Not all the information is good for every business, but most of it is good for most businesses.
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On Ebay, you can buy or sell anything from antennae to zithers. You may have a retail store, or a service business, and not realize the power of Ebay to grow what you have.
As a buyer, Ebay can be a source of rare items and common everyday things. Often, you’ll also find wholesale lots, and at times you can buy new merchandise for less than what you’d pay any wholesaler. First, I’ll talk about Ebay selling strategies. I’ll cover buying strategies later on.
As a seller, you have a national or even worldwide market, so rare things of interest to only a few people, things that would gather dust on a retail shelf, such as a tripod for a surveyor’s transit, or an antique clarinet, can sell for a lot of money on Ebay. At the same time, the ordinary things such as regular guitars, sunglasses, and digital cameras sell for the very bottom range of market value. Ebay is generally better for items smaller than sewing machines, since shipping charges add considerably to the cost of larger items.
Setting up an Ebay account is free and easy. You’ll also want to set up an account with PayPal, a money-handling website that is part of the Ebay empire and makes life easy for buyers and sellers in well over 90 percent of Ebay payment transactions. PayPal takes care of all the credit card processing and payment details. PayPal is also free. All you need to set up Ebay and PayPal accounts is about five minutes each, and the usual information, plus a credit card number, and if you have one available, a checking account number.
When an item sells on Ebay, the buyer almost always pays through PayPal. The seller gets to keep all the money collected except for an Ebay fee, typically around eight percent, and a PayPal fee of around three to four percent. The money is placed in the seller’s PayPal account, where s/he can transfer it to a checking account, or spend it in a variety of ways. The seller then packages the item and sends it to the buyer. If all goes well, and it usually does, the buyer can leave positive feedback for the seller. Feedback is a point that’s positive, neutral, or negative, along with optional ratings on issues such as shipping time and communication, and a comment. The seller too, can offer feedback for the buyer.
So, anyone doing business on Ebay can check feedback before committing to a transaction. If a seller has mostly positive feedback, you can feel confident in making the purchase. Therefore, as a seller, you want to treat your buyers well so you’ll get positive feedback.
Feedback isn’t as important as it once was because Ebay offers a variety of protections for buyers and sellers. For instance, if you buy a laptop computer, but the seller keeps your money and ships you a box of rocks, you can do more than issue negative feedback. You can contact Ebay, and they’ll refund your money – as long as you did everything right. That means to stay within Ebay’s normal parameters. If the seller asks you to pay by some means other than PayPal, or if the buyer asks the seller to ship it to a different address than the one listed with Ebay, the protection might be circumvented.
Selling on Ebay
Many buyers do not know about the Ebay buyer protection, or don’t trust it. For them, the seller’s feedback is very important. As a new seller, you might want to build positive feedback quickly. One way is to buy a few inexpensive things. You get feedback as a buyer. But most sophisticated Ebayers know the difference between feedback as a buyer and seller, and will want to see your seller feedback. Therefore, you can also start your Ebay business by selling some inexpensive things. Perhaps you have some old CDs or DVDs laying around the house. Sell them quickly, and get your feedback.
From this point forward, let’s pick a sample item, and discuss it as if it is something you really have on hand and will sell on Ebay. The item is Rolling Homes, a large-format paperback picture book about busses and trucks that were converted into motorhomes, by Jane Lidz, published in 1979.
The most important trick to selling on Ebay is knowing what to sell, since many items have too little value to sell online. It turns out Ebay has a tool for determining value. So let’s look up Rolling Homes.
At the top of almost any Ebay page is a search field. You can enter “Rolling Homes Jane Lidz.” Today, there are three copies for sale, ranging in price from $42 to $59. The prices and quantities will vary from day to day.
So far, we have learned that it seems to be a fairly valuable book, but we don’t really know how valuable. These auctions haven’t closed yet. Will anyone actually bid? How high will they bid? Let’s find out.
To the left of the listings, you have a column of refinements you can click, to limit your search based on condition, category and other things. In that column, click More Refinements. . . then Show Only. Check Sold Listings then click the Go button.
Now you’ll see a list of items that closed during the past 30 days. Today, I see that six copies sold during the past month, ranging in price from $39 to $45. So, it’s worth selling, don’t you think?
Grab your camera and take a few pictures. Ebay will allow for up to twelve free photos for each item you list. The first one will appear as a thumbnail – the little image to the left of a listing when shown in a group of similar listings. So, it should probably give an overview image of the book. It’s best to photograph items against a solid color background, so they are easy to see. I often use a red background, so if there are many similar listings, mine will stand out. You might also prefer a bright blue, green or yellow background. This is only a small advantage, so a white, even a wood-grained background is fine too. You’ll want your lighting about right, clear focus, and medium to very slightly higher than normal contrast. In the case of a book, shadows aren’t much of a concern, but with non-flat items, you’ll want to make sure shadows don’t obscure important details or make the thumbnail image hard to figure out. I use ordinary household lamps, with my camera’s color correction set to ‘auto.’ You might also experiment with color settings of ‘incandescent’ or ‘indoor.’ I use two lamps, one on either side, and slightly behind me and my camera,
Next you might take some other pictures, such as of the back cover, and maybe the table of contents pages.
Does your book have any flaws? If the cover is dog-eared or stained, maybe a close-up of the flaw would be a good idea. When selling on Ebay it is very important to clearly note flaws both photographically and in the text description. You don’t want negative feedback, and you don’t want to refund someone’s money because they were disappointed.
From the top of the Ebay home page, you can click Sell, then Sell Your Item. You are given a field in which you can enter what you have, and Ebay will give you matching categories. In the case of this book, it is easy. You can simply enter the ten-digit or 13-digit ISBN number that most published books have. Or you can browse to pick a category. Books | Nonfiction seems the most likely category, since this is a nonfiction book. But an option might be a category for motorhome accessories, since this book is of particular interest to the recreational vehicle crowd.
For DVD movies or music CDs, enter the UPC code found just under the barcode on the back.
If the item’s ISBN or UPC number is in the Ebay database, a template listing will come up, with title, number, brand name, model number, and such details already filled in.
Now it is time to edit or enter a title. This is not usually the place to be creative. You want to enter exactly what buyers for your book are searching for. So it would probably be “Rolling Homes by Jane Lidz, 1979.” Since there is room left over, you might pitch your book a bit. If it is in excellent condition, you can say so: “Rolling homes by Jane Lidz, 1979, Excellent Condition.”
Then you get to enter details such as listing the flaws your copy has, the publication year, a condition category, and some other things. Definitely enter the ISBN, or if it isn’t a book that you’re listing, enter a model or part number if one is available.
Then you get to upload your photographs. Below that, you can enter a description. For a book, if you have already entered condition notes, such as “minor yellowing, slightly dog-eared” then a description is not usually required. You could give a synopsis of what’s in the book, but most book buyers already know about what they want. If you’re selling something else, like a hat, you can describe it and pitch it to the best of your creative ability, keeping in mind that superlatives can actually hurt sales. So you might say something like this about a hat: “Size 7-3/8, hat in a vibrant purple. The brim measures 14 inches in diameter. The material is felt. Very slight shiny wear along the top edge that can’t be seen from more than five feet away. This hat was worn by people who felt sure of themselves in the fifties, and it still has that effect today. This is just the hat for a confident and stylish resident of the modern world.”
There is no limit to how long your description can be. That doesn’t mean your description has to be long. Getting back to Rolling Homes, no description at all is adequate. However, you could state something like, “I found this book fascinating, and so I took a 1/2-hour break to study it. A half-hour doesn’t really do it justice. A couple of full-time days would be more like it. I don’t really want to let it go, but you’ll probably enjoy it even more than I did. You will find photos of converted buses and trucks in these pages that you just wouldn’t expect.”
Keep in mind that an overly optimistic pitch like this doesn’t really help most products, so if you value your time, you might limit your descriptions to the basic facts.
As you are working your way down the page, you’ll see options that cost extra money such as sub-title and Gallery Plus. Most of these options have no effect on sales, but do generate extra income for Ebay. Don’t worry, they have plenty of money already, so I recommend that you do not select any enhancements that cost money.
Now, you get to choose whether to sell it as an Online Auction item or Fixed Price, also known as “Buy It Now.”
If you have an item that’s rare or collectible, and it is possible that two or more people will want it no matter the cost, then Auction is the way to go. You can start the bidding at whatever price you choose, and then decide if you’ll let the auction run for 1, 3, 5, 7 or 10 days. If after that time, no one was willing to pay your minimum price, you get to keep it, or try selling it again. If only one person in the world wants it, it will sell for your minimum price. On the other hand, two or more people can get into a bidding war.
I listed an old wooden radio with a starting bid of $50. At the end of the first day, the price had risen to $200. When the seven-day auction closed, the high bidder ended up paying me $1,200 plus shipping. This is a bit unusual in that the price went to $200 on the first day. Many experienced auction buyers wait until the last minute to bid, feeling that if they bid too soon, the higher price will only encourage other bidders. Taking that a step further, there is software that will bid on the buyers’ behalf at the last possible moment.
On the other hand, you might have an item that is common, and many copies are available on Ebay. This might be better sold as a Fixed Price item. You can set the price at, or slightly below the other ones currently being offered, unless the condition of yours is above the others. Fixed price items are more likely to sell because many buyers don’t want to play the auction game. They want an item as soon as possible, and they want to know for sure that they won the transaction. They don’t want to wait a week to see if their bid was sufficient.
Another advantage with Fixed Price is that you can save money. It costs around 30 cents (US) to list an auction item on Ebay, but as little as five cents for a fixed price item if you have an Ebay store, which I’ll cover in more detail a few paragraphs from now.
To get an idea about which items do best as Auction, and which are most often sold as Fixed Price, you can look again at Completed Listings, and see which were offered as Auction and which as Fixed Price. You can also study how other sellers handled shipping charges, and which categories they listed successful and unsuccessful items in. You can click on any item to drill in and see the pictures and read the description to figure out what the seller did, and whether it worked well – made money – or not. From there, you can even click on statistics on the seller to find out what kind of feedback the seller has, what other items the seller is currently selling, and what items the seller has actually sold during the past 30 days.
To give you another view on Fixed Price versus Auction, imagine that you have two saxophones. One is a regular student-model Bundy. The other is a Selmer Paris. There are two other Bundys for sale like yours. There are no Selmer Paris saxophones. So which one will do better sold as fixed price, a which is a better play for an auction?
Another example: You have a Swiss army knife that you’ve seen a hundred times before. There are six of the same model on Ebay already. That would be fixed price. On the other hand, what if even though you are an expert on Swiss army knives, the one you have is a knife you’ve never seen before? Some crazy obscure model. Right, auction!
After some more choices on the Ebay page, you get to decide about shipping options. You can have the buyer pay a shipping fee in any amount you choose, or you can include free shipping. Free shipping may make some items feel less costly to the buyers, but most are sophisticated enough to know that the shipping cost is absorbed in an inflated overall price. So, I generally go with an added shipping charge – charging slightly more than the packaging material and actual shipping cost. If the shipping price is too inflated, you may lose sales and get negative feedback.
You often see things like laptop computers listed for a remarkably low price, but a high shipping price. For instance, a MacBook Pro, that would normally be $2,000, is being sold for $500, but the shipping fee is $1,700. I believe the seller thinks he can trick someone into buying that laptop. But will the hassle and negative feedback be worth the ‘trick?’
You can figure out shipping costs at the major shipper websites. For instance at USPS.com (the United States Post Office), you can enter package weight, dimensions if needed, a specific shipping service such as Priority Mail, and figure out how much an item will cost to ship. Don’t forget that it will cost about a buck on average for a box and packing materials, unless you use the free Priority Mail and other envelopes and boxes supplied by USPS.com. It’s pretty much the same for UPS and Fed Ex. USPS tends to be a bit less costly for items under two pounds (1 kg) in weight. In time, you may want to buy a postal scale. Make sure to get a model that goes to at least 20 pounds (10 kg). When I started out, I had a five pound scale, and was constantly frustrated at having to guess the weights of six and seven pound packages. What’s the best source for a scale at a good price? Right, Ebay!
Keep in mind that when you just ship an occasional thing on Ebay, you can take all the time in the world to fashion your own packaging out of old cardboard boxes and junk you have in your garage. But as you start shipping five or ten items a day, you’ll want to spend some money on consistent packaging materials to save valuable time.
Also keep in mind that some things are really hard to ship. A bicycle will be much harder to package than you can imagine, until you’ve tried it once. Not only that, a bicycle probably surpasses the maximum size that the Post Office and UPS will allow. This reduces your shipping options and raises your cost. For fragile items such as guitars, double-boxing is best. Pack your guitar securely in a box, as if it had to survive a run-away conveyor belt, falling off the back of a truck, and an angry delivery person. Then, put that box in a larger box, with at least an inch (3cm) of padding all around.
If you live near a fairly large population, you can sell large items that are not cost effective to ship. You might have a chair that’s only worth $50, but the shipping cost would be another $100. So, shipping it is not a viable option. Instead, you set the shipping arrangement as No Shipping, Local Pickup Only. People in your area may bid on the chair and come by your place to pick it up. This severely reduces the number of people who are likely to want it. Occasionally, for a particularly valuable item, people will drive a thousand miles to come get it. This happens with antique tractors, for instance. If you do choose Local Pickup Only, add that to your description, to make it clear to people who are not in your area, that you are not providing a shipping option.
Ebay has a program called Global Shipping for US sellers with Ebay stores (which I’ll discuss in a moment). For most categories of items, you can click a checkbox, and Global Shipping will be allowed on your listing. If someone in one of the qualifying countries (not all countries are supported) buys your item, they pay an amount that’s more than the shipping charge you’re asking. You are reimbursed the same as if you were shipping to a US customer. You are given an address of a building in Kentucky, where your item is packaged with all other packages currently going to the same country and shipped in a big lot. Once it arrives in the receiving country, it is then mailed to the buyer using the best local transportation company. This saves the buyer money, and makes your life much easier. Otherwise, you’d have to figure out a price for the non-USA buyers, and fill out a customs form for each item you send. You’d also be responsible for refunding in the cases of lost packages, which is unfortunately common in overseas shipments. Ebay takes care of all those things for you with Global Shipping.
When you list an occasional item on Ebay, you pay 30 cents (US)for a fixed price listing, plus closing fees when it sells. If it doesn’t sell in a month, you’ve lost 30 cents. You have the option to keep it listed for another 30 cents. You can imagine that for a thousand items, this would start to add up.
