big problems emerged:
- Living in Asia was getting depressing because most of my friends had left or were leaving by that point, I was in a mediocre and unfulfilling relationship, and everyday annoyances were driving me nuts.
- I had also promised to create a PowerPoint course and industry-specific modeling courses on real estate, banks, and oil & gas within the next year, even though I knew exactly nothing about any of them when I made that promise.
A Food Tour Guide… or a Black Belt?
To get around the boredom, I tried a comical number of random activities:
- Yoga (I’m normally too embarrassed to admit this one)
- Ballroom dancing
- Paintball / survival games
- And my favorite: I went on a few “food tours” to learn more about the culture, and ended up explaining Korea to foreigners who just landed and didn’t know anything. The guy running it was “impressed” with my knowledge and asked if I would become a tour guide. Nice thought, but I was still just a stupid white guy in Asia.
I felt like Ali G or Borat showing up to some of these events and asking nonsensical questions while everyone else was taking notes and looking very serious.
Industry-Specific Modeling – Mission: Impossible?
Creating the PowerPoint course was more difficult than expected because there were no good references or other courses on it, but you only use a fraction of PowerPoint’s features in finance – so it was still easier than the full modeling courses.
The industry-specific courses, by contrast, turned into an epic battle of Biblical portions.
I pored through books, other training programs, and random models sent in by readers – and I even contacted dozens of bankers in these industry groups to ask questions.
If you think bankers are unresponsive when you’re networking with them, try sending them 10-15 detailed questions on FIG accounting and see how responsive they are.
One time, I played phone tag with a friend-of-a-friend across multiple continents over the span of 2-3 weeks.
Finally we got in touch and I asked all my questions… only to realize that he didn’t even have good answers.
He had worked at a top bank and then gone onto a top PE firm, but he couldn’t explain (in detail) how to make revenue growth assumptions for a company in a certain industry.
I got similar results elsewhere: people didn’t know the answer, or I got 10 different answers from 10 different people.
I thought about stripping down the entire project and creating shorter, 3-5 hour long “summary” modules for the 3 industries instead of extended, 20-30 hour long case studies.
I could just say that my plans had changed.
But then I realized that would be a HUGE mistake.
The problem? Competitors had full-fledged courses on these industries that were more than just short summaries.
Just to see how good they were, I paid $3,000+ of my own money to sign up and go through all of them…
And I couldn’t believe how much they were charging for courses that weren’t that great.
Releasing shorter, cheaper courses would have immediately put me at a disadvantage because I would have been saying, “Our material isn’t as in-depth as competitors’ and these are just short summaries… but look, it’s so cheap!”
You never want to be seen as the “budget option” in any market.
That strategy only works for Wal-Mart, and selling niche financial modeling courses isn’t quite the same as being a soul-less retailer bent on world domination.
So the plan was set: go all-out on these courses, create better material, and sell it for the same price as other courses in the market… right?
One Red Bull IV, Please
In Part 2, I told you how I stuck to a grueling pace in 2009 – 2010 where I was often working 12-14 hours per day, every day (“real work” – not 50% downtime like in investment banking).
I upped the intensity even further in August 2010 and taught myself accounting and valuation for commercial banks, created a case study of JP Morgan, and produced 15 hours of video all in the span of 4 weeks, with no prior knowledge of the sector.
I was drinking so much coffee that I began twitching uncontrollably on most days, but it had to get done because of my favorite technique: setting an impossible deadline (I was leaving for a trip to Europe on August 31st).
I released the course a few hours before hopping on the plane, and hoped nothing would go wrong as I was taking off.
It was the same process for the other industry-specific courses, but it was a bit less stressful since FIG proved to be the hardest sector to learn.
The content for these new courses turned out much better than expected.
They were better organized, they had more quick reference guides, and the formatting and explanations were much better than the first few courses I had created.
But then I screwed it all up by making one serious mistake…
What’s Your Price?
For some unfathomable reason, I released each of these industry-specific courses for $97 USD initially.
This was a big problem because competitors’ courses sold for $400 to $1500+ and actually covered less material.
So not only was I sending a message that my own courses were worse – price send a big psychological signal, after all – but I was also earning less on each sale, even though anyone who signed up was willing to pay more (yes, really – we got emails to that effect).
I said the $97 price was the “early bird discount,” and I mentioned that the prices would all increase eventually (which they did).
