The best investment you can make is an investment in yourself. That’s why I advocate you to start your own business.
However, if there is a piece of advice I can give to first time founders, it is this …
Your first business SHOULD NOT be an online course business or a membership site.
In this article, I will explain why selling digital products are bad businesses for inexperienced entrepreneurs, and explain what you should do instead.
The glorification of leverage
Over the last few years, digital entrepreneurs around the world have fallen in love with the concept of leverage.
The concept dates back for centuries and is essentially a metaphor for using tools. For example, if you have a lever, you can move a rock that you would not be able to move without the lever.
But Naval Ravikant brought the idea to mainstream entrepreneurship with his brilliant Twitter thread called How to Get Rich Without Getting Lucky.
In business, there are 4 types of leverage …
In the Twitter thread, Naval accurately stated that media and code are more powerful forms of leverage than capital and labor. Theoretically, you can write a line of code or create a piece of media that can work for you with infinite scale.
For instance, if I write a tweet, that tweet can spread without limitation and work to grow my brand and grow my business. This unrelenting scale does not exist with capital and labor, because both capital and labor have restraints.
Time is the biggest limiting factor in labor. People can only generate a certain amount of work in any given period of time.
These are all important concepts to understand and for the record, the purpose of this article IS NOT to devalue the power of media and code.
Rather, I want to reveal a simple truth that has been hiding in plain sight and also explain why this simple truth will drastically reduce the probability of your success if you don’t follow some basic guidelines.
The missing link is reputation
Imagine you have a Twitter account with 200 followers.
Imagine you strike gold, you publish a tweet and it gets shared by 100,000 people. That would make it one of the most viral tweets in the history of the internet.
Then what do you think would happen?
In all probability: nothing.
You would probably get a massive influx of DMs and you might even be asked to appear on Ellen, but within a short period of time, no one will remember your tweet or even be able to recognize it in the forest of digital media that already exists.
As I stated before, code and media are more powerful than labor and capital, but they have a barrier to entry. That barrier is reputation.
Why should anyone take you seriously? Why should anyone actually follow you on your journey?
If you want to be taken seriously, you have to do things that are worthy of being recognized.
What actual work have you produced?
What tangible results are you generated?
Without first proving yourself, no one will take you seriously. And this is why 99% of online courses fail.
It’s no coincidence that Naval talks about this in the same Twitter thread. However, it’s one of the most overlooked philosophies because most people look for the simplest, easiest way to succeed. Accountability (which is just another word for reputation) demands exactly the opposite.
Why should anyone buy your knowledge?
It’s not overly dramatic to say that Naval’s twitter thread has inspired countless first time entrepreneurs to get online, start building their brand, and develop media.
This is all positive. It’s always a good idea to start creating content / showing your work and publishing it online.
The problem becomes “how do you monetize a personal brand?”
The seemingly logical choice is to build and sell an online course.
The problem with this is that online courses are essentially the sale of productized knowledge. An online course is another way of selling education, and in order to sell education, you have to know something worth selling.
Which begs the question …
What do you know?
For most first time entrepreneurs, the answer is … not much.
It’s very common to see people with 3000 Twitter followers trying to sell courses on building a twitter following. Or it’s very common to see people in their early twenties trying to sell courses on success, happiness or “living a better life.”
But how could you possibly understand the full spectrum of success and failure in your early twenties?
You need experience to develop a reputation.
What to do instead …
I’ve spent this entire article outlining a problem.
But that hasn’t created a solution for you. If you’re reading this, you’re probably thinking “ok Tim, I get it, but I still want to create a business … what should I do?”
The answer, is to create a business that sells an actual service.
Before you embark on your journey to create an online course about social media, perhaps you should start by building a social media marketing agency, and building a reputation in the space that proves your competency in social media.
Or maybe instead of creating a course about gardening, you should create a blog or a YouTube account that proves your expertise in gardening, and then develop a coaching or consulting business that helps other people build their own gardens.
The difference is very nuanced, but it’s also very glaring.
The benefits of a service business are limitless. You will learn the basics of business in a trial by fire. There are things you learn in these kind of companies that can’t be taught in school. Skills such as …
- management of people
- management of cashflow
Unless you have already mastered these skills, the likelihood of you succeeding in selling digital products is very low.
Without a reputation in the space, your brand is basically worthless. Selling a course requires a brand, above all else.