Why I Built a Business That Can't Scale (My $500K Distribution Mistake)

Published September 1, 2025 • Based on Founder Reality Episode 11

Most founders obsess over product-market fit while completely ignoring audience-market fit - and it's killing their businesses before they even start.

I've been thinking about this a lot lately because I spent 5 years building SimpleDirect into a profitable company serving contractors, only to realize I'd chosen the worst possible audience for sustainable growth.

Every customer had to be personally sold. No viral loops. No organic growth. No network effects.

Here's what I wish someone had told me five years ago about picking an audience that can actually scale your business.

The Audience Selection Problem

I built SimpleDirect as embedded lending for home improvement contractors - think BNPL for $30,000 roof repairs.

Great product, real problem, paying customers. But I made one critical mistake that's haunted me for years.

My customers don't create content. They don't share tools online. They don't amplify products they love.

Here's what I discovered about contractors:

• They're mostly 50+ year old guys who barely use email
• They view other local contractors as direct competitors
• When they find something great, they keep it secret to maintain their "competitive advantage"
• The only referrals we got were from distributors or contractors in completely different states

I basically built a business that could only be grown through expensive, time-intensive sales.

Meanwhile, our competitors with $50M+ in funding could afford to call the same contractor 20 times a week until they signed up.

I couldn't compete with that approach - and frankly, I didn't want to.

What Scalable Distribution Actually Looks Like (And Why So Few Businesses Have It)

Compare this to businesses with real network effects:

• Instagram e-commerce: Someone buys candy they love, takes a photo, posts it to their story. Their friends see it, buy it, share it. Viral loop complete.
• SaaS tools: I discovered Attio CRM through a founder tweeting about it. Now I recommend it to other founders. That's how distribution compounds.

The difference: Your customers become your distribution channel, or your business stays linear forever.

I see this pattern everywhere now. The businesses that scale have audiences that naturally amplify.

The ones that stay stuck have great customers who keep their mouths shut.

My Distribution Framework (What I Do vs. What I Avoid)

This painful lesson taught me to always ask four questions before building anything:

What I Do Now:

• Research audience behavior first: Do they create content? Do they share tools they love?
• Map the sharing patterns: Who do they tell when they find something great?
• Test the network effects: Will customers naturally tell others, or keep it secret?
• Choose compound growth: Can this business scale exponentially or will it always be linear?

What I Don't Do:

• Assume sales can solve distribution problems: Personal selling doesn't scale without massive funding
• Ignore competitive dynamics: If customers hide tools from competitors, you have no viral growth
• Focus only on product quality: Great products with bad distribution die slow deaths
• Build for audiences that don't amplify: No matter how much they love you, silent customers kill scaling

The Network Effects Test for Any Business

Here's my simple filter:

If your customers won't or can't talk about your product online, you don't have a scalable business - you have a consulting business disguised as a product.

In 2025, if your customers don't share your product online, you're building a brick-and-mortar business in digital clothing.

This doesn't mean every business needs to be viral. Palantir works with governments who can't tweet about classified tools. But they knew what they were signing up for and structured accordingly.

Why I Started This Podcast

This podcast and my Twitter growth taught me how content-driven distribution actually works.

I'm seeing network effects in real-time - founders sharing episodes, quoting insights, building on ideas.

I'm learning what I should have built into SimpleDirect from day one. Every episode gets shared by other founders because they relate to the struggles and want to discuss the insights with their networks.

That's the power of picking the right audience.

The Framework That Actually Works

Here's how I evaluate any business idea now:

1. Identify the audience first. Not the problem, not the solution - who are you selling to?
2. Map their sharing behavior. Where do they hang out online? What do they naturally amplify?
3. Test the competitive dynamics. Do they collaborate or compete with others like them?
4. Design for network effects. How will one happy customer lead to 10 more without your involvement?
5. Choose compound over linear. Will growth accelerate over time or require constant manual effort?
6. Build distribution before product. Figure out how customers will discover you, not just how they'll use you.

The Real Problem

Most founders (including past me) fall in love with the problem they're solving instead of honestly evaluating who they're solving it for.

I loved working with contractors. They're hardworking, loyal, great customers. But they were the wrong customers for the kind of business I wanted to build. Sometimes loving your customers isn't enough if they can't help you grow.

Choose your audience like you're choosing your business model - because you are.

The Bottom Line

Distribution isn't just about reaching customers - it's about how customers reach other customers. When you pick an audience, you're picking your growth model.

I'm pivoting SimpleDirect toward API customers (founders and platforms) who do create content and share tools they love. Same product, different audience, completely different growth trajectory.

For whatever I build next, I'll always put distribution first, audience second, product third. The most beautiful product in the world is worthless if customers keep it to themselves.

What's your approach to audience selection as a founder? Email me at george@founderreality.com - I read every message.

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Daily thoughts: @TheGeorgePu on Twitter/X