The answer is Ebay Stores. A store subscription costs from $20 to $200 per month. You can save a bit with a long-term contract, but it is not required. At the basic store level ($19.95 per month), you can list up to 150 items for free – no insertion fee. At the highest level, you get to list 2,500 items with no listing fee, and after that, each item is only five cents. So, you can keep thousands of items listed month after month for a few hundred dollars per month. Once you have thousands of items, a mere few hundred dollars in listing fees will seem like an excellent deal. Stores give you some other advantages. Your listings that are similar to what others have can be promoted higher in Ebay search results. You can have a ‘presence’ on Ebay, with webpages specifically dedicated to your store. You get some special features, such as the ability to run a sale across all, or selected portions of your listings.
Once you have a store, you get to use a section of Ebay called Selling Manager Pro. With this, you can change prices of up to 500 items at a time, as well as many other bulk and individual adjustments. Let’s say you want to add Global Shipping to all your items. Just a few clicks, and they are all changed. With a store, you can organize your items into categories, include descriptions and pictures of your place of business, if you wish, build an opt-in email list of buyers and browsers, and some other tricks.
Having sold over 20,000 items on Ebay, I have found that Ebay and PayPal are good, responsive, reliable companies. I’ve also heard all sorts of rumors that PayPal does this ‘evil’ thing, and Ebay does that horrible thing. None of these rumors have proven to be true for me. If you have a store on Ebay, they offer additional options in support, including as much free support by telephone as you’d like.
I have found the best way to get the most profit out of common, non-collectible items, is to use Fixed Price with what I call a reverse auction. I start the prices of everything way too high, then, lower the price by one percent per day using Selling Manager Pro. A few people will buy things at the way too high price, especially if there are no others like mine currently available. Most others will buy them when the price falls to market value. If something just doesn’t interest anyone in the world, the price continues to fall until it hits a chosen minimum and finally someone is willing to buy it. This is not a good thing for items which have good value, but are seldom purchased, but for common merchandise, reverse auctions is a profitable technique.
My minimum price is $9.95. I feel like anything less simply does not pay for the time in photographing, listing, picking, packing and shipping it, as well as handling the occasional emailed questions that might pop up.
So what’s with the people selling things for a dollar or less? Some are depending on the shipping price to make up the difference. Someone may sell a collectible coin for 99 cents, but then charge a $5 shipping fee. Their profit is in the difference between the $5 and the actual cost of shipping, which may be less than a dollar.
Still, that doesn’t explain all the super-cheap stuff out there. Why would someone sell a pack of guitar strings for $1 with free shipping? I don’t know! But I have some theories:
1. To some sellers, it is better to sell every item rather than throw them away. They are seriously interested in recycling to the best of their ability.
2. Some people live rent free in trailers behind their parents’ house. They ship with all recycled materials. Their merchandise came from dumpsters, house cleaning, or other free sources. To them, a dollar is a windfall.
3. Sometimes children may be responsible for the low prices. Under a parent’s supervision, a child may run an Ebay account, and be willing to sell an old X-Box game for pennies, just for the instructional thrill of participating in Ebay.
4. Sometimes, it is a mistake. The seller didn’t realize that an auction would actually close at the opening bid. The seller may have been dreaming that someone would bid $50 for his fossilized trilobite, but no, the only interested buyer got it for a buck.
With certain merchandise, people are less likely to buy something online that they can’t touch, hear, smell or feel. This kind of item is harder to get realistic bids on.
This is especially true of musical instruments, because most people would like to hear their sound quality. One trick if you happen to sell instruments is to link in a sound recording made from the instrument you’re selling. Taking that notion a step further, if you’re selling something like a camera, you might show a picture that was taken with that camera. selling a computer? Show something enticing on the screen of the computer.
Buying on Ebay
The experienced Ebay buyer often gets fantastic deals. Once the things arrive, you can sell them on Craigslist, through your own retail store, on consignment, or in some cases, you can put them back on Ebay at a profit.
There are two good ways to buy on Ebay.
The first way, the one you’d expect, is to win auctions. When something comes up that you’d like, or more specifically, something that you think you can make a profit on, perhaps a Korg keyboard, you can study the listing a bit.
First, you can see whether others like it have sold in the past 30 days on Ebay, and how much money people paid. As I mentioned earlier, you can just enter the item in the search field at the top of almost any Ebay page, then select “Sold Listings” from the options at the left. When looking at sold listings, make sure to factor in the shipping charge. For example, a steamer trunk that sold for $100, really cost the buyer $270, when you add in the $170 shipping charge.
That tells you the Ebay price, but Ebay prices are often depressed compared to what a person who can actually touch, hear, or smell an item, such as a local craigslist buyer, is willing to pay.
You might check Amazon.com and elsewhere to see if there are current price guides for the kind of items you focus on. I have an acoustic guitar price guide that I have referred to from time to time. Old price guides will mislead you, so make sure to get current ones.
Look at the item’s pictures and read the description carefully. Are there any photos that ought to be there but aren’t? For instance, if you can’t see the corner of a painting, it might be because the seller is hiding a defect in the corner. Descriptions can be deceptively worded, not clearly letting you know that parts are missing, or the item is misbehaving in some way. One thing that is seldom discussed, but can be important, especially for items with cloth or leather components, is the odor of mildew or cigarette smoke. You can contact the seller with questions that the description left unanswered.
In the rare case that the photos and description are clear, yet the item that arrives is unsatisfactory, the seller is responsible. If the seller won’t make good on the deal, Ebay has buyer protection – a kind of insurance – to back you up. In the worst case scenario, assuming you played by Ebay’s rules, within the permitted time frame, Ebay will refund your entire purchase price. Still, you may have to package and ship the item back to the seller at your expense. Let’s quickly examine two examples:
You purchased a Dell Studio 17 laptop, but instead got the smaller and less valuable Dell Studio 15. Nowhere in the listing did it say you’d be getting the 15-inch model. In fact, the listing’s title specifically said “Dell Studio 17.” If the seller won’t cover you, Ebay will.
You purchased a beautiful sweater, but it has a serious cigarette smoke oder. The listing doesn’t mention anything about the smell of the sweater, and you didn’t ask. I don’t know for sure, but I’m guessing that due to the ambiguity of the situation, Ebay may not cover you.
Feedback can be a good indicator for a buyer. If a seller has almost 100% positive feedback, and a lot of it, you can pretty well trust that all will be fine. If there is some neutral or negative feedback, you can drill into it and see what happened. Some negative feedback is just crazy. There is a small percentage of people who are not quite sane, and sometimes this results in inappropriate negative feedback.
In a recent case, I bought a laptop computer that was slow to arrive. I knew that I might expect that, since the seller had three negatives in the past month, all were about having taken more than a month to ship the items. I bought it because I wasn’t in a hurry, and I knew Ebay Buyer Protection would cover me if it didn’t arrive at all. It did arrive in a reasonable amount of time.
In another case, a seller had two negatives in the past month. In both cases, he took parts out of the laptops before shipping them. In my opinion, that’s just plain weird, but on Ebay, you’re dealing with everyone and anyone, so this kind of thing can happen. Needless to say, I didn’t buy that person’s computer.
There are two best ways to buy things on Ebay.
The first is exactly what you would expect: You can bid on items being auctioned, and if your bid is higher than anyone else’s, you’ll win. Auctions can run 1, 3, 5, 7 or 10 days. You can bid any time you want, and you can bid as much as you’re willing to pay. Even though your maximum bid may be quite a bit higher than the current price, your actual bid is only one increment up from the current high price, generally a dollar in the USA. So, if an item has been bid up to $78, and you enter a maximum bid of $150, your actual bid will be only $79. But, if someone then offers $80, your bid goes up to $81. Because almost everyone offers maximum bids in excess of the current price, the price can suddenly jump as the automated maximum bids duke it out. If the current high bid is $79, and the other person’s maximum is $140, then as soon as you offer $150, your actual bid goes to $141.
Everyone believes it is best to bid at the last possible moment. This way, people won’t see that others are interested, and the casual buyers are less likely to bid. You can watch items’ bids grow during the last minute. It is kind of fun to see, unless you are one of the bidders. You’ll see a porcelain vase go from $20, to $22, to $35, to $91, to $148, all in the last few seconds. Some bidders are actually sitting at their keyboards physically clicking their mice at the last possible moment. Others are using “sniping” software that will bid for them, based on rules they have set minutes or even days before.
Occasionally, items that were set to end in the wee hours of the morning will get fewer bids. Items that are only appealing to a few buyers, none of whom have been watching Ebay lately, may close at the minimum bid, or no bids at all. Items that are imperfect in some way that you are willing to accept can be good deals. This is especially true if you can repair things like computers, cameras, clothing, or musical instruments, and know exactly what’s wrong with an item being offered. One of the best ways to get things is to find items that are not properly described, or even misspelled. What if you search for “cammera?” You may find a very good camera that no one has bid on, because when other potential buyers entered “camera” it didn’t show up in their searches. This is especially true if the “cammera” is also listed in the wrong category. I once saw a guitar listed under fountain pens. However, the Ebay search engine is very intelligent. When you enter “cammera” it may show you a list of all cameras. Conversely, if a seller has called his thing a gituar it may show up in guitar search results. I believe most searches start with a keyword, not a category search, so again, there’s a bit less power in looking for things that are misspelled.
The other way to buy, and one that’s more consistent, less stressful, but also less exciting, and perhaps less profitable, is to find “Buy It Now” listings that are too low. A seller unloading his old student-day stuff might not realize that a saxophone in any reasonable condition is worth hundreds of dollars, and list it for $75. This happens more often than you’d guess.
The problem is that there are other dealers also looking for undervalued saxophones. So, the listing may last only fifteen minutes before someone snaps it up. The professional fixed price buyer has bookmarked Ebay search results sorted into just the right criteria, and checks the pages several times a day. For instance, the saxophone buyer may be looking in “Musical Instruments | Woodwinds | Saxophones,” with settings for “Fixed Price Only” sorted by “Most Recently Listed First,” and a price range under $200. The same buyer may have another bookmark on “Musical Instruments | Woodwinds | Flutes” and a maximum of $150. She may also have entered “-wood -wooden” in the search field, to exclude all the wooden flutes.
Did I say snapping up Fixed Price offerings is less stressful? Maybe not. When you see something that just came up, you’ve got to quickly read the description, check the pictures, check the shipping charge, check the seller’s feedback, then maybe check a price guide, and see if you already have too many of the item in your inventory, all before someone else buys it. But this can be fun, right?
When considering a partnership, you want to look for someone who has what you don’t have. Starting out with a partner who has the same strengths and weaknesses as you, means something won’t be covered. That’s a recipe for disaster. Generally, the three ingredients that a partnership (or an individual) needs are time, experience, and sometimes money. There’s a fourth ingredient – one that all partners need, and that’s enthusiasm. You absolutely don’t want to start something with someone who is not enthusiastic about the idea.
Before forming a partnership, carefully assess your partner’s personality. Will you be able to get along with this person? How about in cloudy weather? Is the person lazy? Does the person have shoddy ethics? Is the person obstinate? I once saw a bicycle shop almost destroy itself because one partner of the three who owned it suddenly decided that they needed new wall-to-wall carpeting just a few months after starting the store. That would have cost $10,000. I think any objective person would agree that carpeting was not a top priority in that store. It had a painted concrete floor that was just fine. But, he couldn’t be talked out of it, and the partners nearly came to blows. Finally, the two other partners bought this fellow out, at an inflated price that took them years to recover.
In another case, a partner got evicted from his apartment, and decided to live in the inventory storage area, against his partner’s wishes, leaving little room for the business, and violating the local zoning ordinance. This fellow would do things like wake up, and walk out among customers in the showroom at 11am, unshaven and shirtless. Nice partner, eh?
In putting together a performing group, whether it’s a duo, trio or a large band, all the members must have enough interest in the project that you can be absolutely sure they’ll show up at gigs on time. They must also be the sort of people who won’t embarrass the group by showing up drugged or drunk, or say inappropriate things on stage, or when mixing with the audience. You also need entertainers who are in alignment with your group’s philosophies and performance style. Finally, a band member must have ego and emotions sufficiently in check to avoid damaging the band’s potential as a group. All this is necessary, in addition to being an adequately skilled entertainer.
So, if you’re going to consider a partnership, think about all the things that might go wrong with your perspective partners. Do not mention the idea of a partnership to any of your prospects until you are absolutely certain. It is harder to burst their bubble after you’ve created it, than before they know a partnership is possible.
Family members can be the best, or the worst! I think you know what I’m talking about. A grandfather-grandson (or grandmother-granddaughter) partnership can be wonderful with the right people. I’m sure you can think of several successful family performing groups such as the Trapp Family, Jackson Five, and the Haygoods.
In a retail setting, families can get away with some things that normal employee-employer relationships cannot. For instance, an uncle may own a store, and may have a 14-year-old neice operate the cash register for an hour a day after school. As a partner, she can be paid less than an adult would need and expect. At the same time, she is learning business skills and social interaction.
In another example, you may have a brother on disability with multiple sclerosis. During good times, your brother can help in the shipping department, and really enjoys being useful. Your brother can be a limited partner. During bad times, the brother is not required to come to work. During the good times, you can spend your time on inventory management, but during the bad times, you work in the shipping department.
Of course, arrangements like these are legally fuzzy, so you’ll want to check your local laws first. If you’re working with someone who is receiving government assistance of any kind, you want to carefully check the legalities and limits. For instance, you may discover that a person in a certain situation can earn up to $1,500 per month, but the amount earned must be deducted from disability payments. Or, perhaps someone can earn up to $300 per month without needing to report it. Or, in a more lucrative partnership, your family member, friend – whoever your partner is, may be in a perfect position to blow off government assistance entirely, earning a living from your partnership.
Here’s a look at another common but unfortunate scenario: Let’s say you have a brother who has been in jail twice for drunk driving. He’s unemployed again because he came to work too hung-over. You might think that if you offer this brother of yours a partnership, it will help him. Wrong! You must, absolutely must, consider partners for their strengths, not their weaknesses, if you intend to succeed. And if you don’t succeed, it will not help your brother in the slightest. It will probably make his lack of self-esteem worse.
How many partners should you consider? The minimum number you can get away with. If all you need is someone with repair skill, a good drummer, or someone who can keep the shop open during weekends, then one partner is sufficient. Additional partners means that the profit is split smaller. It also means it is harder to make decisions. Larry Page and Sergei Brin have been very successful with Google. When it came time to make decisions, they had a brief discussion, came to a consensus, and moved forward.
