We’ve all heard the small business failure statistics – that one half of all start-ups disappear before the end of year two. Knowing the odds are stacked against us as entrepreneurs doesn’t make it any easier to accept the loss of a great business. On August 2, Sprouter, a community-based networking and mentorship site for start-ups around the world, will be shut down due to “capital constraints.”
Sprouter founders Sarah Prevette and Erin Bury had a great idea and launched a company. For two years they’ve been satisfying a tremendous need in the marketplace for free advice, networking and information for entrepreneurs in the early stages of their business. The problem was Sprouter was hard to monetize. When you give everything away for free, where does your revenue come from? For many online companies, revenue is generated by selling ad space, referral commission (affiliates), or posting paid links. The importance of developing a sound monetization strategy from the get-go can’t be underestimated. After all, if you can’t monetize your business, you don’t have a business.
This issue came up on Wednesday’s episode of BNN’s The Pitch, where I was a panelist. One pitcher had monetized his company and the other had not. Guess which pitch won over me and my other panelists, John Sleeman and Brad Nathan? Your monetization strategy – or how you’re going to generate revenue – needs to be well-planned and researched well before launch. Of course, expect those plans to change as you go through start-up, but it’s important to at least have a plan that works on paper first.
To our friends at Sprouter, we will miss you but we know you’re serial entrepreneurs and you’ll make a triumphant return.