Why entrepreneurs fail.

Fast-forward 5 years; there’s a 98% chance your idea will have gone nowhere, and you will still be working at your job and struggling to make ends meet. What’s the difference, then, between the 98% who fail and the 2% who succeed? One answer is that successful entrepreneurs avoid the traps that stop everyone else from succeeding.

Here are three traps that, in my experience, will trip up even the most motivated entrepreneur:

Trap #1: You Jump at Every “Opportunity”

You’re getting ready to start your business when a “friend” (and I put “friend” in quotes here because these people aren’t really your friends) pitches you on a “killer product.” “It will fit right into your business!” your friend says, usually with a superior smirk. “All you have to do is sign up and begin making money!”

What you don’t realize is that each idea or “opportunity” you explore takes time away from your current idea…and makes it less likely that either idea will succeed!

As an entrepreneur, you must have the diligence to pick one business idea and stick with it for at least 6 months. Ignore all other “opportunities” during this time. After a few months, you will have a feel for whether your business is working or not.

It’s worth noting here that your business plan may change during that time. When I started my company, we offered every type of web hosting, from $7/month shared accounts to dedicated servers to colocation. As the business grew, I slowly stopped offering so much and focused on our most profitable areas — high-end dedicated servers and colocation.

One thing you may not know about me is that I actually sold two web hosting companies. I spun off my shared hosting company into a separate brand, 10for10.com. Then, I shopped it around and sold it in 2006 to Empowering Media, who runs the company today.

My business plan changed over time, but my company remained lean and mean. I didn’t start off trying to run several different businesses at once. From the beginning, we only did web hosting — not web design, SEO, or any of the many offshoots I was tempted to explore. In the end, we were far more profitable than firms that tried to do everything.

Bonus: Your Business Becomes Easier to Sell

An added bonus to focusing your business is that it’s easier to find a buyer. Spinning our shared hosting company off into its own business and then selling it was one of the best business decisions I made. Buyers want to buy a business that has one or two major product lines, not 20. It would have been harder to sell my business had we tried to do every type of hosting.

Start one business. If that doesn’t work after a few months, try iterating your original plan instead of scrapping it. Remember that there are very few, if any, businesses that are overnight successes. After over a year of running my hosting company, it was making the grand total of just over $400/month! But 5 years after that, it was pulling in revenues of over $72,000/month. All because I stuck with my original idea instead of scrapping it when it didn’t immediately pan out.

Trap #2: You Develop “Bright Shiny Object” Syndrome

You have your idea. Now, you’re looking for more information on how to promote it and get the word out. You see a conference that looks like just the ticket, and go. Then, before you get the chance to implement anything from it, you’re invited to another seminar…

This is Bright Shiny Object Syndrome. Another variant of it is when you get so obsessed on getting “up to speed” that you find yourself joining 57 social networking websites and spending all your time reading industry news — instead of building your business and getting customers.

You know you have Bright Shiny Object Syndrome if you call your friends and the first words out of your mouth are, “Hey, did you hear about XYZ? I hear it’s the next big thing…what do you think? Is it awesome?”

If you call me and say this, I will usually reply, “How is your business going?”

There will always be some new, super-cool, awesome thing that’s guaranteed to make you thousands of dollars a month “virtually overnight!” The best way to avoid getting sucked up into these vacuums is to have a business plan. I don’t necessarily mean the 40-to-80-page document describing every aspect of your business. I just mean: What’s your revenue model? Who is your target audience?

Once you have a solid idea of how your business intends to make money, you can quickly filter out all the “opportunities” and pinpoint what you need to move forward. I get pitched constantly, but I don’t let myself get distracted from my goals. The gurus pitch their products year after year, so don’t worry about missing the “next big thing.” There will always be another.

Here’s how I avoid getting sucked in: I don’t allow myself to buy another product until I have completed the last one. Have I read or watched it and implemented its action steps? If I haven’t, I buy nothing else until I have. (I set this rule for any product over $50.) I also limit myself to buying one product per seminar that I attend, and I often buy none.

Avoid Bright Shiny Object Syndrome, and your wallet will be happier. Plus, by denying yourself access to those “cool” products and websites, you will force yourself to take action instead of simply absorbing information!

