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The 5 Mistakes that Caused a Jordanian Startup to Fold [Updated]
Updated: Elias Jaber has confirmed that his startup recently closed.
Elias Jaber founded a company that offers comprehensive maintenance services for households in Jordan, in November 2010. His idea was to solve a well-known problem: the difficulty of finding reliable and well-priced maintenance services in Jordan. Often, contractors are relayed to customers by word of mouth alone, and they are known to overcharge, for example, billing around $50 for minor plumbing fixes. Yet without many options, customers can't keep prices in check.
To provide a better deal, Jaber developed a plan to offer comprehensive household maintenance services for only $99 a year. This seemed like a surefire hit, and, sure enough, he found investment within months and was able to hire a large team.
Yet by summer 2011, Jaber had made series of decisions that brought him to the brink of bankruptcy. He found himself facing astronomical monthly payments to investors, wrestling with underperforming employees who wanted to take over the company, canceling an ineffective marketing campaign, and, finally, most difficult of all, having very little time to see his young daughter.
Jaber made some tough choices to recover his losses and rebuild his business plan. He has pivoted into a new sales model, in which he partners with companies that are already selling appliances and can sell his services on the side. He also created an agile, flyer-based marketing strategy, and, in September 2011, had around 55 satisfied clients.
Yet by October, he was forced to close shop. In an atmosphere in which many keep quiet, he bravely wanted to share his story so that other entrepreneurs could avoid the same pitfalls. Here are the five mistakes he says he made:
1. “I went to a public sector funder who took six months to get back to me.”
Initially, says Jaber, he approached a public sector organization that funds and advises companies in Jordan, that promised him assistance. Yet he was frustrated by the fact that they took months to get back to him, and ultimately decided not to support his business plan, for unclear reasons.
2. “I was so desperate for funding that I took it on any terms.”
Jaber was so interested in getting the project off the ground that he took the first investment he was offered, from a set of investors who granted him $100,000. Their terms included having him sign 20 checks for $5,000 each, that he would begin paying back once a month, starting after six months. Jaber was so confident that he’d turn profit within six months that he agreed. But building his business took time, and suddenly paying back the investment so soon became a crippling factor rather than an enabler.
3. “I hired too many people up front.”
"We have a saying in Jordan," says Jaber, “If you start big, you stay big. Start small, and you will stay small." Jaber took this to heart and began hiring enthusiastically from the beginning. He hired an operations manager who came recommended by his lawyer, and selected another four initial team members that stood out from a pool of 300 applicants. He eventually hired a total of 17 people by mid-February 2011. But by March, he found himself firing them, partly because they were not bringing in business, and partly because some tried to band together to oust him and put the general manager in his place, he confessed. “I should have started with 2 people instead of 17,” he says.
4. “I paid for advertising services that ultimately did not gain me customers.”
Of his initial $100,000 investment, Jaber sank $45,000 of it into advertizing, banking on the idea that splashing out on marketing was sure to reel in customers. He approached an agency “well-known in Jordan and Lebanon,” that a friend recommended. The agency conducted a big campaign involving a branding exercise and print ads, and yet, Jaber realized, the ads failed because his product was the kind that needs to explained face-to-face. “I could have done it for $4,000,” he says, using social media and a more grassroots, word-of-mouth campaign to gain consumer trust.
5. “I got emotionally attached to my idea and project.”
He got so emotionally attached to the project, he says, that he was initially unwilling to change his vision, or wait for the right conditions to implement it. This was one of his biggest mistakes in general, he says.
Ultimately, Jaber’s cautionary tale is not due to a lack of experience in his sector, or because he expected building a business to be easy.
“I cleaned tables at McDonald's when I was younger. I know what hard work is,” he says. “I worked with Aramex for three years, so I know logistics. At one point I managed 45 saleswomen while working at a cosmetics company. I also worked for four years in construction, since my family owns one of the biggest construction companies in Jordan, so I know every single detail about maintenance and engineering.” He knew how to hire and manage a team, and deliver the maintenance services he set out to deliver.
Sometimes experience can impart what works and what doesn’t. Yet his story warns entrepreneurs against taking an investment deal with poor terms, that is not designed to truly grow a business, or depending too much on the advice of friends when it comes to hiring or marketing.
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