The purpose of this blog post is to openly share what Rainmaking learned from Freshinhale, which we have recently closed down.
In 2010 Rainmaking decided to launch a chain of stop smoking clinics inspired by the German concept, Relief. Basically smokers are offered a combination of soft laser treatment and counselling. Our concern was whether the treatment would actually work, whereas we did not expect it would be that hard to get customers. It turned out that 70% of the smokers actually stopped smoking after getting their treatment, which is very impressive. However, unfortunately we had underestimated how difficult it would be to attract enough customers at a reasonable acquisition cost. We just managed to take the business to breakeven but since we were not convinced we could make a real attractive business out of it, we decided to close down the business in February 2011.
All customers have now been treated, all creditors been paid, and we have arranged with a competitor that our existing customers can get further help for free going forward.
The numbers and facts
The project ran for 10 months and we invested a total of £ 80K in cash plus some unpaid management time. We had one project manager full time and 2 free lancing therapists conducting the treatments. In total we treated 130 customers and 70% stopped smoking. We tested different price points and £ 295 seemed like the most optimal price. Customer acquisition costs were way too high – several hundred pounds on avearge.
We tested Adwords, facebook ads, face-to-face, affiliates and newspaper advertorials. None of them showed consistent and convincing results.
What have we learned?
a) Always dedicate sufficient management time
I was partner lead on the project and I don’t think I have spend sufficient management time on coaching the project manager and helping with the project. In the future we need to ensure we do dedicate enough management time to all our projects.
b) Never underestimate sales
We were very inspired by the German concept, Relief, and we knew that they attracted approx 40 customers/clinic per month at low marketing costs. We therefore anticipated that attracting customers would not be that difficult if the treatment worked. I therefore think that we were too complacent and did not put in the effort really needed to generate the sale. Learning: never ever underestimate sales!
c) Stick to your values – even when things get tough
During the critical phase for freshininhale we were offered an investment at attractive terms. This investment could have made us run for another 12 months – at least. However, we decided to advice the investors not to invest, since we were not ready our self to put in more money and we were concerned whether we could turn the business into something successful. We are proud that we managed to stick to our values and maintain integrity despite the temptation to test the concept further for other people’s money.
d) Be ready to kill your darlings
It always hurts to stop a project, which you have put a lot of effort into. And there is always the temptation to see another 1-2 months where things might change. However, I am glad that we (once again) managed to take the difficult decision to stop the project now and then move on. There is a decent chance that the project would eventually become successful – after all it must be possible to copy the German success, however, I think it is right for us to focus our effort on other project with more tail wind and accept that sometimes we just do not get it right.