Trap #3: Your Target Market is “Everyone Who…”

This is potentially the worst offender, and I have been as guilty of it as anyone. Here’s what happens: You come up with a great product idea — let’s say, for example, a classified ads website.Your next step is to go out and build it, right? Not so fast!

If you tell me about it, my first question is typically going to be, “Who do you expect will use this site?”

You know you are stuck in this trap if this question throws you. You will have no immediate answer. You will stumble around, stammering a bit until you finally seize on, “Why, anyone who uses classified ads!”

Nope, sorry. You have failed the test.

If your idea of a target market is a descriptive term that includes millions of people, like “women”, “men”, “small business owners”, or “kids”, you don’t really have a target market at all. I addressed this from the perspective of web site copywriting secrets earlier, but it holds equally true when you’re figuring out what type of business to start — or trying to figure out why your business isn’t gaining traction!

Here are some examples of interesting target markets:

Accountants and attorneys who make over $150,000/year, yet have no free time

Disgruntled freelancers who make less money and work more hours than they did when they had a “real job”

Deli, catering company, and pizza store owners who want to be able to accept large catering orders through their own websites

Silicon Valley startups that need highly scalable dedicated servers — and want those servers local to them

Having a clearly-defined target market allows you to quickly and effectively network at a party, write good copy for your website, and create advertising that gains new clients. It also helps your employees, friends, and contacts filter leads and send them to you.

Once you define your target market and make that definition clear on all of your marketing materials, you should start to see results. (If you don’t, it may mean you have defined your target market too narrowly, or that your target market isn’t interested in your product. In these cases, it’s time to go back to the drawing board.)

How To Avoid These Traps

If you see yourself in any of these three scenarios, it’s not the end of the world; it’s just time for a course correction.

Avoiding these traps is often as simple as focusing on your idea and shutting out distractions. It also takes courage to tell others “No” when faced with an opportunity that will split your time and energy.

Finally, it takes an admission that succeeding in business is less about jetting off to every conference and joining every social network and more about putting your nose to the grindstone and making sure Stuff Gets Done.

Do you see yourself (or other entrepreneurs) in these traps? How have you avoided them (or fallen into them) in the past? I welcome your comments.

Recommended Reading:

• 20 Ways to Make $100 A Day Online. You CAN make money online without being a geek! This is a comprehensive, 247-page guide to making your first dollar online. I bought it and devoured it. It’s one of the best “getting started” guides I’ve ever read on starting an Internet business. As an added bonus, it’s written by top experts, not scammers. Well worth the price.
• Web Site Copywriting Secrets: Rocket Your Sales with These Two Easy Tips. I go in-depth on how to choose a target audience for your business — and integrate your target market into your website.
• It’s Time To Completely Change Your Marketing Strategy! Have you acknowledged how the recession is affecting your customers? I share some tips.

It’s hard to concentrate for more than a few seconds; writing anything more than two sentences is almost too much effort. You can’t remember anything and begin to slip on making appointments because your brain is so foggy. You find yourself constantly glancing at your calendar for fear you have missed another appointment. You are invited to social events, but can’t muster the energy to go. Even taking a 20-minute walk makes you feel like you need another nap.

This is what my life has been like for nearly a month now. I won’t mince words — it’s devastating and depressing. I wondered constantly what I was doing wrong. It was clear that this had something to do with food, but eating less, more, or different foods didn’t change the situation. I was sleeping 14 or more hours a day and not finding relief.

It became increasingly clear I wouldn’t solve this myself; besides my brain being too foggy to self-diagnose on the Internet, it was time to heed my own advice and hire an expert to help me solve this issue.

Finding an Expert

My massage therapist recommended a nutritionist named Nancy. I called Nancy and, to my relief, got an appointment last Friday. At Nancy’s request, I started keeping a food diary. On Friday, I headed to her office, where we would spend the next three hours discussing what was wrong and my treatment options.

I explained that every time I ate, I felt like a wreck — no matter what I ate. I had changed my diet to eliminate most meat, but even fruit was causing me issues. I had eliminated alcohol, caffeine and most sugar years ago due to similar problems. Yet whatever I had, it was clearly getting worse. It was to the point where I didn’t want to eat because I knew it would make me exhausted. I had lost 5 pounds in the past few weeks, even though I wasn’t overweight to begin with.