But I waited 1.5 years before doing that, which was a very costly mistake.
The truth was that in the back of my mind, I didn’t think the courses were “good enough” – and I felt uncomfortable charging higher rates.
In Part 2 of this story, I said that sales and marketing are the most systematically under-taught skills in business schools.
Among business owners, though, pricing is the most systematically misunderstood aspect of business.
Pricing is about far more than how much revenue you generate – it affects everything from how you market yourself to how much you can spend on marketing and customer support to the types of employees you can attract.
There is sometimes a “sweet spot” where you can maximize revenue and/or profit…. but it is not always a good idea to pick that price if it compromises other aspects of your business, such as customer service.
This is why I would never sell a guide for $5.95: for that price, I would rather just give it away for free.
Business owners tend to underprice their own products and services, for the same reasons I did here: insecurity, the feeling that they’re not “good enough,” and a lack of market knowledge.
Doing so leads to lower sales, sub-par support (it’s much easier to support 10 customers rather than 1,000), and lower margins.
This is why we’ve shifted to selling higher-end courses and services and serving fewer customers over time.
Sure, there is also a market for $5.95 guides, but I do not want to be in that market.
Predictably Irrational Pricing
“So,” you’re thinking, “that’s interesting, but what evidence do you have that this was a mistake? Where are the numbers? Or is this just a theory you’ve dreamed up?”
When I raised the prices of the industry-specific modeling courses, unit sales increased.
Yes, you read that correctly: after raising the prices from $97 to $247, the volume of courses sold actually increased even though the price was 2.5x higher.
How could that possibly happen?
Let’s say that you’re looking to buy a new car, and you’re expecting to spend ~$10,000 USD on it. You find 1 model selling for $8,500, 1 model selling for $10,100, and one selling for $9,300.
Then you find 1 model selling for $2,500.
Would you think it’s a great bargain?
Or would you think there’s a defect with the car?
That’s what happened here: by pricing the courses so far below anything else out there, we were effectively saying, “We have an inferior product” even though that wasn’t the case.
Meanwhile, I had come to the conclusion that I had to leave Korea.
It had gotten to the point where even routine tasks like going to the convenience store filled me with rage.
After my first 9 months there, I started having less and less fun; I was in a fairly stable relationship, but I knew it wouldn’t last and I didn’t see it as a reason to stay.
My enthusiasm for learning the language had also plummeted. I made a lot of progress in the first 6 months, but after that I should have taken a class with a professor who could explain nuances and focus on “business formal” language.
Instead, I continued taking lessons from… a friend of my original bartender “teacher” I found on Craigslist.
I assumed that since I knew Japanese (similar grammar) and had studied Mandarin (shared vocabulary), I could tackle Korean on my own.
But I was wrong: Korean is significantly more difficult conversationally than either of those languages, and it is arguably THE most difficult language for native English speakers to learn.
By the middle-to-end of 2010, though, I just didn’t have enough enthusiasm to go take a real class or otherwise learn from a professional.
I left the country in December 2010 and had a farewell party where everyone made an appearance: friends, my teacher, her friends, and yes, even various females I had dated (good thing they didn’t know each other).
I remember explaining to a friend how I would never return to the country.
He disagreed and said, “You think you’re leaving, but you’ll be back. This place finds a way to draw everyone back.”
I laughed at him, wished him the best of luck, and said I was heading off to Australia next.
I wasn’t quite ready to go back to the US, and I wanted a country that was “Western” but still “foreign” – so Australia seemed like a good fit.
Plus, I was a US citizen and I had an employment record and bank accounts to point to – how hard could it possibly be to get a visa?
Side Note: I’m laughing as I write these words in August 2013 because I’m currently sitting on a bench in the Seoul-Incheon International Airport. Yes, I’m back in Korea. My friend was right.
I’ll get to this story if I extend this series and write Part 5 in the future.
“My Enemies Are Everywhere And My Friends Are Fools.”
“It’s a common mistake among inexperienced founders to believe that a partnership with a big company will be their big break. Six months later they’re all saying the same thing: that was way more work than we expected, and we ended up getting practically nothing out of it.”
-Paul Graham, Do Things That Don’t Scale
Toward the end of 2010, I did an “end of year review” and uncovered some disturbing trends.
First, it was clear that the BIWS promotional partnership with Wall Street Oasis, which had expanded to a few other sites, was not a good deal for me.
