Part of the problem we ran into 12 years ago was a lack of sophistication of the puppets. For having no clue what I was doing in the way of puppet building then, the puppets weren't bad. But with the Muppets, there is a little higher expectation of what puppets should look like.
Also, we had a lack of characters. Time and Money kept us from making a lot of different characters for the show. So we ended up doing improv with five puppets which ultimately made the audience wonder why we were using the puppets to begin with since we were just doing the same things five humans could do.
And the biggest problem was LACK OF MONEY!!! Not enough for anything: space rental, puppet building, advertising, miscelanious supplies. Obviously, none of us were making money and most of us lost money.
It wasn't a total loss. I used the puppets for an indie feature. And now going back to it, we know better what we need to do. A large assortment of characters, less straight improv, more sketch comedy. Add some music to the show. Keep it short: short sketches and short shows. We'll be making use of an already established venue and running in their late night slot in a smaller, more intimate space. Also, we'll be combining puppets and a few live actors. And instead of doing the same show every week, it will change from week to week, including at least one serial style piece.
In the short run, we are still going to lose money. But this is going to be a long run type of thing.