On the other hand, I knew of an organic restaurant that had 17 partners. One of their specialties was waffles. They had one waffle iron, and so customers had to wait up to 45 minutes for their orders in the morning. The 17 of them had a meeting to decide whether they should buy a second $30 waffle iron. The meeting, argument really, ran until after midnight, and they couldn’t come to a decision. In fact, it was weeks before they could all figure out that $30 was a reasonable price to pay for another waffle iron to satisfy their breakfast customers.
Once you’ve sorted out who your partners are going to be, you need to state some things up front. Is one going to be a silent partner? If so, how silent? How will various kinds of decisions be made? For instance, the person who’s just about to book a gig probably shouldn’t have to place a phone call to another partner before the gig can be scheduled. What happens as the business grows? Do you add more partners? Do you hire employees? How do the partners decide on new employees?
All the terms of partnership need to be discussed. More than discussed. You want the major points in writing, and a contract signed by all partners.
The very most important clause in that contract will be an escape hatch for each partner. What happens if the business loses money? What happens if a partner becomes sick or dies? What happens if two partners can’t stand the sight of each other after a while? Escape clauses need to be fluid. For instance, if a partner wants to leave early on, his value in the business is worth far less than after five years. These escape clauses must be manageable, so that it is truly possible to make changes in the partnership as needed. For instance, a very bad escape clause would be that if a partner leaves, the others have to immediately pay her $500,000. If a good escape clause and other such situations are all spelled out in writing ahead of time, all will be well in these eventualities – or at least as well as it can be.
Another consideration in partnerships is your own personality. Take me, for example. I can’t stand having to share my decisions with anyone. I have always had to have full control. I’d make a horrible partner unless I was allowed to run the show one hundred percent.
So, on the opposite end of the partnership spectrum we have sole proprietorship. The individual doesn’t have to defer to anyone before making major decisions. One hundred percent of the profit goes to the individual. That’s huge, even with just two partners. Let’s say that the profit of a business is $60,000 per year. That means that an individual takes home $60,000. But two partners owning the same business would only get $30,000 each.
There’s also an ego component. I love being able to say, “I own this.” For me, it would be miserable to say, “I own a portion of this.”
Getting back to the original question, what if you don’t have the time, experience or money to start a business on your own? And once again, there is a very simple answer. Start something evolutionary. Do you really need a drummer, or just a drum machine? Do you really need someone to keep the shop open in the evenings, or can you just close at 5pm? Start something that you can manage, and let it build as you gain experience, money, whatever you’ve been needing.
The Sure-Fire Millionaire
As I indicated in the last chapter, partnerships are expensive. I mean really expensive. I’m not saying don’t get partners, I’m just saying you should consider expensive options carefully, weighing them against potential profit.
For instance, you might think the decision to buy a cup of coffee at Starbucks is simple – just do it. But what if I tell you that cup of coffee will cost you $42? Would you still buy it?
Let me explain. If instead of that $3 cup of coffee, you put the money in an investment such as a mutual fund, and leave it there for 20 years, it will, on average, turn into $42. I knew a fellow who understood this so well that he made millions of dollars, yet he worked for nearly minimum wage.
When I met him, Brian was 48 years old. He had retired with several million dollars two years earlier at age 46. When he was 26 years old, he got a job for Sears, driving a van, and repairing washing machines and driers in peoples’ homes, which pays just a bit more than minimum wage.
At one home, Brian met a couple who told him that he ought to ‘pay himself first.’ He asked what they meant, and it sounded like a good idea. So every week, he took 25 percent of his paycheck after taxes, and put it in a savings account. Then whatever was left went to rent, food, and fun. That wasn’t very much, but he wasn’t making very much in the first place.
Week after week, Brian kept it up, until he had $10,000 in his savings account. He knew he’d have to learn something about investing. Even though he didn’t feel like learning about that, he went to the library and started studying up – this was before the Internet. He learned about mutual funds, municipal bonds, money market accounts, and even some things that didn’t begin with “m.” He moved the money from the savings account into better investments.
Brian was content with his job at Sears, and not really qualified for anything else. He kept ‘paying himself first’ year after year. In fact, in the first years, his investment fund grew frustratingly slowly. Yet, early on he remained what you might consider painfully careful about spending money. He could certainly have purchased a 35-inch TV, or even a 60-inch TV, but he knew how much that would actually cost. He felt his 21-inch TV was just fine, considering the bigger picture.
He learned to buy only the best car he could buy with cash – no payments. At first, this meant he had to keep his old car a few years longer than he might have.
He couldn’t really impress people with material goods. (He did impress people with his common sense.) He couldn’t buy fancy clothes. It had to be Wal-Mart, and only when necessary. Sometimes he bought clothes at the thrift stores. After twenty years, he retired. He can now have pretty much anything he wants. He dresses well. He travels when he wants. Brian has a new Jaguar that cost $88,000, paid with cash, of course. Now, he can really impress people with material goods!
I think you can see that Brian was patient. Patience is a wonderful attribute in business. Just about any business you start, if you are patient, if you are willing to accept the occasional setback, grow it slowly, stay interested, you’ll be successful. Maybe even beyond your wildest dreams!
The Psychology of Making Money
Here’s another little story about patience in business. Steve was a science-fiction writer. Or, well, he wanted to be. He figured that if he could co-write with the big names in science fiction, he’d succeed. He pitched ideas to Larry Niven, Robert Heinlein and other big names in science fiction, and some of them accepted the idea of co-writing with him. For eighteen years, he wrote with these famous writers. One after another, the books flopped. The publishers would pay a small advance, then no royalties came in. To make ends meet, he taught English at the local college. Eventually, Steve’s name became poison in the industry. No one would co-write with him any more. All these great writers knew that if they wrote a book with Steve, it would fail.
Out of desperation, he wrote a book by himself. It became an international best seller.
Now, eighteen years is extreme. I tell the story only to illustrate patience. For you and I, just a few months can seem like years. But if you can stick it out those months, you’ll probably see some level of success. Even if your success is slow, you can stick with it, and eventually you’ll have your major success.
Also, note that the story didn’t go the way Steve figured. He thought he had to co-write. Turns out, a little adjustment made all the difference. Don’t force your story to go the way you figure. Allow for some flexibility. Look around the edges of things. See what you can experiment with. See what you can change. Have fun. You’ll do fine. Better than fine! For instance, in my first bicycle store, I totally ignored used bikes. They were ‘beneath my dignity.’ I wanted my place to be a ‘pro’ store, and the way I saw it, used bikes didn’t fit the paradigm. Somehow, in my second bicycle store, I had loosened my grip a bit, and started dealing in some second hand bikes. Guess what? They brought four times more income than the new bikes. Furthermore, the ‘pro’ customers were attracted to the secondhand bikes, and bought and sold some very high-end used bikes with me.
You probably heard about the three gold miners in California. They staked a claim where they were fairly certain they’d hit a big vein, and dug. And dug. And dug some more, but no gold. Finally, they gave up, selling their mine for nearly nothing. The new owners started digging. They went three feet (1 meter), and hit the biggest gold vein yet found in California.
Advertising and Publicity
It is easy to buy advertising. There are many salespeple who would love to have you advertise in their newspaper, in their phonebook, their website, or on their radio or TV station. If it doesn’t bring the results you expected, they’ll just tell you that you didn’t buy enough advertising yet. They’ll tell you people need to hear the same message over and over. But you do need to buy some advertising, right?
Did I say, “buy” advertising? I meant “get free publicity.” Just about any form of advertising that a small business can afford will be entirely ineffective. Yellow pages ads are the worst. You end up paying a lot of money per month to the phone company, or a phonebook publisher, and get little effect. People don’t use phone books any more. They use the Internet. So you’ll want a website. It can be a simple one-page affair. All people want is your contact information. You can do some search engine optimization (SEO) tricks, discussed in the next chapter, to get people to your webpage. If you’re in a city with a dozen other similar businesses, they’ll all have their own websites, and without search engine optimization, you might be 13th on the list when people google your town name and specialty.
You can do more to boost a website in search results, but you may not have to. Remember that most people using the Internet to find a local business will already know your business name, and what your business does. They’re just looking for your address or phone number. You can bring in new customers through a website in a few ways, but it is perhaps more work than non-website ways to bring in customers. For instance, your website can have a virtual museum specializing in bicycles, musical instruments, vacuum cleaners, whatever you sell. If you have pages of pictures and descriptions of unusual or antique items, it becomes a valuable Internet resource. You can also become an ‘authority’ site. You might post the schedule of local events, a blog for people in your specialty, or the local competition schedule and results from last week’s competitions, and things of that nature.
So, when it comes to paid advertising, almost nothing works for a small business. Good free publicity, on the other hand, can change things overnight.
You may be thinking I’m talking about sending press releases to the local newspapers, radio and TV stations announcing that you have a new business or have added something to your business. That can have a small effect. Much greater is to do something newsworthy, meaning, something positively eccentric.
I mentioned this to a bike shop owner, and he said, “Oh, like give away free water bottles printed with the store logo?” He didn’t get it. Better is to sponsor something unique. Sponsoring a compelling but unusual free entertainment event, or offering a half-hour of free studio or workshop access is a start. Getting clients to wear your custom printed T-Shirts is a step in the right direction. Then, they will hopefully tell friends to do business with you. That will have a small effect, but it is not newsworthy, and it really isn’t free, because you have to pay for the T-shirts. I’m talking about something newsworthy. Let me give you an example.
Customers of an old bookstore in San Francisco used to complain from time to time because is was sort of dark in there, especially in the deeper shelves. That gave the owner an idea. He held a special sale. All books were 1/2-off. But, the sale ran from midnight to 1am one night. And, he turned all the lights out. At the door, all the customers were handed flashlights. That not only made the news, but it is still talked about today, 20 years later. After reading the story, thousands of new customers visited the store, mostly because they were curious to see if was as dark as people said.
At another bookstore, some college students created an art project. Their idea was to rearrange all the books, not by subject and title, but by color. Shopping there during that time may have been tedious, but all sorts of people came by to see it, and no doubt many of them came away with books they would never have noticed normally. (After two weeks, the same college students put all the books back in subject and alphabetical order.)
So, what kind of positive eccentricity can you think of for your business?
As I mentioned, having at least a basic website is important for most businesses. Fortunately, a one-page site is sufficient for most, and easy to create. You can do positive eccentricity on a website as well. We’ll talk a lot more about websites in the next chapter.
A guy who’s business was repairing Apple computers uploaded a little video to YouTube, and linked to his website, that showed him dropping a PC and a Mac computer off a six-story building. Both crashed to the sidewalk. The Windows computer was smashed to bits, but with the aid of trick photography, the Mac had only a couple of scratches. That was a fun video.
Then there’s the old fashioned way, business cards and flyers. Putting business cards in everyone’s hands who comes your way can build a business slowly, but surely. Of course, giving them something more interesting such as a keyring tape measure, or an interesting hologram will be more effective. A computer tutor can give out business cards that have a chart of the common [Ctrl] (or [Command] on Mac) keyboard shortcuts.
[Ctrl] + [A] = Select All
[Ctrl] + [C] = Copy
[Ctrl] + [F] = Find
[Ctrl] + [V] = Paste
[Ctrl] + [X] = Cut
[Ctrl] + [Z] = Undo
So what kind of information could you put on the back of your business cards?
For local businesses such as offering lessons, or repair, putting something on all the local bulletin boards can surprise you. You’ll get more business with no cost. Bulletin boards at laundromats work well, because patrons have to spend idle time waiting for the wash. You might think that laundromats attract low-end clientele – those who can’t afford their own appliances. This is true, but they also attract a higher-end clientele. These would be customers who have to wash blankets bigger than their home washer can handle, or people who are waiting for their home machine to be repaired, or – I hate to say it – people who will wash rags in a public machine because they don’t want to mess up their own machine.
Bulletin boards at natural food stores work especially well. I’m not quite sure why. Bulletin boards at diners, quick-change oil places, and elsewhere can work well, too. The best kind of flyer is one that makes only a few quick points, because too much text is hard to read. The best flyers have little pull-off tabs at the bottom with your name and/or what you do, and your contact info, generally your phone number. You might want to have full-page and half-page flyers, since many bulletin boards are too full to accommodate full pages. When space is very limited, you can put several business cards fanned out under a thumb tack, indicating to people it is OK to take a card. For this use, the cards ought to have large text that’s easy to read at a distance. There’s a color called “Solar Yellow,” that’s very bright and sometimes used for cards and flyers. It is a bit loud for sure, but in a jumble of white flyers, it gets noticed.
Sometimes people will tear off a tab on each of the flyers they put up. This is to make the general public think there’s interest in what the flyer advertises.
Websites That Work
Just about any business will benefit from a website. In fact, some businesses can be entirely websites.
There are now several places where you can create your own website by simply cutting and pasting or entering text, dropping in a picture or two, and click an OK button. Wix, Blogger.com and Tumblr.com come to mind. However, if you want to take advantage of all the ideas below, you might want to learn some basic HTML, or just hire someone to help you with the optimization parts.
Whenever you hire someone to help you with a website, make sure to maintain all access. You don’t want the site on some guy’s server. You want it on a big national company’s server such as Bluehost.com or Godaddy.com. Because, what if your webmaster goes broke, leaves town, or has an argument with his wife and shuts down his server?
It is very important to get all passwords associated with the site. You don’t want to have to hire the same webmaster over and over again for each little change that you could eventually make yourself, or pay someone else to make for you. I can’t tell you how many times, I, as a business coach, have had to tell business owners (kindly), “I told you not to trust that webmaster.”
The most important thing websites need is visitors. There are three main ways to get visitors.
1. Buy advertising. That mostly doesn’t work. Or more specifically, with enough money you can buy visitors, but that would be fewer visitors than you would need to pay for the advertising. I think it was Pets.com that was famous for that. Right before the big tech crash of 2000, this company had a popular website. It turned out that the company had spent millions of investors’ dollars on advertising, and their revenue was far below the expenditures.
There is one form of advertising that can work for many businesses, especially local businesses. That’s Google AdWords. You can sign up for an AdWords account for free. Once there, you bid on keywords. They should actually be called “key phrases” because most keywords are more than one word. Let’s say your keyword is “Piano lessons San Francisco.” You may find that your closest competitor has bid $2.17 per click on that same keyword. You can bid $2.18. Then, your ad will show up at more websites, and closer to the top of the paid side of Google search results, than your competitor. So, your ad is then shown on random websites. Well, not random. Targeted. This means that if someone has a website that has to do with piano lessons in San Francisco, your ad – and your competitors’ ads – will show up on that site. Or if no one has a site about piano lessons in San Francisco, then you’ll show up on websites about piano lessons, and other sites about San Francisco. When someone clicks your ad to go to your website, Google takes $2.18 from your account. You can adjust maximums, and all sorts of other settings so that if it runs wild, you won’t go broke. You can do things like change your keyword to “Piano Lessons San Rafael (a small city on the other side of the Golden Gate Bridge), which may not cost anywhere near $2.18 per click.