Sales had increased, but profits were down because we were paying out a high commission on all product sales referred by others.
You might think, “Wait a minute – you’re selling digital products, who cares if you pay out a high commission? You have no expenses!”
And then you might think, “Don’t you want to be in as many places as you can be? Who cares if it cuts into your sales?”
Both of those thoughts are wrong.
Yes, I have higher margins than an offline retailer, but there are still big expenses – creating the courses, customer support, web development and design, paid advertising, promotional materials, bandwidth, etc. etc.
So if you think this is a 90% margin business, you’re off by an order of magnitude. Any business owner who claims to run a 90% margin business is lying or not doing the math correctly, e.g. not counting his/her own salary.
And yes, it’s good to “be everywhere” if you can… but not if it dramatically cuts into your margins.
A business like this could never be sold to another company or taken public, so I have to focus on the bottom-line.
Spending frivolously and waiting for an exit would be like Waiting for Godot.
It wasn’t just the numbers – by the end of the year, other problems with partners were popping up.
Some partners wanted their own custom pages, detailed reports, and special treatment; with others, the relationship was always uneasy because we were competing in some areas but were partnered in others.
It was like Apple and Samsung’s relationship, but 1 million times smaller.
I knew it wouldn’t last, and the only question was when to change the terms and what to say.
I was about to do this at the start of 2011 right after I settled down in Australia, but then…
Meet Raj Verma!
I ran into serious problems getting into Australia, partially because I was dumb and applied for a 12-month tourist visa – so in early 2011 I was stranded and wandering around Southeast Asia while trading letters with the Australian government.
But I was making better-than-expected time on the industry-specific courses, so I decided to use the 4 weeks I spent in Malaysia to revamp one part of the Advanced Modeling course and fix a few lessons that had been completed too hastily.
In the middle of that, someone named “Raj Verma” contacted us and asked a bunch of questions about the BIWS courses.
From his questions, I could tell that he would likely end up asking for a refund anyway – so I didn’t try too hard to convince him to sign up.
But he did notice one small inconsistency: in the course outline, I wrote there was a “50% discount on new courses.”
By “new” I meant “new courses that we release in the future.”
That was true at the time because each new course was priced at $97 back then, and members could sign up at a discounted rate of $47.
He interpreted “new” as meaning “any additional courses you sign up for.”
Yes, the language was confusing but it was a mistake on my part and not a “trick” or anything like that.
I clarified the language to him, acknowledged that it was confusing, and then did what I thought any logical human being would do: I corrected the course outline and sent him the new version.
The actual policy never changed – I simply corrected language that could have been misinterpreted.
Raj Verma didn’t quite see it that way – here was his response:
After a few more exchanges, he wrote back with one final demand – he left this one out of what he posted online:
He tried to blackmail us into giving him a $347 course for free because he misinterpreted one statement in the course outline, which we then clarified.
This guy was so clueless that he actually posted the entire email exchange online (yes, including the parts with him swearing at me), after which he got flamed out of existence.
Hundreds of posters jumped on him, his name and email address were black-listed at banks, and he probably changed his name shortly thereafter (if it even was his real name – doubtful).
And the best part was that he was NOT even a customer of the courses – he was just asking about potentially signing up.
The whole incident consumed 2 days of my time and caused me to reconsider if I really wanted to stay in this market for the long-term.
If potential customers were going to be this crazy, was it really worth it? Did I want staff members to spend their time responding to criminals?
It also forced me to delay changing the terms of the partnerships – after all, one of our key partners at the time (WSO) had just stepped in to defend us, or at least many users there had.
Arriving in Australia
My Australian visa finally came through, but by then I had already traveled back to the US to visit friends in New York and California. So after planning to arrive in Australia in early January, I only got there in late March of 2011.
Upon landing, the immigration officials pulled me aside for an “interrogation” because I seemed suspicious.
They were skeptical that I was really a “tourist” and started asking for all these stats about my business, the # of Australian customers, how we promote the courses in Australia, and so on.
“Well,” I thought, “I can get out of this one, but I’m sure glad I listed my occupation as ‘Consultant’ rather than ‘Drug Dealer’ on my immigration card this time around.”
A few days after that, I was diagnosed with a serious ear infection that could have resulted in permanent hearing loss.
Oh, and then the Internet took over a week to set up at my apartment.