Nancy said one thing that stood out to me: “My goal is to make sure you can go to the ballpark, eat a hot dog, and drink a beer and feel great — even if you don’t want to do that!” I knew I had picked the right person to help me when I heard that!

My Visit With Nancy

Something really interesting happened at her office. I had only eaten a light breakfast before I came, for two reasons: one, I didn’t want to pass out during our appointment; and two, I didn’t expect to be there for more than an hour. After about an hour of being there, my blood sugar dropped and I started to get tired. Nancy noticed and handed me a protein bar. “Try this,” she said. “It’s gluten-free and fructose-free.” (She was concerned that I might have a gluten allergy.)

45 minutes after I ate it, I was basically asleep in the chair. I was yawning and struggling to keep my eyes open. Nancy was surprised. “That was fast,” she remarked. I learned that typical food allergies manifest after a few hours; that it happened so quickly meant my body was not properly digesting food. We had solved a small part of the puzzle — I was tired because my body wasn’t getting any nutrients from the food I ate.

Trying to Find a Fix

Nancy prescribed a plethora of supplements, and asked me to try them in a few different dosages and quantities. After experimenting throughout the weekend, the breakthrough came Monday afternoon. I tried a supplement Nancy had given me called Glysen, which has nutrients designed to “support insulin receptor sensitivity” and regulate blood sugar.

It worked like a charm and stopped my exhaustion! On Monday night, I was happy, laughing, and enjoying myself. Richard asked me when the last time I had this energy level was. I said, “I think eight years ago,” and then I started crying. I couldn’t believe it had been that long since I felt like a normal human being after I ate, but looking back, I do think that’s true.

It has only been a few days since I started taking Glysen, and the underlying cause of my exhaustion has yet to be uncovered. I am currently waiting for the results of a blood test and a saliva test to help Nancy and I understand what’s going on at a deeper level.

This is a journey, and I understand that there will be setbacks along the way. There may be days when I feel worse instead of better. The Glysen may stop working, or I may need to take more drastic measures. All I can do right now is continue recording everything I eat and how it makes me feel and continue taking Glysen. I consider it a huge blessing that I am finally able to get back to blogging and helping you.

But What Does This Have To Do With Your Small Business?

I thought hard about whether to even write this blog post. After all, I thought, it doesn’t really have anything to do with business success or entrepreneurship.

Then I realized I was being foolish. After all, aren’t we, as entrepreneurs, the heart and soul of our businesses? If we’re not feeling well, our businesses suffer. I realized I had learned four lessons from this that I could pass on to help both you and your small business succeed:

1. Call in the experts! It’s so tempting to just Google “exhaustion” (or whatever your symptoms are) and self-diagnose. But often, a web site can’t really help. You need tests to determine what’s really wrong.
   
   One of the reasons I didn’t want to call in a doctor was because I was afraid the doctor would say what I’ve heard so many times before: “Oh, just eat better and exercise more, and you’ll be fine.” You wouldn’t stand for that kind of vague answer from an employee who has done something wrong, so why stand for it from your doctor? If your doctor won’t help or isn’t taking you seriously, find someone who will!
2. Once you have the right expert, set expectations. I asked for recommendations from two people in the medical industry I trusted, then used my gut instinct to choose Nancy from the list of folks I got back. When I saw Nancy, I made it clear up front I wanted tests done to determine what was wrong, and while I was willing to take diet suggestions, I needed them to take a back seat to figuring out what was wrong.
   
   In retrospect, Nancy handing me that gluten-free, fructose-free protein bar and seeing me nearly fall asleep might have been the best thing that happened to either of us all day. At that point, she realized the primary conern wasn’t what I was eating, but why my body wasn’t digesting food. She took action and ordered saliva, blood, and urine tests, and recommended additional tests based on results of those three tests. I am now on my way to figuring out what lies underneath this exhaustion.
3. Communicate with your investors, customers and employees as much as you can. Those close to you should know what’s going on. Don’t hide it from them. Remember, you are an important face for your business. Especially if your business relies on you, it’s critical to keep in touch with your team regularly — I would say daily if at all possible.
   