AdWords works particularly well because it is well-targeted. Google’s automated software does a good job of making sure your ad shows up on only the most relevant sites, and with only the most relevant search results.
Google also uses a technique that some think of as magical, and others feel is an invasion of privacy. They will show your ads to someone who has shown interest in your product or service. For instance, I was looking at Dremel tools one day on a couple of websites. For the next two weeks, ads for Dremel tools showed up in the ads on many of the sites I visited.
Think about the results: If you’re teaching piano at $30 to $90 per hour, how much would you pay to get another student? Each student would be worth hundreds or maybe thousands of dollars, right? So what’s $2.18 compared to that? Not everyone who clicks through to your website will buy lessons, but the ads are well-targeted, so a good many will sign up for lessons. Especially if your website is well-designed, which we’ll talk about in a minute.
2. SEO – Search Engine Optimization. You can do some simple things to make sure your website shows up near the top of search results in Google, Yahoo, Bing, and other search engines. We’ll talk mostly about Google, because it is the elephant in the room. My guess is that at least 70 percent of all searches are done through Google, with the remaining 30 percent handled by Bing, Yahoo and many lesser search engines. Then too, if you make a website that works well with Google, it will work pretty much the same with the other search engines.
Google ‘ranks’ pages based on how closely parts of the page match the keyword people are searching for, and on how many other websites link to a page. The first aspect, matching elements of the page to the keyword is easy. The second is more work and takes longer to achieve, yet may be less important.
By the way, don’t let anyone tell you they have a magic formula to get top ranking. There are hundreds of companies out there willing to take your money for search engine optimization that is all smoke and mirrors. What you are going to read in the next few paragraphs is the heart and soul of search engine optimization. Oh, there are some complicated schemes that might bring a marginal increase in results, but these companies that promise the sky do not deliver. That’s guaranteed.
So, if people are searching for “piano lessons San Francisco,” all you need to do is put that phrase in the page title – between the <title> tags, and in the< It can be helpful to have a page filename that also matches the keyword, such as www.mywebsite.com/pianolessonssanfrancisco.htm. Google says that as of October 2012, having an exact match page name is no longer significant. However, I have noticed that if you have an exact match domain name, such as www.pianolessonssanfrancisco.com, Google seems to index your page – include it in their search engine listings – within a day or two, rather than within two to three weeks.
So how many people are looking for “piano lessons San Francisco?” It would be important to know that, wouldn’t it?
As of now, 210 people per month are entering that keyword. How do I know? I used the Google AdWords Keyword Planner. It’s free when you sign up at adwords.google.com. Signing up for AdWords is also free. It only costs money if you place a bid on a keyword. You can enter any potential keyword, and it will show you how many people are searching for that. It will also tell you how much AdWords bidders are paying for the keyword and some other interesting information. It will then offer a list of related keywords, in case you find there are already too many websites optimized for your keyword.
Once you are on the AdWords home page, select the “Tools and Analysis” tab, and then “Keyword Planner.” Once that’s in front of you, select “Search for new keyword and ad group ideas.” Enter a keyword in the “Enter Your Product or Service” field, the scroll down and click the “Get Ideas” button.
You’ll see an interesting list, but that’s not the list you’re looking for. Click the “Keyword Ideas” tab. Now you see information for your specific keyword – data about the people who have entered exactly your keyword into Google, and below that, you’ll see a long list of suggested keywords based on what you entered.
So, the next step is to see how many people have already optimized websites for your keyword. Good news, well fairly good: Not many people have optimized sites for “Piano Lessons San Francisco.” When you simply enter that keyword in the Google search engine, several sites come up, some which have the term in their titles, descriptions or <H1> tags, but none seem to be doing it in all four.
As you may know, you can see the source code of any web page by right clicking (or [Ctrl] and click on a Mac) and selecting “View Page Source” in FireFox, or from within a context-sensitive menu on other browsers.
So if you were teaching piano lessons in San Francisco, you could be the top page in Google search results, and most of 210 people a month who are actually looking for piano lessons in San Francisco would click through to your website. Gosh, that could bring you 50 or 100 new students every month! So many that you could raise your rates and pick which students you want to teach.
But, if many websites already used your keyword, there are still some things you can do. You can change the keyword a little bit, checking the Google AdWords Keyword Tool and actual search results, until you get something that has enough people looking, and isn’t highly optimized. Maybe “Piano Lessons Berkeley” (a nearby community) or “Piano Instruction San Francisco,” or “Classical Piano San Francisco.”
You can optimize for more than one keyword. If you have a local business, you can make a whole bunch of similar web pages each focused on one area, or put several area names in your tags. For instance, “Piano Lessons San Francisco, Concord, San Mateo, San Rafael, Sausalito.”
If your business is national or international, such as a website designed to make money by itself leveraging Google AdSense, or perhaps selling rubber reptiles via mail order, then you might use a keyword that addresses a range of similar interests, like “fake rubber snake lizard turtle amphibian reptile.” Of course you wouldn’t put such a non-poetic name in the visible portions of your page, but you get the idea.
Next on the list is backlinks. This thickens the plot a bit. If a thousand websites have added links to your page, Google puts you higher in search results than someone who may actually have better on-page SEO, but fewer backlinks.
This is another place the charlatans go crazy. They tell you they have all sorts of ways to get instant, automatic backlinks, for only $39.95 per month. . . They also tell you that backlinks are essential. However, with a well-selected keyword you can usually ignore backlinks and still end up with lots of hits.
Don’t fall for any of that rubber snake oil. Much of what they do, when they do anything at all, is pure spam, and in the end, may weaken your position with Google. You don’t need to pay money for backlinks, and you don’t need to do spammy things to get them.
Simply asking webmasters to add a link to your site can work quite well. Many webmasters will, without cost, just because you asked. You can also trade links, as long as you don’t mind adding a reciprocal links list to your site. Better yet, you can post in newsgroups, forums, discussions. You can answer questions, or ask questions. At the end of every single post, you are allowed a tag line in almost all forums. Your tag line can contain a few words about what your site is, plus an actual link to your site.
Not only will these be noticed by Google as backlinks, but some real people will actually click through, bringing up your visitor count organically. The trick to not spamming is simple: Contribute legitimately to the discussions in which you participate. You can answer questions, postulate theories, bring up analogies. If you don’t know much about a subject, it is completely OK to ask questions, as long as you are not selling ‘expert service’ on your site on the very subject of which you’re asking questions.
What’s wrong with spam? Besides the fact that you’re interrupting people, and diluting the value of bonafide discussions, Google has become quite smart about spam, and actually penalizes a website in search results if the backlinks are of low quality.
One of the best sources of good backlinks is social networking, which will be covered in the next chapter. Social networking can work so well, that you may not need SEO at all.
Once you’ve built or updated your website, you can let Google know it’s there. This is especially important if no other websites link to it yet, otherwise Google has no way to know you’re out there, because Google finds websites by investigating links from other websites, crawling the entire Internet every two weeks or so, link by link. However, you can expedite the process through “Fetch as Google” a simple, free and easy-to-use part of Google Webmaster Tools.
If all goes well, you can have a hundred visitors within 24 hours of building a new website.
Once you’ve got at least a handful of visitors coming to your site, you can do some more things to make sure it works.
If you can provide some useful content or positive eccentricity, then people will tell people who will tell people. Your site can go viral. Take a look at hamsterdance.com. Especially take a look at the “Hamster Classics” and then “Interactive Dance.” This one dance page is similar to how the whole site originally looked.
It seems a computer science student made a one-page website as a thesis project. All it did was show lines of cartooney dancing hamsters with some background music. That was in the late 1990s, when it didn’t take much of a website to excite people. There was something about the cuteness of hamsterdance.com that caused everyone to email everyone else, and it went viral almost instantly. Millions of visitors came. The creator saw the potential, and quickly added more pages and advertising to the site.
It will take more than dancing hamsters to impress people these days, but if you can do something sufficiently amusing, or informative, you win the game!
Another example is Crayola.com. There, you’ll find quite a few interesting and interactive things for children. People come to the site because there’s something useful there.
Yet another example is a website where you can buy an antenna for specialized electronics. The site has many charts with exactly the information that radio designers need, so of course this site is where the radio people go to when it is time to order antennae.
Your author has made several such sites. One of the more interesting sites is www.worlds-worst-website.com. Its sole purpose is to cause people to tell people, who will tell people, and so on. If I recall correctly, I have never done any SEO with the Worlds Worst Website. This site has functionality and eccentricity.
Once you’ve got a site that gets visitors, you want to direct their time there. It would be a shame to build a large visitor count, then have all your visitors become confused and leave the site without satisfaction. Or more to the point, you want them to do something that satisfies you, also, like buy your product or service. Think of your webpage, or your website, as a funnel. The top is wide. Lots of people spill into your site. The funnel narrows, directing people downward. Or more specifically, it holds their interest. Someone told me the average web page visitor stays one and a half seconds, unless something catches their interest in that time. The funnel eventually directs them all through the spout. The spout is the action step. What do you want people to do? Click the “Buy Now” button? Give you a phone call? Come to your store? Set up the page to have this effect.
You should have a compelling title, or short bit of text in the upper left corner, since that is where most people look first. The purpose of this top left item is not to sell something, but merely to cause them to feel that your site is worth focusing on. To have them become invested in your site enough to stay on the page and read more, perhaps click through to other pages on your site. Finally, at the bottom of every place they might go within your site, you have your action step – the button to click, the phone number to call – whatever you want them to do. During this process, you may also want to convince them that your site is so excellent they should tell all their friends.
One thing you almost never want is links away from your site. In this book, I can tell you about crayola.com, because you already bought the book. I don’t need to sell you anything. But if I did, I would not risk losing you to Crayola. Besides, I think I’ve got your interest by now. Hopefully, I have you well on your way to starting or improving your own business!
There’s a super-effective trick with the social networking sites that can bring you hundreds or thousands of new customers, but which is oddly left out of most discussions of social networking. I’ll tell you about it after a brief introduction and ‘how-to’ in case you are new to the whole phenomenon.
The Big Three
The big three social networking sites are Facebook, Twitter and Instagram. There’s also a lot to be said for Pinterest and LinkedIn, as well as some other social venues. There are hundreds of others. And then, there are sites that you may not think of social networking sites, but have interactive features and can be used for social networking. These include YouTube, Vimeo, and even Ebay.
For this discussion, we’ll just focus on the big three. There’d be little sense in putting much effort into ‘lesser’ sites when the same effort on one or more of the big three will yield ten times the results.
Let’s start with Twitter. The main concept is that anyone can enter messages at any time of up to 140 characters in length. You can also attach pictures, links and videos. But the core of Twitter is these little messages, called tweets. What in much of the Internet world might be considered spam is perfectly fine on Twitter. In other words, stating tiny little trivia about whatever interests you, as often as you like, is perfectly fine.
Amateurs use Twitter to tell you they hate today’s homework, Jane wore the wrong dress, the boss said something insane, Frank just took a picture of his basset hound – you get the idea.
Most communication of this type happens among people who have decided to follow each other. For insance, if you start following Barack Obama, you’ll get his tweets about the things that interest him – health care politics, international relations, and so on. When he writes a tweet, only those who have chosen to follow him see his messages. In his case, millions of people are following. But unless you are the President of the United States, not that many people will follow you.
Here comes a big trick with Twitter: You can incorporate hashtags into your tweets. A hashtag is a word or phrase that starts with a number sign. Phrases consisting of more than one word are compounded, like this: #MileyCirus. When you put a hashtag in your tweet, anyone who has elected to see all messages about that subject will see your message. Now, rather than the three people who are following you, suddenly thousands may see your message.
If you pick something too common, no one will be following because the number of tweets are simply overwhelming. For instance, if you do add a #MileyCyrus hashtag, chances are few people will react because there may be thousands of tweets about her every day. On the other hand if you pick something too specialized, there’ll be no one who cares. Something like #RichardBransonHighSchoolDeploma – just isn’t going to bring results. But if you use a hashtag that some people are going to be following, magic can happen.
First, they’ll get your message, and perhaps go to your website to learn more about what you’re doing. Then, if your tweet is compelling, they may start following you, so you can speak to them even in ways in which you can’t incorporate effective hashtags. Finally, they may tell their friends, mentioning you or your website, or at least your tweets, in their own tweets to their friends (called retweeting).
Can you do the same thing in Facebook? You bet. Hashtags work almost the exact same way. You can even link Twitter and FaceBook together (and even several other social networking sites), so that when you post a tweet on Twitter, it also shows up in your Facebook activity.
Facebook has a concept called Groups. There are thousands of groups. These are just what you’d think: People with a similar interest ‘subscribe’ to a group, where the photos, messages, videos, and links are all about the topic of the group. For instance, there are more than 4,000 in a group about juggling. There, you’ll find posts about jugglers who have appeared on television, pictures of people juggling three, four, five and more objects, how-to information, and more.
The magic of Facebook groups is that you can subscribe to a group and post messages that will be seen by everyone in the group. Unlike Twitter, you don’t have to depend on people searching for hashtag terms, and you don’t have to already have made friends with thousands of people. Just post in an appropriate group, and you can have hundreds, even thousands of targeted visitors to your website within hours.
Just like the rest of the world, you don’t want to spam groups. You can’t subscribe to a group about orchids, and post about inexpensive Rolex watches. Well, actually you can, but you’ll probably be banned from the group. Besides, it is just plain not nice. Spam weakens a group. Have you ever seen a group that has lost the spam war? It’s disappointing. You might want to read about a vegetarian diet, but every post is about weight-loss products. As a group is dying, you see nine out of ten spam posts, and have to sort through them to find a little bit of good stuff.
But you can post on-topic material, and leverage your presence in the group. You might find a group about Manchester United. There, you can say whatever you want about the other soccer teams. The Manchester fans in the group will love you for it. Then, at the bottom of your post, you can have a signature line, complete with a link to your website. In fact, you don’t even need a signature line. You can add links to posts – as long as they aren’t wildly off-topic. You don’t even have to do that. Many people will wonder who you are, check your profile, the links you have posted there, and so on.
It is better to stay nearly on-topic, even with your signature and links, if you can. If your product or service is about fishing, you can find many boating and outdoor sports groups in which you can participate in a valid way, and receive targeted visitors to your linked websites. For instance, if you post in a bicycle racing group, you’ll get bicycle enthusiasts coming to your bicycling website. Many of them will because they are interested in everything ‘bicycles.’ If you post a link about bicycling in a mountaineering website, even if your text is a valid on-topic post, few people will actually click the link.
