I’ve seen countless websites and businesses that failed to launch because the project exceeded the budget for development, and nothing was left for marketing or building a team. With adult entertainment heavily focused on creator platforms right now, these are commonly running out of money and seeking buyers for distressed properties. Sometimes, the only marketing you’ll see for a new platform is the launch press release, and off to the graveyard it goes. The reason? Creator platforms are usually cost-heavy with tiny margins and are only profitable when they reach a specific scale.
Most commonly, with technology companies and platforms, development costs overrun and starve the business until there’s nothing left to invest in launch costs like marketing. Luckily, when I started JuicyAds seventeen years ago, I was the lead developer, so we always had the advantage of low programming costs, which made it more difficult to go under. But usually, that’s not the case.
Sometimes, founders try to sell a distressed business because they run out of money and fail to launch, or they get into trouble because they realize more capital is needed than they can raise. Approximately 29% of businesses fail because they need more money. I’ve sold distressed companies at Broker.xxx, but they are challenging to sell and never sell at a price that makes the investors whole again.
The problem is broader than just tech companies. About five years ago, I invested in a gym for the exclusive use by personal trainers and their clientele. But, when the initial renovations exceeded the budget (so much so that they returned for additional capital), it permanently crippled the business’s cash reserves and cash flow and left very little for marketing. Soon after launch, more gyms with the same business model popped up all over town. To make matters worse, when COVID-19 hit unexpectedly, the company was intermittently closed due to government regulations. By some miracle, it limped along for many years. However, as I write this, the shareholders have voted to (finally) close the business.
So, what can be done to avoid the cash crash? [Continue Reading in XBIZ Magazine]