   If you have many customers, email them all or write a blog post. Explain candidly what’s going on and what steps you are taking to resolve it…but if you don’t know when it will be resolved, don’t say you do.
4. Use this time to create and maintain a strong support staff. If you’re not feeling well and can only get 30 minutes or an hour of work done each day, make those 30 minutes or an hour working with employees and contractors so they can handle customer issues. Have someone else in your company call or email customers and keep them up to date. That hour of good work time you have in the day shouldn’t be spent putting out fires; the stress caused from that will certainly not make you feel better.

Being sick isn’t easy, especially when it is an extended illness or one that doesn’t have a horizon where you know you’ll be “over the hump” and feeling better.

If there’s one thing I can impart on you from my experience, it’s this: If you decide to be your own doctor, CEO, personal assistant, and support team, you will fail. None of us succeeds alone.

Just as you would with employees, feel free to “fire” doctors who won’t work with you and find the good ones who will go the extra mile to get to the root of the problem. You deserve to feel your best so you can go out and become the next small business success story!

Addendum: After I finished writing this post, I saw a news headline that reinforced my point about communication. Most of us are aware that Steve Jobs, the CEO of Apple, has been extremely ill lately. Recently, Warren Buffett, billionaire investor, said Apple should have disclosed the seriousness of Jobs’ illness.

Buffett said, “If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American, the Berkshire shareholders about it. I work for ‘em.”

This is a great attitude and I wholeheartedly agree. Communicate with your customers, employees, and investors. The good ones will understand. The ones who don’t probably weren’t worth keeping anyway!

The Beginning

In August, 1999, a few months after I graduated from high school and having just turned 18, I packed my car full of everything I owned and drove to the promised land — California.

I was young and naive. I moved from a small farm town in Indiana to smack in the middle of a huge, 1-million-person-plus city (San Jose) and chose to live in the dorms at San Jose State, where, needless to say, I stuck out like a sore thumb.

I found a job, and got fired in record time when they found out I was 18. (They were not happy they had just unknowingly hired a college freshman as their Marketing Director.)

I found my calling doing desktop support at Cobalt Networks, a young startup company. I made friends, had boyfriends, and watched my beloved employer rocket itself to the 4th-largest IPO in history. I used all my extra money to invest in the Cobalt employee stock purchase plan. The stock doubled; I cashed out and bought a car:

I took part-time classes at San Jose State and failed several of them. I was more interested in working in the computer industry. School bored me. Even in high school, I knew I would probably never finish college. My teachers tried to talk some sense into me…all except one. I’ll never forget what happened.

All business majors were required to take a class called Business 10. It was basically the “Do you really want to be a business major?” class. My teacher took an instant liking to me.

One of our first assignments was to get together with a few others and create a business plan for a fictitious business. Our ragtag group decided to create a plan for a nightclub. I did a website for the nightclub in HTML and presented it to the class. Everyone else was using Powerpoint, but I was more comfortable using HTML.

A Teacher Gives Me Strange Advice

My teacher pulled me aside after class and asked me what the heck I was doing. I said “What do you mean?” I thought he was angry that I had decided against Powerpoint. It turns out he was mystified as to why I was in college.

He said, “This is an unprecedented time. Kids your age are making millions.” He asked me why I had moved to the Valley. I said I wanted to be in computers. He said, “Go. Drop out. Don’t waste your time in college. This is the golden age for people like you.”

I was shocked. I spent days pondering what he had said. A teacher, telling me to drop out! I took his advice under serious consideration because I felt he was being honest and not just pushing a party line.

A year later, I dropped out of college. I was flunking accounting, and the constant push and pull between school and work was aggravating me. I had watched Cobalt IPO, but had missed out on the stock options, as I was a part-time contractor. Many of my friends within the company were now paper millionaires. I was jealous that many of them were just a few years older than me. Oh, how I longed to have been born in 1978 instead of 1981…

Cobalt was acquired by Sun Microsystems and I quickly snagged a full-time job at Sun by virtue of having dropped out of school. My boss at Cobalt, who considered me one of his surrogate kids, told me I had made a decision I would live to regret. My mom started crying when I broke the news; she told me dropping out of college was the worst decision of my life. Somewhere inside me, though, I knew I had made the right decision.