Let’s say you’ve found the paydirt. Perhaps your buiness is buying and selling used violins. You find a violinists’ group, an orchestral musicians group, and a classical strings group. You can’t just post over and over again that you’re buying and selling violins. What you do instead is offer violin trivia, post technical information, state that you particularly like Rossini’s William Tell Overature, and so on. You can answer questions that you’re qualified to answer. You can ask questions if you’re not an expert. You can ask controversial questions which will sometimes keep an active discussion going for weeks. With all this stuff on your wall, you can become something of an authority on the subject. By simply participating in a natural and appropriate way, you’ll bring many visitors to your website and end up trading many violins!
Finally, we have Instagram. Anyone can sign up. You may be already signed up and not know it. Facebook owns Instagram has taken the initiative to link all their divisions together.
Instagram has hashtags. Some experts are predicting that Instagram is a fad, that five years from now, it will be a ‘thing of the past.’ Instagram has one big disadvantage, and that is that you cannot embed a link in your text. On Facebook and Twitter, you merely have to mention a website, along with it’s extension, such as 500ways.com and it’s is linked. With Instagram, you can’t do that. So, you have to rely on a link in your profile description. However, you can mention websites in your post text, and people are able to copy and paste your website into their browsers.
Let me give you a concrete example:
I wanted to publicize an idea about bike safety. I found a group for bicycling. After reading a few messages, I figured out that the group is about bicycling in the San Francisco Bay Area, a place I have lived. There is a popular bicycling road that goes out to the rural edge of west Marin County called Sir Francis Drake Boulevard. It is dangerous because it has no shoulders, blind curves, and trees casting mottled sun and shade, making visibility difficult at times, especially since it heads due west into the sunset in the evenings. So I said so. I created a brief post stating that Sir Francis Drake was dangerous, and exactly why. At the bottom was a link to my bicycle safety website. You’ve gotta remember, I just told a bunch of bicycle lovers that the place they like to ride is dangerous. That was very controversial, just as I thought it might be, and so I was able to keep the discussion alive for a week. On the first day, 400 people came to my website. By the time the discussion died out, 1,000 visitors clicked through. And, these were exceedingly targeted customers – the very bicycle advocates I wanted to come to my site. My site was actually of international interest, but I happened across a Bay Area group, and remembered the problem on Sir Francis Drake, and so was able to make my little splash.
Letting Ebay Spread Your Message
I’ve listed some things for sale on Ebay, and noticed that hundreds of tire-kickers may come by before anyone actually buys a thing. How can you leverage this? You can post things that are not designed to sell. If they do sell, that’s just frosting on the cake. The reason for posting is to get a couple hundred viewers, who will then click through to your website.
Now, Ebay frowns on sellling things outside of Ebay through an Ebay listing. So you can’t do that. But you can mention a non-competing website in your listing, and you can direct people to your ‘about me’ pages on Ebay.
YouTube is another great website that you can use in a social networking sort of way. People love videos, especially ones that explain something or eccentricities. Right in your video, you can include links to any site you want. YouTube even gives you ways to monetize your videos directly. Let’s say you have done something weird enough that it goes viral, like this one:
For those of you who are reading this on a device that can display web pages, you can click the picture to see the video. Otherwise, you can go to this link to see it on another device: http://www.youtube.com/watch?v=ItZyaOlrb7E
The drummer is Steve Moore, known as The Crazy Drummer. When this was first uploaded to YouTube, it sat around for two years and got only a few hits. Then the name was changed to “This Drummer Is At The Wrong Gig.” Suddenly, it went viral. As of today, it has been viewed more than 23 million times.
If that were your video, you could have YouTube supply advertising within and around the video. Their advertising is linked to Google AdSense, which is no surprise, since Google ownes YouTube. AdSense places context-sensitive ads automatically. Ads will be displayed that are related to the subject matter, (probably “drummer” and “gig”), and also to what the viewers have shown an interest in. For instance, Google must be hip to the fact that I have been interested in Dremel and Foredom tools lately, because these are among the ads I see. Or, you could embed your own links.
Interestingly, the quality of a video is not nearly as important as the content, or the subject it addresses. Many successful YouTube videos were shot with cellphones, and not edited very much, if at all. But what all the successful ones have in common is that they do something people want to see. They are informative or eccentric.
And there are the other websites. You can post photos or artwork on DeviantArt.com, Pintarest.com, PhotoBucket.com, you can make interactive blogs on Tumblr.com or Blogger.com.
In these websites, or any social networking or similar websites, memes can be effective.
A meme (pronounced ‘meem’) is a unit of information that carries an idea from person to person almost in the way that genes carry physical traits from generation to generation. Shortened from the Greek mimeme, which means “imitated thing,” the term was coined by Richard Dawkins, an evolutionary biologist, in 1976. Modern memes can be a written phrase, an image, an animation or sound clip.
Bumper stickers might be typical memes. Remember the one that had a picture of a golfer and said, “Don’t drink and drive. Use a 7-iron.” Hopefully, this meme made driving a little more safe.
It’s easier to create memes these days. You can just upload a little something to Tumblr, Twitter, Google+, you name it. And if your meme is successful, everyone will share it with their friends and associates, and soon, your meme will be seen by millions. A typical image meme would have a photo or drawing, and a bit of text. There are no standards – yet. Your meme can be any size, any of the standard Internet formats – .jpg, .bmp, .gif, or .png), and of course it can contain anything you want. All you do is make your meme, including a link to your website or whatever you want to convey, upload it somewhere, set back, and watch the business roll in. At least that’s the idea.
It would be pretty hard to make a text-only meme. The closest I came is this: “If all the toilet paper used in America was on one giant roll, we’d be unrolling it at 7,600 miles per hour, roughly ten times the speed of sound.” This could be uploaded to some trivia websites, or into various groups on Facebook, along with a link to whatever I’d want to link.
The problem is that text memes will tend to get separated from their links when people spread them around. So, the answer is imbed the text and link in a picture, so it is the picture that gets passed around, not just a line of text. Besides, the picture may enhance the concept of the text.
You can also make video memes, with or without sound. They have the advantage that they more completely involve the viewers. The downsides are that they take a bit more effort to produce, they don’t run consistently in all environments, and people have to sit and watch them before they get the entire message. In this information-rich society, the attention span is said to be one-and-a-half seconds. If your animated meme doesn’t catch people in that amount of time, it isn’t going to be an effective meme.
I wanted to tell you about a couple of Craigslist tricks that are important to many kinds of businesses.
If you have a service business such as teaching or repairing, I have a tip for you farther along in this chapter, but let’s start with merchandise business ideas on Craigslist.
If you buy and sell things, great opportunities exist in the space between Craigslist and Ebay. You can often buy things for less on Ebay than they can go for on Craigslist. That’s because people often will not trust things they can’t personally see and hold before buying. This is especially true of musical instruments, since people want to play them, to hear them, before they commit. Then, you can sell these same things at a profit locally on Craigslist to people who you will let see and hold them. These people are also more likely to buy locally because they can have their items right away. Many folks don’t want to wait a week or more for their purchases to arrive. Others don’t really understand and trust Ebay, and would rather pay cash to an actual person.
On the other side, people who are moving out of town, don’t want to pack and ship things, and who want immediate cash will sell things for much less then they would be worth online. They can’t get the full value for these things, because the market is limited to the local community. So of course you can come along, swoop these things up, and list them for a profit to all the national or international buyers on Ebay.
First, let’s talk about a couple of tricks for selling things on Craigslist.
When you list an item for sale on Craigslist, it scrolls down the list as other people add the things they have for sale. In a busy community in a busy category, such as Computers in Seattle, your ad can scroll out of sight within a few hours.
So, here’s what you do: Every couple of hours, add a different item. Let’s say you are selling used clothing. You can put up an ad for a sweater at 1pm. Then at 3pm, you can put up an ad for a pair of pants. Then at 5pm, a jacket, and so on. Each one of these ads carries a link to your website, saying something like, “much more clothing available at mywebsite.com.” You might even have thumbnails for your other clothes at the bottom of each ad. This is not spamming, because every ad is for something different.
As you may know, with craigslist, you are welcome to ‘renew’ an ad every 48 hours. This means that your ad will reappear at the top of the list. So, after you’ve built up a sufficient number of ads, you can start renewing them, one at a time, every couple of hours, so you always have something near the top of the list.
The other trick, which I already alluded to above, is that you can have a website that has a larger list of your inventory. Every one of your Craigslist ads can link to your website. It seems to work well to have a vertical table on your website, with thumbnail images of each item on the left, descriptions to the right, and prices to the far right. I used to do this with bicycles, although you could do it with clothing, musical instruments, computers, furniture, or whatever you want. I kept an inventory of about 18 used bicycles and each was pictured on my website until sold.
I have to admit I didn’t stay up to date with posting on Craigslist. I usually only managed between one and three ads per day, and skipped some days altogether. This was because my bottleneck in the bicycle business was getting bikes, not selling them. Unlike most many other product lines, all except high-end bicycles are too big to buy profitably on Ebay – due to the shipping cost, so I had to depend on a local market. And there too, I have to admit, I could have done things to purchase more bikes locally, but had other business interests at the time. Still, I sold 20 bikes per week with an average profit of $75 to $100. So this could work the same way for your business. After doing it for three months, I moved on to other pursuits, but during that time, strictly from craigslist exposure, my bike inventory website had received over 20,000 unique visitors.
When an item sells, it is appropriate to delete it from Craigslist as soon as you can, but I think it is better to leave the listing on your website for a day or two, marked “Sold,” leaving the price visible. When people see that your business is active, an unconscious impulse causes them to want to buy something ‘before it’s too late.’ It also keeps browsers coming back. They want to watch the activity, and eventually when they need an item, or have a friend that does, where do you suppose they’ll look?
One of the best ways I could have increased my purchasing of bicycles at the time would have been to keep an ad active in the “Items Wanted” section telling people that I buy used and broken bicycles. This would have the added advantage that my wanted posting would also link to my website, so people who see that I want bikes, will also see I have bikes, in case they are upgrading, or looking for a bike for any reason.
The impact of such listings grows with time. Several months later when Fred, who doesn’t need a guitar, hears that Jenessa wants a guitar, he’ll remember the ‘guitars wanted’ ad on Craigslist, and direct Jenessa to the linked guitars-for-sale website.
And of course, on your website with your list of items for sale, you can mention that you are also a buyer.
One of the best ways to let people you’re buying things on Craigslist is to let them know you’re selling things. Whereas you could post multiple similar ads such as “Cash paid for sweaters,” “I buy name brand bluejeans,” and “I want your quality used clothing,” this verges on spam, in fact it pretty much is spam, in the “Items Wanted” category. Not only does spamming make a mess out of a good category, and is unethical, and will probably get you a bad name, but Craigslist users will probably get in the habit of flagging and deleting all your ads.
A much better approach is to sell things in the proper “For Sale” category. In each ad, you also happen to mention that you buy things. Of course, you can have a single ad announcing that you’re buying in the “Items Wanted” category at the same time. You might be able to expand in the items wanted category if you are careful. You could run an ad that you are buying upholstered furniture on Monday, an ad that you are buying wooden furniture on Tuesday, and an ad that you are buying office chairs on Wednesday.
If you are in a service business, such as repair, entertainment or lessons, there are a couple of problems. First, you can list only in the “Services Offered” category, which fewer people see. Oh, they may be better targeted, but still, few people browse that category. The other problem is that it is difficult to post multiple ads in the Services category.
The only way you can post multiple services without spamming is to break your services down to specifics and advertise each one. For instance, if you tune and repair pianos, and give lessons, that’s three ads, isn’t it? Lessons, Repair, Tuning.
But that’s awfully close to spamming, and probably not enough exposure. So here’s the plan:
Now that you’ve read this book, you have a good idea about how to buy and sell things at a profit. I’m going to suggest you dabble a bit in used items, even if that is not your primary business. If you are into pianos, buy a couple of investment pianos and put them in your garage or whatever. Or, as you teach lessons, perhaps the very pianos you teach on are always for sale (as long as you keep a spare piano, ready to use). Now, you can put ads in the Musical Instruments section of Craigslist for your pianos, doing the tricks stated above. But your objective isn’t to sell pianos, although that could be a good income on the side. Your ads are there mostly to present the links to your website where you sell the lessons and repair services that you offer. If you don’t really want to mess around with buying and selling (but who wouldn’t?), you can keep your prices too high. The point is that people looking for used items are often the same people who want lessons or repairs. This is where they’ll be, in Items for Sale, not Services Offered.
Finally, on Craigslist, you’ll notice that there are forums at the left side of the home page. You can participate in those forums. You can teach what you know. You can answer questions. You can ask questions about what you don’t know. But at the bottom of every posting, you can have a low-key link to your website. Keep in mind that some of the forums are national, so you’ll want to notice that before you post a link for local service or large items for sale.
More About A Free Exchange
Perhaps your church or group has sponsored an occasional clothing exchange. I’m not talking about a rummage sale where you donate your unwanted clothes and they sell them to support the organization. I’m talking about an event where everyone brings their unwanted clothes, perhaps on a Saturday morning, and everyone can carry away other members’ unwanted clothes. So, you can get rid of that funky sweater someone ‘gifted’ you with and pick up a great pair of pants, or whatever.
What if this happened on a grander scale and was about whatever you’re interested in, not necessarily clothing? Imagine a regular location where this free exchange went on every weekend, or even every day? Do you see where the profit is in this? Since you could be the one who organizes and maintains it, it is only fair that you get first pick on everything that comes in. If you let everyone know right up front that that’s exactly what you’re doing, they’ll all be OK with it. I can assure you of that, because I set up a business that grew nearly overnight into a large, ongoing free general exchange in Marin County, California, and that’s what actually happened.
More specifically, I rented a 2,500 square-foot store, primed it with stuff I bought for next to nothing at garage sales, and opened to the public. In my exchange, I allowed exchange of anything of reasonable size (no refridgerators or mattresses, please!) There were many books, garden tools, car parts, sports equipment, you name it. But I could have specialized in appliances, bicycles or car parts and accessories, clothing, computer gear, or pretty much any type of thing. A couple of years later, I set up a quite successful specialty exchange, dealing just with books, CDs and DVDs.
Never once did anyone complain that I had first pick. Quite the contrary, I received complements all day long for the nature of the business.
Another thing that might surprise you is that I received much more stuff than I gave away. There was so much stuff coming into my exchanges, that much had to be discarded.
