What I Learned From Starting An Investment Research Company

Author: Dustin Crossland

05-17-2023

As many of my peers know, I started and ran an investment research company from January 2020 to October 2021. During that period of time, I learned more about business, marketing, working as a team, and myself than any other time in my life up to this point.

Will a good product ensure success?

I recently reviewed the recommendations I made while running CIR (Crossland Investment Research) out of pure curiosity. I wanted to know if I was actually pretty good at finding, analyzing, and recommending stocks, or if I had just gotten lucky for a few months. I pulled up my performance tracker, and I was very pleased to see my recommendations were still absolutely killing it compared to the market. As of this writing, my recommendations are up 82.36% over the same period of time that the S&P 500 is up only 26.02%. Someone that religiously followed my recommendations, investing the same dollar amount into each one, would have a return over 3 times better than the market! I think it’s safe to say the value provided by this product was exceptional.

But did this product that gave members a 3 times higher return than the market also churn out massive profits? Nope. It did okay, but it never profited enough to be more than a side hustle. Customer retention was high. Very few people gave up their memberships after their initial purchase, but getting new customers was the real battle.

We did all of the right things: consistent social media posts that added value, paid social and search ads, an extremely accommodative customer service policy, email campaigns, and hours upon hours of sweat equity. I literally worked over 100 hours some weeks. The needle was moving, but it was painstakingly slow. I credit most of my marketing knowledge from this phase of my life where I tried anything and everything and did countless hours of research into marketing and psychology to try to move the needle in the right direction.

The issue is that the business was incredibly easy to start, and people don’t buy stock recommendation memberships to make money investing long-term in the stock market. See, my recommendations were very Warren Buffett style in that I searched for value. I wanted a company whose discounted cash flows showed me the company is worth more than the current price. This is an investment strategy that takes time because the market doesn’t react instantaneously to market inefficiencies. The customer base for my product, however, wanted quick short-term profits. People that understand the financial prudence of a long-term perspective are talking to financial advisors, not getting their recommendations from some small company on the internet. Combine the complete product-market mismatch with the fact that this business had very few barriers to entry, and I was never actually going to have a serious chance of growing the company into what I envisioned.

A good product absolutely does not equate to a successful business. If I had read my market better, I could have avoided nearly 2 years of exhaustion and frustration.

Other considerations

The takeaway? Always, always, always research your market. What do they truly care about? What do they think about every day? What are their priorities in their current stage of life? Most importantly, find data to support your final conclusion because assuming everyone will like what you like is the best way to send your product to an early death.

Once you have researched your market, consider the barriers to entry, or lack thereof. If you can start your business in a day, chances are you will be competing on marketing, not the actual product. You will need to either be able to offer better prices (avoid this trap), or you will need to be a marketing superstar. Anyone can do what you’re doing, so they will, and the best marketer will win in that marketplace. That’s okay if you think you can win, but it’s usually better to avoid those businesses unless you’re a marketing protege.

All things considered, those 2 years were probably one of the most valuable experiences of my early adult life. I learned to code during that period of time, learned enormous amounts of marketing strategy and know-how, learned how to see things in a company’s financials that few others were seeing, increased my emotional resiliency and ability to tackle challenges, and ultimately learned more about business than I ever learned while getting my degree in finance. It was tough, but I’m glad I had the experience.