And then I was in for one final surprise: I decided to live in the CBD of Sydney, thinking that a central location would be best.
But my building was 90% Asian, and so was the surrounding area.
It was as if I had tried to leave Korea, but Korea said to me, “Not so fast. You’re not getting away this easily.”
Life in Australia was off to an excellent start.
Location, Location, Location… and Launches
I was also way behind on the last industry-specific course: Real Estate & REIT Modeling.
I said the release date would be April 30th, 2011, but there was no way to finish by then given the disasters above, continued partnership troubles, and more and more crazy people emerging from the magical leprechaun forest.
So I pushed back the launch to May 15th, which was do-able, and pulled in Peter to help with some of the content.
Social life in Sydney was very “meh” because I didn’t have enough time to go out and meet people. It was a non-stop 80-90 hour per week effort once I landed, and almost losing my hearing cost me some time as well.
And then another sub-plot was evolving: some of our own partners approached me and suggested that our commissions were too generous.
“Brian, you realize that all these companies providing CFA prep, FRM training, and others are giving far lower commissions… and their products aren’t even as comprehensive. Why are you so generous?”
My “end of year review” showed similar results months ago, but I had been delayed changing things around and I didn’t want to do anything rash without running the numbers.
So I dug into the numbers, ran a bunch of analysis in Excel, and I even calculated R^2 for several sets of data.
Profits had actually decreased even as traffic increased, mostly due to these high commissions, plus the rising costs of support.
It went back to my main fear from the beginning: I knew there was huge audience overlap between the 2 major sites in this market (M&I and WSO), and I wasn’t convinced that we were getting unique visitors by partnering with him.
But there were big risks if I changed the terms.
First off, he could promote other companies’ courses instead of BIWS.
Second, I might have been using the wrong assumptions all along. There was no way to “prove” where new customers came from and who had seen the courses first via my own promotions vs. those on his site.
It could have been the case, for example, that a high percentage of customers had seen the BIWS courses promoted elsewhere, but had simply come back and signed up through this site anyway.
But there was no way to tell what would happen without actually making the changes.
That was the biggest decision I faced in 2011.
Do I change the terms of the agreement and possibly lose a huge percentage of sales?
Or do I leave it as is, keep everyone happy, and accept declining profits even as I kept working harder and harder?
I wanted to resolve this by June 1st to avoid letting it drag on for the rest of the year.
Gut Feeling and Fear-Setting
I went back and forth about 10 times, but ultimately I went with my gut feeling that it wasn’t a great deal for me and that the terms had to change, or the deal had to be dropped altogether.
I figured that even if the deal completely ended, the courses would continue to sell because of my audience on M&I and additional traffic to the site, plus word of mouth.
And, in the worst case scenario, if the entire business collapsed I would not have shed a tear.
Besides Raj Verma and a few other disasters, I was incredibly burned out.
Just imagine working for 80-90 hours per week for 2+ years, with only short breaks in between.
When I say “work,” I mean real work – writing, editing, producing videos, and creating sellable deliverables – not “work” in IB where you sit around the office with nothing to do for half the time, and doing mindless work such as changing the font sizes in revision #153 of a presentation the rest of the time.
I had produced nearly 3 million words of content in 2 years, which is about 30 average-length novels (not a typo).
Just like Patrick Bateman, I was barely human.
But just like Bateman, I also had my limits.
Going back into finance was not an option, but since I had a CS degree from a top university I had a “Plan B” that most people in finance do not have: go into the tech industry, either at a large company or a start-up, and work in a technical or product/project management role.
Sure, it can be intense… but it still would have been 10x easier than running this business, producing that volume of content, and also being the combined CEO, CFO, COO, and CTO.
Then there were other issues: for example, I was running out of ideas for M&I articles.
The obvious solutions were to cover new industries, do more interviews myself, or hire guest writers, but I didn’t know how sustainable those were.
Even if I found topics to keep writing about, did I really want to keep writing about this one specific topic forever?
Running a business like this in your 20s or 30s is one thing.
But could I really see myself as a 65-year old man who was still writing articles about how to get investment banking internships?
Let’s be honest: it would be pretty strange.
But there’s also no easy solution to that one – when you own a business, you’re at it for years or decades regardless of whether or not you “like it.”
Until you save enough money to do something else or you decide to sell the business (easier said than done), it is your life.
And it is also your wife/husband, your best friend, and your main hobby.