When people decide to clean out the attic, basement or garage, they tend to bring multiple boxes full of stuff. There were hundreds of wealthy people who brought things to the exchange just so other less wealthy people could get them. All these donors knew full-well that I was supporting the business by picking the cream off the top.
I’m sure you can imagine what I did with the one percent or so that I picked. Right, I sold them on Amazon and Ebay.
I only ran my exchanges as experiments for four months each.
During my first four months, in the general exchange, a volunteer ran some math and worked out that I gave away $44,000 per month worth of stuff. This was just wonderful for all the people who came from the poorer areas east of Marin and were able to get good things for their children and themselves. Even though the store was in a rather fancy suburban neighborhood, and many of the ‘shoppers’ came in junky cars and looked kind of scary to the locals, I was often told how much it was a great community service by the well-off locals.
I have been more of an experimenter than a do-the-same-profitable-thing-year-after-year person – probably to my detriment, but my exchanges could have been huge successes. Instead of moving on to the next experiment, I suppose they could have branched out, and I’d be very successful in the exchange business. But, being an experimenter and a writer, I’ll leave starting the next exchange up to you.
Imagine the potential. If you specialize in musical instruments, you’ll get instruments into the hands of children and adults who couldn’t otherwise afford them. If someone has had their instrument stolen or broken, you can provide them with another. You can provide sheet music. It wouldn’t be surprising if your free sheet music collection could become larger than what any store in town carries. You could have walls filled with free CDs. Interestingly, your place can become a destination for musicians. Many will volunteer to help your efforts. Everyone will just love hanging out, offering advice, repairing instruments, talking shop, jamming – well, you get the idea. What a place it can become!
If you specialize in clothing, you’d be offering a great service indeed, as people who can barely afford to clothe themselves and their children will get what they need. Their hard-earned money will go to better quality food, paying back bills, and so on instead of clothing, and they can dress proudly, not shabbily.
Of course much of the stuff that comes in will be in sad shape. You’ll get brass instruments that are quite dented. You’ll get torn clothing. You’ll get books that are 30 years old. You’ll get unidentifiable car parts. You’ll get wobbly furniture. But not all of it will be junk!
When it’s free, you’d be surprised how delighted someone can be with “70’s Pop Tunes.” When it’s free, people will figure out a way to fix that chair with the missing leg, or the vase with the crack in the side. Or if they can’t fix it, they’ll have fun trying. You may not be too happy about selling the good things that come in, even though that could be quite profitable. But if a stamp album comes in that you can sell on Ebay for $4,000, that money will go along way to support the exchange, wouldn’t it? That way, you can get a lot more servicable goods into a lot more hands.
Perhaps the bulk of the money will be from selling pieces of broken things. As far as I went with pieces is that I experimented with two student-model flutes. I took them apart and listed the pieces on Ebay. They each brought just over $100, after all expenses, selling most of the bits and pieces for $10 each. I once took in a guitar that was cracked on all sides, and missing a couple of tuners. It was not a production model. It appeared handmade, having no brand name and no model, but it had excellent inlay around the sound hole. I put it as-is on Ebay, expecting maybe I’d get lucky, with a winning bid of around $20. It sold for $203.
The reason I created two exchanges was that I wasn’t quite happy with the first one.
My first version started out quite large, and I had a rag-tag assortment of about 20 volunteers. Not being a great manager, I quickly lost a degree of control over these people. Some came in drunk, some complained about everything in sight, some treated the clientele crudely. So, if you’re going to do this, you’ll either want quality employees rather than volunteers, or you’ll want to screen your volunteers better, or you’ll want to have a more alpha personality. Or, perhaps the best solution, is keep it small and manageable, perhaps in a 700 – 1,000 square foot space in a smaller community, or hidden away in a neighborhood.
That’s what I did with my second exchange. I wanted something smaller and more manageable. It was 1,000 square feet, about a third the size of a typical 7-11 store, in a town of just under 20,000 residents. Initially I did everything myself, no volunteers. I decided to specialize in books, CDs and DVD movies, because I figured I’d have a quieter, more focused clientele. I was exactly right. The second exchange was just as profitable, yet much less hectic, and therefore more fun for me.
Speaking of profit, I spent about $10,000 setting up the second exchange. I could have done it with less, but in my case, I didn’t need to. By the end of the second month, I was making $5,000 per month profit. At the end of the four-month experiment, I sold it quickly for $32,000. (If I had wanted to, I could have held on for a year, and sold it for much more!)
A bit of a problem with the first, general exchange was waste. Since I was taking everything, not just books and disks, I had to rent larger and larger dumpsters to accommodate the things that weren’t worth even giving away. At the end of the fourth month, I was paying $250 per month for dumpster rental.
To avoid discouraging people from bringing things, I decided never to decline any reasonable donations. I stand by this, and believe it’s better to spend a bit on garbage pickup than losing donations from people who start to figure you may not accept what they bring. Interestingly, things they assume you don’t want may be wonderful donations. I received a sousaphone that’s bell was crushed all out of shape. It was awful in appearance, but still played, so I gave it away.
If an item needs repair, you may be surprised how many volunteers are available to fix it. They may prefer to fix it in the exchange – if you have the space for a repair area. This is so they can become part of the social scene. Or, they may want to take things home to repair them. But what if the volunteers are unreliable? What if someone brings a sweater home to reknit a blown seam, and never brings it back? If you were going to give it away anyway, no loss!
In the case of an item beyond repair, you can sell what parts are good. There’s good money in a sousaphone mouthpiece or valve if someone needs that exact part on Ebay. I have studied the bicycle parts sections of Ebay from time to time, and am amazed how many ordinary everyday parts are being sold there. I once took apart a Roomba vacuum cleaner, and sold all the parts for well over $100.
I had a sign on the front window of my general exchange that told people not to leave donations after hours. But they did. Most mornings I’d find a enough bags of worn-out clothing, broken lawnmowers, sofas without cushions, and so on to fill a pick-up truck. These were the things that people just wanted to dispose of, didn’t want to pay landfill fees, and would be too embarrassed to try donating to the store during the day. Of course this wouldn’t be so much of a problem with a specialized exchange. In fact, the nighttime donations might surprise you. Someone once left two banker’s boxes full of old records. I called my friend Ken, who paid $100 per box for the collection. He took about six albums per box, and donated the rest back to the exchange.
In my media exchange, I learned to solicit nighttime donations. I had a drop box with a slot outside. Hundreds of books per months came in through that slot. I used a slot rather than an open container, because I didn’t want other people coming by and rummaging through the books before I had a chance to pick through them. I also put a free shelf outside, so visitors could get books, and occasionally music CDs, any time of the day or night.
Taking the concept one step further, you might be able to design an exchange that doesn’t need your presence at all. One way is to staff it with volunteers. Another is to have drop boxes around town, much like some clothing companies do, in which you ask people to drop of things they’re not using. On the drop boxes, you’d have signs indicating what you’re doing – donating most of the stuff to children overseas – or locally, for that matter.
I believe you should also state that you’re making a profit in the process. If you’re up front, not only will no one complain, but many will just love what you’re doing. If you try to hide it, people will undoubtedly get the wrong idea. Unfortunately, some of those companies that put out clothing donation boxes a few years ago developed a bad reputation for not actually fulfilling the promise of making good use of the donated clothing.
A little aside here: As I understand it, a fellow in Boston advertised on Craigslist that he would pick up unwanted books. He didn’t mention what he was going to do with them. He didn’t promise anything. Yet, many people gave him thousands of books, which he sold on Amazon.com.
Taking it even a step further, I can imagine that you might have a charitable arm. But that’s up to you. It is quite possible that a year or two after you start an exchange it becomes so profitable that you would have money left over with which to do good work.
To round out the picture, it would also be possible to have specialty exchanges that are simply shelves in public locations. The idea is people can drop off CDs, DVDs, books, toys, or whatever they don’t care about any more, and pick up ones they like – all for free, of course. Your job, besides keeping the shelves organized and clean, is to go through the stuff that comes in, gleaning what will sell online. Quick oil change places, laundromats, and restaurants would all love to have such a shelf.
You can tighten up the efficiency of free exchange shelves a bit by having a box with a slot on the shelves. Signs tell people to drop donated music into the slot, and take whatever they want. The point is you don’t want people carrying away the obscure and possibly valuable items. You want to be able to sort everything that has been donated before it gets away.
Don’t forget to have contact info so if someone has boxes and boxes of stuff, they know how to contact you for a free pickup.
If have not tried this exact business model myself. I did, however, put book shelves in eight laundromats. These weren’t exchanges. I purchased the books by the boxful at garage sales, paying on average five or ten cents per book. I then put them in the laundromats with signs saying, “Put $3 in the slot per book.” I split the money 50/50 with the laundromat owners or managers. Sure, some books were stolen from my shelves, but I never noticed, and it didn’t significantly impact the bottom line. These shelves were quite profitable for the small amount of time involved.
Music CDs ought to work especially well. Millions of people are looking for music they haven’t heard to put on their iPods or smartphones, and then discarding the CDs once they’ve finished uploading. It’s recycling at its best, isn’t it?
Getting back to the idea of a full-size exchange, when you pick a location, it is important to have good parking. This can be even more important than for an ordinary retail store, because many people are going to be bringing large loads of stuff. If they have to carry it a hundred yards (100 meters), they’ll be less inclined to bring stuff next time. Fortunately, the parking was very close to my first exchange. Even still, I provided hand carts for people to get things from their cars into the exchange. You don’t want anything to come between people and their desire to bring things to your exchange.
And yet, parking was a problem. My store became rather popular within a very short time. (Advertising and publicity is absolutely not necessary in a business that exists to give things away.) The problem was the parking lot became congested. And that, ultimately, was the downfall of my experiment. When traffic started clogging the little strip mall I was occupying, the neighboring businesses started to complain. The property manager suggested I leave. Oh, I could have worked things out, but since I was ready to move on, I just pulled the plug.
So, you can learn from my experiments. One thing I’d recommend if you want to start your own exchange is to start very, very small. You don’t need to rent a store. Depending on where and how you live, you might want to start it out of your garage. Or you can rent a space in a flea market. Or set up something cooperatively with someone who has commercial space available. For instance, you might find a quick-change oil change place who would gladly donate some lobby space in trade for hundreds more people getting their oil changed there.
I’m not the first one who set up a store to give things away. The precedent was set in 1968 at the Digger Store in the Haight-Ashbury neighborhood of San Francisco. The Diggers were a loosely assembled group of entertainers (one of whom was Peter Coyote) who started making free soup, beans, and bread for the hippies that came to the Haight during the Summer of Love. In time, they rented a storefront where they accepted donations of clothing and general merchandise, and gave everything away. I did a bit of research and never found out how they paid the rent. My guess is that they came up with the first month’s rent, then just coasted until they were evicted. That store, too was a short-lived experiment. Digger Archives
Your Own Retail Store
The prestige and freedom that comes from having your own retail store can put a long-lasting smile on your face. It’s your place, so you can have wonderful conversations with your customers. You can decide to host jams, groups, or parties after hours. The local celebrities may drop in from time to time. You’ll probably eventually end up making more than any hourly wage, and you can hand the whole works over to your children forty years later.
Being primarily a writer, I lost interest in the stores I started, so I did what you can do with your stores too – if you are impatient as I am: You can build your store up, then sell the business for what will seem like a remarkable amount of money. The longer you keep your store, the more it is worth. The downside is that you’ll be making so much after a few years, you may not want to sell it.
I have found that the idea of starting a store from scratch scares many people. That’s why so many will pay so much for an established store. However, as one who has done it several times, I can tell you starting a store from scratch is really quite easy.
It is also easy to lose money, so I’ll offer a few pointers in this chapter to help you start successfully and stay successful.
Consider this, the first rule of business: You’ve got to make more than you spend.
A good second rule might be: Don’t invest more than you can afford to lose.
Given those two rules, you may have to start something on a shoestring, and let it pay for its own growth. That’s very possible, and what this chapter is about.
But you may not yet have even a shoestring. If you don’t yet have the money for a retail store, you can put this book away and give up. Wait a minute! Of course, I don’t recommend that. There is another way.
you might like to start small – very small. You can usually find a way to start with a very few of whatever you’d like to sell, or something similar, put them in the trunk of your car, sell them to friends and aquaintences, list them on Craigslist if it serves your area, and possibly sell at flea markets or in consignment stores. As your mini-business grows, and as you are gaining experience with your product line, you can start building a pile of inventory and a pile of money, until you have enough to easily and safely start a retail store. I know a fellow who did it with camping gear. He started with second-hand things he bought at flea markets and garage sales. It’s been several years since he started. He now owns two full-fledged and full-service retail camping goods stores. His stores don’t compete with K-Mart. He mostly sells high-end used and new camping gear to expert hikers, climbers, hunters and others. It turns out there are plenty of those expert enthusiasts to keep his two stores plenty busy.
The biggest expense for most people starting a retail business is space. A typical store is around 1,000 square feet. Rent in a ‘good’ neighborhood is $1 to $2 per square foot (10 – 15 Euros per square meter), or more. So, right away, you’re looking at $12,000 to $24,000 per year.
Then you might want to consider heat or air conditioning, electrical usage for lighting and so on, liability insurance, telephone, credit card processing, and city or county licensing. All these typically add up to another $10,000 per year.
Then there’s advertising costs. And there could be the rather huge expense of employees.
These are the expenses for someone starting a typical retail store.
If you want to start a business in the usual way, you must be able to afford to lose a lot of money, at least until your business is up and running. And many businesses take from two to five years to become profitable.
Worse, many, make that ‘most,’ businesses never do become profitable. The statistics are staggering, and interesting. Did you know that one out of every four women fail in business? Ah, but what about the men? How well do they do? Four out of every five men fail in business!
Of course there are stories of people who failed two or even three times before becoming successful. Can you afford that? Would you want to go through that kind of stress?
But there is the other way – starting small – in which you can avoid most all the stress, most of the expense, and the risk of failure. Starting small has been covered in other chapters.
You can shortcut this process. You can do it your way. But I don’t recommend it. What I’m going to tell you is a rather safe and sure way to get into the retail business once you have some experience and money built up. Starting from absolute scratch has as much chance of growing into something big, maybe even huge, as those who start with $500,000 cash.
You want to choose a business that will work in our modern world. Urban blight, WalMart, a troubled economy, and inexpensive machine-made products are part of our world these days.
So, let’s rule out some things: If you have a hand-made product that’s the same as, or no better than what anyone con buy in a variety store such as K-Mart, then you probably aren’t going to be able to sell it. If it costs you $10 to make each of your ‘things,’ then the big companies can have the same ‘thing’ made in an Asian factory for perhaps $2.
If you want something that can be purchased wholesale, and you can buy them in lots of 100, you’ll pay more per item, and more for shipping, than the big chain store companies who can buy in lots of 100,000. They make all sorts of back-room deals with the manufacturers with which you can’t compete. UnlessÖ (more about that in a minute.)
You’ll find service is easier to sell. Yes, the big chain stores offer computer repair, eyeglasses, they have a big photography department, some offer tayloring, you can have window screens replaced, paint mixed, keys made. However, everyone knows this is boiler-plate service. The service is generally done by minimum-wage employees with relatively little training.
If you offer service by an expert, in a field that needs quality attention, you’ve got something you can sell. Then, if you can offer that, you can pump up your sales with hard goods – the very things I said you can’t buy at competitive prices. As you’re writing up service tickets, you can suggest this replacement part or that accessory. The customers who come into your store start to become familiar with what’s on your shelves, and will start coming for the specialty items they can’t find at the department stores. And, even though you have to pay more for items purchased from wholesalers in lots of one or a dozen (instead of 100,000), you’ll be able to sell them for more.
A small bicycle shop fits the mom-and-pop retail paradigm nicely. Wal-Mart does not offer high-end bicycles. They do not have special cycloscross tires, or Zefal pumps or Kool-Stop brake pads. They do not have employees that know how to custom fit your bike to you, or even sell you the right size. They do not offer any after-sale service other than a complete refund. They don’t know how to get you the same model, but in lime green. What else? They don’t know about accessorizing the bike: fenders, lock, lighting, luggage and so on. They cannot tell you from their own experience how it is to bicycle tour in Bulgaria, how to train for a double-century, how to strategize a BMX race, or maybe even how to fix a flat tire.
The same is true for a fabric store, a pet shop, or a musical instrument store. The department store employee doesn’t quite know what pinking shears are used for, why someone might like 12-inch hacksaw blades instead of 10-inch, or what a red-eared slider eats.
I think you’re beginning to see why a specialty shop would be successful, even with a huge chain store right next door. Maybe even more so, since all the chain-store buyers will see your sign and drop into your shop when they want something that the chain store can’t offer.
What other kind of store might work? Musical instruments. Tool supply. Certain kinds of appliances, many kinds of specialty sports or hobbies, as long as there are enough participants in the sport or hobby in your community. Ethnic foods. Organic natural foods are particularly good if your community is one that is aware of good eating, and doesn’t already have too many such stores. Automotive accessories. Antiques. Used merchandise can be a great choice, especially second-hand clothing and furniture.
Do you see the common factor in these? They offer products that can’t be found in the department stores, or something that requires more knowledge or service than those stores can offer.
It is probably important to pick something that you know quite a bit about. Whereas a person can just decide to start a guitar store without even knowing how to play music, it is harder that way. On the other hand, the owner will probably enjoy learning to play guitar, how to determine the value of guitars, and so on – but it can be an expensive process as mistakes are made, and customers are left without the advice they need.
So what do you know and enjoy? Second-hand building materials? Home crafts? Spanish cuisine? Sound systems? Digital photography? Soccer? Laptop computers? Organic gardening? You don’t have to start out as the world’s leading authority in your field. But it helps to know enough to advise your customers properly, and know what kind of inventory they will want to buy. And if you’ve been through this process and that, you’ve read the books, you know you’d want to buy certain brands and models, then you have the knowledge you’ll need.
What people notice first about a piano store is the pianos. A successful piano store doesn’t sell the kind of keyboards you find in the department stores. They start at mid-level, and go up in price from there. That’s because they can’t compete with low-end keyboards. You can purchase an entry-level Yamaha keyboard from a typical wholesaler for $119. You can buy the same thing at Radio Shack for $79. But when it comes to keyboards for $400 and up, with a USB port and weighted keys, they simply aren’t available at Radio Shack. On the other hand, customers shopping in that price range are rather specific about what they want. So, you need to carry a variety, be well tuned into what people want, or expect sales of new keyboards few and far between. Then, assuming there are other high-end music stores in your area, you’ll have to keep your prices competitive, making only a rather small mark up.
So, eventually, you’ll want to carry new keyboards and pianos because they bring customers in who buy sheet music, amplifiers, microphones, and all that. They come to look at your keyboards, as if it were a museum, but they don’t leave without buying a patch cord, a speaker cabinet, a sheet music book, or some other accessory.
However, if you were to start your music store with new keyboards and pianos, you’d be in debt on your first day – or maybe you would have blown your inheritance foolishly.
So now let’s talk about this shoestring concept. That’s how I started. I took it to the extreme, by necessity. You see, I was 16 years old at the time, with just about no money at all – maybe $10. So doing what a 16-year-old sometimes would do: I started fixing bikes for kids in the neighborhood, trading used bike parts, and just having a good time puttering around. Every now and then, I’d make $20 or $30 on a repair or a trade. Then people started paying more regularly for repairs. The trading inventory became so attractive that people bought my second-hand things more and more often. It wasn’t long before I outgrew my one-car garage, and my parents’ patience. But by then I had a couple of thousand dollars. That’s when I made the leap to a retail store. I found a place of about 700 square feet for rent in the ‘bad’ part of town. It was a place I could afford. And I moved my eight used bikes, handful of used parts and tools into the store. I painted my own sign and kept the heat very low all winter. I was willing to do whatever it took. I remember one time regluing a bunch of wooden dining room furniture because I had a customer who was willing to pay for that. But I also taught some bicycle repair courses in the shop. By spring, I had made it through the winter without going in debt. In fact, I had more than when I started. Actually, it was right before Christmas that I was able to make my first-ever wholesale purchase. I bought $200 worth of lights, pants guards, reflectors, patch kits, tires, seats, and things I thought might sell as Christmas gifts, or be good general inventory. I had found a wholesaler who was willing to sell in quantities of one or two, not dozens of anything. Some of the stuff sold, and I bought more. By Spring, I was able to place my first order for honest-to-goodness NEW bikes. It was only 6 bikes, but oh, I was so proud!
Let’s fast forward four and a half years. My shop had turned into a ‘pro’ shop. In a city of 400,000 people there were 10 other bike shops. Too many, really. But I did well anyway, because I treated each and every customer as if they were important – because they were. I studied, practiced, and listened, and became a bike expert. I was able to offer advice. I’d steer someone away from a certain brand of patch kit because I knew the glue would always dry up after the first use. People like this kind of personalized service, and went out of their way to buy things at my shop. They told me all the time that they drove past this bike shop or that, to come to mine. I taught more bike repair lessons. I learned how to build custom frames, and taught frame-building lessons. I hired people to help. At the peak of the summer season, I had eight employees and had expanded into other units in the building. I was then operating out of a couple thousand square feet. To fill the extra space, I went crazy and bought 125 new bikes in one batch and sold them all within a month.
Actually, new bikes wasn’t the focus. The part of the profit pie that came from new bikes was actually rather small. The piece that came from the accessory sales, repairs and customizations those new bikes brought was larger.
The two biggest parts of the pie were the general repair trade and used bikes. It turns out that all my customers told their friends and family that my shop was good, honest, fast, and all the other right things when it comes to repair. So during the summer, I had enough work to keep four mechanics going full time.
Used bikes turned out to be much more profitable than I had figured. They were more profitable than new bikes. You see, I learned early on to ask anyone who was considering buying a new or used bike whether they’d like to trade anything in. I could buy bikes all the time for $25, put perhaps $25 worth of labor and parts in, and sell them for $125.
And that’s my advice for someone who wants to start on a shoestring. You may not have to start as small as I did, or maybe that’s just right. Can you work out of your back yard? Your basement? A tiny rented space? I have seen bike shops set up in 10 x 20 foot flea market stalls. What about partnership? If you don’t have everything you need, perhaps you can find a partner who has the missing knowledge, money, time, space, whatever you lack. Check out the Partnerships chapter.
As your business slowly outgrows your space, you’re gaining experience in your product line, and in dealing with your customers. By the time you have the money to move into a bigger space, you also have the expertise to make sure your profit is more than enough to pay for it.
What happened after 4-1/2 years? I sold the business for quite a bit of money. I bought a motorhome and traveled around the USA for several years on the profit. In retrospect, that may have been foolish, but I was still young. If I had kept the shop, it would probably have been a chain of bicycle shops by now. I may have had my own manufacturing plant. On the other hand, by traveling, I gained more and varied experience, and at any time I could have started another bike shop. In fact I did, twice. And I created some other businesses. Then I sold them. I can always start another. But of course today, I’m having too much fun writing about businesses.
Here is some more detailed advice:
1. Remember the first rule? Don’t spend more than you take in. If you take that quite literally in your first months, you’ll stay safe. Furthermore, you’ll learn all sorts of shoestring tricks, ideas and work-arounds that will serve you well, even once you’re making millions of dollars. Then, you can have your managers show your employees some of the same things you once did to save money, so each of your employees is also profitable to you.
2. And the second rule? Don’t invest more than you can afford to lose. Once business is gaining momentum, you may be tempted to speed things along a bit by investing too much, too soon. I remember a camera store that had one Hasselblad, a very expensive camera. After a while, it sold. So, they bought five more. It took years to sell all five, and in the meantime, those five high-end cameras tied up a lot of inventory money that could have been used for everyday things that sell more quickly.
When you first start, it is completely acceptable to focus mostly on service, if your product line has a profitable service component. If you can fix the things you deal with, you have an immediate income in the repair business, without having to put much, or any money into inventory. As your repair business grows, you’ll know which parts and accessories to stock that will sell frequently.
It was quite common in past decades to find many stores in a town that were really almost entirely repair shops. You’d walk in, and see almost no retail displays. It felt like walking into a, well, repair shop. Right up to the front door was equipment in all stages of repair, tools everywhere, the ‘salesman’ who probably owned the place greeted you in dirty overalls. You may still see this from time to time. Shoe repair stores come to mind. TV repair stores often were like that. TV repair, however, has gone bye-bye, since solid-state electronics are more reliable and the cost of new TVs is so low in comparison to repair costs. But for many businesses, starting out as a ‘repair shop’ can be just as successful today as it was back then.
If your product doesn’t really have a service aspect, look into what else you can do. Can you teach in the back room? I know a health suppliment store that teaches classes on many aspects of nutrition and healthy living in their back room. They make more money out of the back room than the front room, with all its cans and bottles. Can you buy, sell, consign or broker used items? Can you set up profitable local events of some sort based around your product line?
Listen to your customers. Talk to everyone. Find out what they want, and do your best to provide it.
Be on the look-out for pride. What if I told the dining room furniture person, “No, this is a bicycle shop, I refuse to stoop so low as to fix your chairs!” Well, I’d have to borrow money for groceries that week! Plus, it turns out, the furniture guy bought bikes for both of his teenage sons that spring, and another bike when one was stolen, and spent perhaps $400 that year in parts and service.
Finding the right retail building can make a world of difference. If you can find a location where many people drive by, and where it is easy to park, you’ll be much more successful. Even better, if you can rent a spot in a mall, tourist location, or where there are plenty of people walking by, people who are there to shop, you may never need to do any advertising or publicity at all. Just put up your sign, and you’re in business! Really check out your location before signing a lease. If it is in the ‘bad’ part of town, there may be people who are afraid to come to your store. You may also have to deal with shoplifting. On the other hand, depending on your product line, you may find many grateful people in the ‘bad’ part of town who no longer have to commute a long distance to get what they want.
Parking meters are the death of a retail business. Many customers would rather drive across town to their competitor than be worried about whether 25 cents was enough the whole time they are shopping in your store.
Exposure is the thing. I’m sure you’ve heard the expression, “Location. Location. Location.” Getting the wrong place can ruin a business before it gets started. Getting the right place, even if it is small, or the cost per square foot is high, can mean that you start making money from your very first month.
Most small retail businesses start with rented stores. Unless you are prepared for an entirely different kind of investment, commercial real estate, you’ll be better off renting. Commercial leases are pretty much like residential leases. They are usually one-year or five-years in length.
In upscale settings, there is something called “Triple Net” abbreviated as NNN. This is a monthly fee added to the rent for maintenance, such as mowing the lawn, cleaning of the common areas, and upkeep of parking lot. The ‘triple’ in triple-net means nothing. The amount is anything the landlord decides. Typical triple-net for a 1,000 square-foot (100 square-meter) retail store is from $35 to $100 per month.
once you’ve found the right place, you may want to have the one thing that’s missing from most leases written in: An escape clause. What if a dry cleaner next door fills the neighborhood with perchlorethylene fumes? What if a family situation requires you to move to Philadelphia? What if the dog next door just won’t quit barking? You laugh, but these things really happen. What if your business grew faster than you thought, and you need to expand into a larger building? You don’t want to be stuck with a one-year or five-year lease. So, the escape clause is something that both you and the owner of the building can live with. For instance, you might suggest that if you want to move before the end of the lease, you’ll pay three months rent up front.
Finally, before you sign that lease, you need to work out a business plan. Oh, I don’t mean a fancy plan to show a banker for a loan. I do not advocate starting with a loan. If you don’t yet have enough money saved up, and the ability to risk that money, there’s no hurry. You can just keep selling your stuff on craigslist, out of the trunk of your car, the flea market, or whatever, until you do have enough money. This is a better plan, because you’ll be proving to yourself that your business is profitable, while you learn the ropes.
A business plan just for yourself can be as simple as scratching some numbers on the side of a grocery bag. What you want to see is whether you’re biting off more than you can chew. Figure that you’ll need to pay first and last rent, then pay the rent for a few months until your business is running and established. You’ll need to cover the electric bill and other overheads. If you’re smart, you won’t figure in employees. They come later, after you’ve become successful. This is a business that you’ll run entirely by yourself at first. Finally, you need a starting inventory. Ideally, you already have plenty of items. If you don’t, go ahead and step back for a year or so, continuing to do your business out of the flea market or whatever, until inventory surrounds you. Until it fills your garage, living room, bathroom, and takes up all the space under the kitchen table.
Moving forward, let’s say you have figured out the finances, and rented a store. Now what? There’s just a little bit of paperwork, and it is easier than you thought.
Through your chamber of commerce, find your local business license office. There, you can get a DBA – Doing Business under Assumed name, also known as a business license. This costs a little bit. Typically from $20 to $200 per year, depending on your community. You fill out a one- or two-page form with the usual stuff – name, address, phone number, and they give you the license. No one is refused. Furthermore, you don’t have to know anything about it. The people in these offices know that you are not an expert in what they do. The typical person coming in wants to start a car repair shop or a beauty parlor, and knows all about car repair or cosmetology, but nothing about business. So, they are there to help you. They want you to succeed, so you can keep paying your annual license fee to the community.