I almost hoped the entire business would fail simply so that I could go back to the real world, take a normal job again, and get back into a normal career.
With that type of silly logic in mind, I decided to move ahead and reduce the commissions on our products.
I emailed Patrick to explain that the terms were changing, and he almost immediately dropped us.
I proposed a commission that was significantly lower than the original rate, and I expected him to counter with a higher offer.
My logic was flawed, though, because I had very little leverage in this situation.
He could simply promote another company’s courses and there would be no difference to him as long as the commissions stayed the same.
I don’t blame him at all for dropping us. We don’t “hate” each other. If I were in his position, I would have done the exact same thing.
From his perspective, this had come from nowhere after we had just worked together for the past 1.5 years.
He saw it as: “I just sent this guy $X in sales, where $X is a large number – why would you suddenly decide to reduce my rates after I sent you so many new customers?”
My perspective was different because I had all the numbers.
While he saw them as “new customers,” I had good reason to believe that many of them had actually seen the courses promoted on both sites and would have signed up through us anyway.
That made it a great deal for him, but a rather poor deal for us.
I replied and expected to go back and forth a few more times… but instead, it stopped and I didn’t hear anything for a few weeks.
Last-Minute Second Thoughts
I went to a friend’s wedding in Hawaii at the end of May 2011, partially to celebrate being done with the Real Estate course and partially because, well, it was Hawaii.
The whole time, I kept thinking about this deal and whether or not I had just made a huge mistake.
A few days before June 1st, I woke up and thought, “OK, this is stupid. This is going to destroy my business if I go forward with this. I have to propose better terms!”
NOTE: This type of thinking is a HUGE mistake. Once you propose something in a negotiation and the other person says “no,” never go back on your word and give better terms.
I didn’t follow my own advice though, so I checked in again and said I would be open to a higher rate, though not as high as the original one we had.
…And a few days later I heard back.
It was a “no go,” even with the higher rate.
He had already moved on a long time before that, and would be promoting other courses on his site as of June 1st.
It was over.
The whole incident served as a reality check for me.
I had focused so much on the products that I ignored all other aspects of the business – diversifying our marketing, improving the user experience, staying in touch with customers after they had signed up, and more.
In response, I contacted a marketing firm and asked about hiring them to get started with paid advertising and to revamp marketing everywhere else.
I started planning my outreach to guest writers, knowing that if the site continued, I would need contributions from others.
And I planned a trip back to the US because I wanted to start networking and interviewing for traditional corporate jobs in the SF Bay Area.
I really had no idea what would happen, but it couldn’t hurt to have other options on the table.
No, I wasn’t going to run out of money anytime soon… but there was a significant chance that both sites would simply die out.
And hiring guest writers and a marketing team would only work if I had enough money to hire them in the first place.
That was in serious doubt as June 1st approached.
The Night Before June 1st
It was the night before the partnership would officially end, and there was nothing left for me to do.
Two years before, on June 1st, 2009, I had landed in Korea with almost nothing, a huge amount of debt, and a tiny business that barely paid the bills.
Two years later, on June 1st, 2011, I was about to lose everything I had built up in that time.
“I know,” I thought to myself, “I’ll make a pro/con list! Or I’ll start making a list of companies I want to work at!”
I decided to do something much smarter instead: I went snorkeling in the ocean near my hotel in Hawaii.
Oh, and then I read more Game of Thrones (I was on the 3rd book by then, easily the best in the series).
No matter what happened to my business, I reasoned, Tyrion would always be awesome.
I went to sleep early that night, and woke up the next day to see what would happen.
I turned on my laptop, and…
Next Time, Next Time
Yes, it’s a cliffhanger ending.
But you’ll see how I clawed my way out of this one in Part 4 of this series.
- Why hiring guest writers, or at least my implementation of it, turned out to be a questionable move.
- How we funded, created, and produced Cost of Capital and why I wanted to do it in the first place.
- Why I completely changed the direction of this business in 2012 after a harsh wake-up call from a top business coach.
- And most fun of all: how a toxic relationship with the craziest person I’ve ever met almost destroyed me.
The Rest of the Series:
- Part 1 – Launching the Site in 2007 – 2008
- Part 2 – Growing and Launching Courses in 2009 – 2010
- Part 3 – How I Almost Quit in 2010 – 2011
- Part 4 - 2011 – 2012 (not yet written)