You’ll probably want a business checking account, and in some cases, the local government wants to see your business checking account number before they’ll grant the DBA. No problem, any normal bank can do this for you in twenty minutes. Most banks offer business checking accounts for free.
Customers coming to retail stores often expect to pay with credit cards. In the past, this was somewhat expensive and difficult to set up. Now, you can go to PayPal.com, and get set up to take credit cards easily. In one of my stores, I was unable to take credit cards for the first couple of weeks after opening. I told people up front – so as to not suprise them once they approached the sales counter, and let them know there was an ATM a block away. So far as I can tell, I did not lose a single sale during that time.
Finally, you need to get set up to collect sales tax or VAT in most countries unless you are in a place without sales tax such as Alaska, Delaware, Montana, New Hampshire, or Oregon. This costs nothing, and also requires filling out a simple one- or two-page application. The certificate, often called a resale certificate or tax number is usually given to you right away. They also hand you a pamphlet explaining how sales tax works in your area. You’ll learn what percentage to charge, and which items and people are tax-exempt. For instance, in New York State, American Indians do not have to pay sales tax if they present the retailer with an exemption form. In some states, labor is taxable, and in some, it is not. To find the tax office in your community, simply ask at the business license office. They already know that’s where you’re going next, and will certainly have the address. Now-a-days, you can often set up your sales tax account entirely online or by mail.
Collecting sales tax can be thought of as a right, responsibility, or privilege. I won’t get into the philosophy here. The usual arrangement is that you set aside the tax money you collect, fill out a one-page form, and mail a check to your tax office every three months.
Once you’re in business, you do need to keep track of income and expenses. You’d want to do this anyway, so you can understand how things are going, and what to adjust from time to time to make sure you’re making a good profit.
The old-fashioned way still works: You can buy an ordinary ledger book, and enter your expenses and income by hand. Domes Monthly is a ledger you can buy in any stationery store in the USA. There are no doubt equivalents in every country. Keeping track isn’t rocket science, although it may seem so at first. The only thing you need to do is list everything you spend money on and enter the amount of money you take in every day. You can optionally break out the income into categories such as “new,” “used,” and “service.” You’ll want to break out the expenses into categories such as “inventory,” “rent,” and “utilities.” You may want to additionally list all legitimate business expenses such as “automotive,” and “advertising.”
It is much easier to use automated software. For under $100, you can buy any of a variety of business bookkeeping packages, such as Quicken. This software tells you what to do at every step. The people who make the software know that you’re a musician, beautician, or bike mechanic, not an accountant, so you’re not expected to know what to do. The software has a lot of built-in help.
If that still seems intimidating, you can hire a bookkeeper for a single session to set up your system, and tell you what to do. Only after your business becomes successful, unless you are already wealthy, do you want to hire a bookkeeper on a regular basis. Some bookkeepers are better at teaching than others. If your first bookkeeper is not good at explaining things, try another.
At the end of the year, you need to figure out your income tax. This too, is easier than it might seem. In the US, the basic addition to your taxes for business is a Schedule C. It is a single two-sided page. The categories are obvious. But it is easier to get the automated software that does it for you. At the HR Block website, you can do the whole thing on line, and then just pay $30 to $80 to file your taxes. With a business, it takes about twenty minutes longer than someone who is only filing an ordinary 1040.
What if you make a mistake? All the government officials are on your side. Really! They’d rather have you succeed, than harrass you. They know you’re not an MBA or accountant. They want you to succeed, so you can go on paying taxes year after year. If you make a mistake, they tell you what to do different. They may issue a reasonable fine – just part of the cost of doing business, and you get to move on. No one goes to jail. Well, OK, I knew one fellow who did. He was a professional ice skater who paid no income tax at all. Still, he wouldn’t have spent six months in jail if he didn’t stand up to the judge and the whole court and make a big presentation about why he shouldn’t pay income tax. Only rebels go to jail. In fact, even with all the small mistakes all of us make, almost no one gets audited. I’ve received perhaps five letters from the IRS and sales tax agencies in all my 35 years in 18 various businesses. In each of the three cases where I actually did something wrong, I had to pay a small fine. My fines ranged from $20 to $150. I knew one fellow who didn’t report his income tax at all for several years. This one was a professional juggler. He was probably making around $150,000 per year. He didn’t even keep any records, so no one, even he, knew how much he made. The IRS stated that he owed them approximately $20,000 in back taxes, which he gladly paid. Of course from that time on, he did have to keep records and pay the appropriate taxes. I know a lot of business people and these two are the worst case scenarios.
Something like a signage violation is so minor that some business people play with them. For instance, in a little store that had a maximum 3 x 2 foot (1 meter x 66 cm) sign requirement, I made a much larger sandwich sign and put it out on the sidewalk every day from the first day I opened. I knew this was in violation, and I knew someone would notice it. They did, after two months. The zoning office did not issue a fine. They only issued a ‘cease’ letter, telling me I had 30 days to comply with the law. So I kept my sign out for another month, then I threw it away. It had done its job. I’m not recommending that you play with your government regulations, unless you know what you are doing is morally correct and the repercussions are safe.
Once you are in business, you can get wholesale catalogs and the wholesalers’ secret price lists. In order to qualify for a wholesale account, all you normally need is to fax or mail a copy of your resale certificate or DBA. Some wholesalers do require a photograph of the front of your store. Some have protected dealerships. This means that if someone else is selling their brand within a certain distance, perhaps 5 miles (3km), you can’t also sell the same brand. That’s fine, find other brands that aren’t protected or aren’t yet represented in your neighborhood. You can find the wholesalers online. Often, they find you, sending representatives to your store, to let you know about their wares.
Whereas you might start your store with only second-hand or collectible items, you now have the opportunity to sell new merchandise. The biggest advantage is that you can buy multiples of things that sell well. I have always imagined how nifty it would be to have a store that sells nothing but 25-pound (10kg) bags of dog food. Only one brand, only one type. I’d sell them over and over, the same to everyone who comes in. This is of course an oversimplified dream, but you can imagine that in a typical store it would simplify things if you could sell 100 copies of the same thing.
You’ll find the markup is remarkable in the lower-priced items, if you’re not familiar with retail. Things over $100, in most specialty businesses are marked up 50 percent. So if you pay $100, you sell it for $150. If you can ‘turn’ your inventory six times a year, meaning sell six of those $150 items in a year, your profit will be $300, on what amounts to $100 invested. A 200 percent annual return on investment (ROI). Compare that to a money market account! But wait, it gets better. the mark up on things in the $5 range is 100 percent. So things that you sell for $10, you paid $5 for. And under $2? It can run as high as 800 percent. If your business sells a lot of left-hand-threaded ‘thingamajigs’ for $2 each, you may find that you can buy them for 25 cents each. But you do have to sell a lot of left-hand-threaded thingamajigs to make any real money.
Insurance presents an interesting quandary. You want to be covered for liability, especially if you’re selling anything like ladders, saws, bikes or automotive accessories. But at first, you may not be able to afford $500/year for general liability insurance. On the other hand, if you can’t afford that. then you have no money, and no lawyer will take the case against you, because there’s no money to be had. So, you can buy insurance when you can afford to. By then, you may have assets to protect.
The one hole in the theory is that you might want to help people who have somehow have had a loss due to something you may have done. Its like driving a car. You want insurance in case you bump into someone. You want them to have their fender fixed without paying for it out of their own pocket, or your pocket.
So, my advice regarding insurance is to keep it high on the priority list, and get it as soon as you can after you’ve decided you’re going to grow a business.
Most local insurance agents are a bit unfamiliar with general liability insurance for businesses, but they can talk to their parent companies or refer you to agents who know how to help. Shop around, because you’ll find the costs vary considerably.
Most general liability insurance comes packaged with some other things that you might enjoy having, such as loss of contents. If your building is flooded, and if you have the right insurance, you can be covered for your lost inventory, equipment, and even loss of income while you were repairing the damages.
Then there’s advertising. The huge mistake most new retailers make is to buy too much of the wrong kind of advertising.
Especially when you are starting out, try to do as much as you can with free publicity. If you’re offering something new or different, or even if only something about what you’re offering is new and different, the newspapers (press releases, editorials), TV and radio stations will want to tell the public about it. After a while, when your initial publicity wears off, maybe you can invent something else that’s new and different about your business, and get another round of publicity. See the Publicity chapter for some crazy ideas.
In absolutely every case I can think of, placing display ads in your main newspaper, your local ‘throw-away’ newspapers, merchant maps, or anything else like that, works remarkably poorly. In this country, literally billions of dollars have been spent on advertising that brings absolutely no new business.
The advertising salespeople always have the same story when your advertising doesn’t work: “You didn’t buy enough yet.” Don’t fall for that!
Coupons work better, but don’t pay very much for any sort of coupon ad campaign. In fact, I’d suggest staying away from that altogether, unless you can make the coupons yourself and place them with restauranteurs, on bulletin boards, and so on. The nice thing about coupons is that you have a way to gauge the effectiveness of your advertising.
A reasonably small yellow pages ad, in the main phone company phone book (not any sort of third-party phone book) can be useful. But today’s customer mostly looks online, trying to find your phone number on your website.
So, of course you’ll want to build a website. Even if it’s just a home-made blog with a couple of pictures of you at work, your storefront if you have one, etc. All you need to do is display your phone number, hours, directions and a description of your products or services. In most cases, the website won’t initiate new customers. They need to have heard of you elsewhere, then they’ll use the website to see if you carry X-brand, or if you’re open on Sundays. So, don’t spend any significant money on a website.
In some cases however, SEO – Search Engine Optimization can work wonders. The basic idea is that you put product or service and the name of your community in the right places on your website, and the search engines such as Google, will display your website high on the page of search results if others in the same product line, in the same community haven’t already optimized their pages in the same way. You can read much more about website and business in the Website chapter.
Once your business grows, you’ll want employees. There are four ways to handle this:
1. Only when your business is very small, you can pay a part-time person in cash to help you out. This is truly illegal but seldom enforced. So, you’ll want to seriously consider the following alternatives:
2. Contract worker: This is not an employee at all, but a person who technically has their own business and is designated to provide a specific service. This may be delivery, repair, cleaning, or commission sales. It is important to understand the distinction between a contract worker and an employee. Generally, the contract worker sets his or her own hours, often works off-premises, has his or her own tools, and does a specific task. If you can tell this worker to clean the bathroom, then this person is not a contract worker, but an employee. You can pay this person like any supplier – just pay cash or write a check weekly, monthly, whenever, in trade for an invoice. Contract workers are entirely legal – assuming they’re not illegal aliens or anything else that violates other labor laws. Be careful about having contract workers rolling around in vehicles. You’ll want to make sure you have the right insurance coverage if anything happens.
3. Temporary: You can contact a temporary agency (or “head hunters”) to get workers. This involves almost no paperwork on your part. All you do is pay the temp agency every month. They take care of all the employee insurance, the taxes, everything. But they also charge you 30 to 40 percent more than the employee would cost you directly. ‘Temporary’ is just a term. If you and your ‘temp’ like the arrangement, it can last as long as you both wish.
4. Employee(s): To do this legally, you need to provide workers’ compensation insurance and collect and submit payroll taxes. New software packages make this easy, but it gets even eaiser when you use an agency that exists for the sole purpose of helping you with employee paperwork. ADP is an example. You tell them the name, social security number and amount of pay for any new employee. At the end of every pay period (week, or two weeks), you tell them how many hours the employee worked. They do all the magic, filing federal forms, state forms, collecting from you any taxes that are required, sending those taxes to the government, and provide you with whatever accounting you may want. Occasionally they forward a form to be signed. For all this service, they charge around $50 per payroll period per employee. Another version is a bookkeeper who comes to your place every week for an hour or two, files all all your paperwork, pays your bills, fills out any tax or official forms, has you sign a document or two, offers suggestions to organize your business better, and then comes back next week. This is great, and relatively low cost, so you can focus on what you do best, and don’t have to learn anything. Bookkeepers are not licensed or tracked in most communities, so be sure you get a good one – one who knows what he or she is doing. When shopping for a bookkeeper, ask about training and experience, and check references. With a bookkeeper, probably more than any other worker, you really want to check references. In addition to possible embezzlement, you could get into trouble with the government, or lose money, if your bookkeeper is confused or uninformed. With a great bookkeeper, you’ll learn about and implement utility discounts, better credit terms with suppliers, and other tricks that might more than conpensate for the bookkeeper’s cost.
When hiring a worker, make sure not to discriminate. You can read more about this, but basically, be fair. Hire people based on their skills (including being able to co-exist with others in your business), and on their references, not based on skin color, sex, religion, etc.
So you see, it’s all easy. Especially if you think about the process only one step at a time.
And, it’s reasonably safe and likely to succeed if you remember the two rules:
1. Don’t spend more than you take in.
2. Don’t invest money you can’t afford to lose.
You may be amazed at how much a small store can grow, and how it can grow from almost nothing. Especially if you let it be a natural process. Imagine that you happen to like Lowrey organs.
Typical Current Lowrey Organ
Click for YouTube Video
(On readers that support YouTube.)
Now, that may or may not be your favorite contraption, but they are expensive. So, if you happened to like them, you might eventually get yourself a used one on Ebay. Perhaps it’s an old one and costs you only $1,000. You play it, enjoy it, and in time get a newer but still used one for $4,000. You sell the first one on Craigslist, and to your surprise, it brings $1,800. So, you put your $4,000 organ up for sale at $6,500, just in case someone would actually pay that much. And sure enough, after a bit of wheeling and dealing, you agree to sell it for $6,000. But now, you have no organ! So you quickly order another on Ebay. Two in fact. And you end up selling them. Fast forward a year, and you have four Lowreys in your garage, and two in your living room, and you’re selling one every week or two. At some point, you realize you’re making $30,000 per year with your organs, and so you quit your job, devoting your full time to it. Now, you’re making $50,000 per year, and have $20,000 in a savings account. So, you rent a store, put the six Lowreys you currently have in the store, order four more, and things just keep growing.
As the years pass, you almost don’t notice the growth of your business, because you’re having such a good time. You spend your days playing your various organs, demonstrating them to customers, or just noodling around for your own amusement. You get to talk shop with lots of other people who love organs, including your sales people. Eventually you get a Lowrey dealership, and we won’t even talk about your income ten years later, because, well, wealthy people don’t talk about their money!
You may enjoy more books like and unlike this one by searching for Jeff Napier in the Kindle Store, and at jeffnapier.com