The next day, my parents cut off all of my financial support. I was truly on my own, and I had a lot of bills to pay.

Contract Work to Pay the Bills

I scraped by, working contract jobs as well as full-time at Sun. After a year of being demoralized by working at a big company, I quit. It had been my dream for years to start a web hosting business. By this time, I had moved into a 1-bedroom apartment 35 miles east of San Francisco. It was all I could afford. Soon, my boyfriend at the time would move in with me because I couldn’t pay the rent there by myself.

I found contract web design jobs to pay the bills. It was 2002; Silicon Valley was in a deep recession; I was 21 years old. When I presented invoices to my clients, I got scared. Sometimes I would talk myself out of invoicing them for weeks because I wasn’t brave enough to say they owed me more than $1,000. Often I’d throw in a discount on the invoice to make it under $1,000, because that number just seemed unjustifiably large to me.

Somewhere in there, I had started a small web hosting company, and was slowly gaining customers. I agonized over the website, wrote my own shopping cart, and had my uncle program an invoicing system in PHP. I figured I would be happy if I made enough profit to pay off my cable modem bill.

By the end of 2003, my fledgling web hosting company, Simpli Hosting, was making more than my consulting gigs. The problem was, I was spending 40+ hours a week doing web development, and maybe 5-10 hours a week on hosting. I figured I had nothing to lose. I met with all my consulting clients and arranged transitions. I would be a full-time web hosting company owner in 6 months.

7-21: Intention Becomes Reality

I had one rack of servers at the time; I spotted an empty cage near our servers with four glistening empty metal racks. Each cage had a number; this one was 7-21…the same as my birthday (July 21). I knew it was fate; it was meant to be. We were going to expand into that 4-rack cage. I told my sales rep so. He was amused, but promised to save it for us.

On October 28, 2003, I signed the contract for cage 7-21 and we moved in.

2004 came and went rapidly. I hired my first employee, an eager fresh college grad named Brandon. He was nearly a year older than I was. He wanted to work for free. I told him I’d pay $14/hour.

Brandon came on board and was an amazing worker. I hired so many other amazing people throughout the years; Mooneer, a gifted college student who worked from home in Southern California; Cal, a talented PHP programmer turned COO; Wolf, a fire-eating, spiky-haired, spirited engineer; Russ, a great friend and geek extraordinaire; Ben, an 18-year-old who was Simpli’s first intern; Seth, my best friend and Simpli’s second COO, who helped me break down so many walls; Kolya, Simpli’s first office manager; Sohrab, one of Simpli’s most gifted and treasured employees and the hardest worker I’ve ever seen. There were many other great employees, too, who came and went mostly because there was always too little money and too much work.

Mental Breakdown and Breakthrough

In August, 2006, I reached a mental boiling point and broke down in the middle of a vacation. I decided then and there I would sell my company in a year for over $1 million. There was never any question that I could do it; that I would do it. I never doubted myself in terms of my ability to set goals. But what would happen next shocked me.

It was May 9, 2007. I had just hired a new employee and agreed to pay him a large salary when our datacenter, Market Post Tower, called and said they were locking us out of the datacenter for failing to pay them over $60,000.

In total, we had something like $160,000 in debt for a company that was on target to do a little over $800,000 in revenue for 2007. It was too much. We had maxed out all of our available credit (including all my personal credit cards) already. We had nothing left.

Mortified, I realized that my failing grade in my college accounting class had come back to bite me…hard. I had no concept of the numbers. Neither did anyone else. I called Seth in and had him negotiate with Market Post Tower. We delayed a tax payment to pay them $15,000 right away so they would open our cage again and we could resume business.

I laid off over half my staff that day. It was the worst day of my life. May 9 seemed to stretch on toward infinity. The day just would not end. And my tears would not stop.

With my tears still flowing, I called another one of our upstream providers, to whom we also owed money. Since the owner was a friend, I candidly explained the situation. He made a blunt offer. He said once our customers found out that we were locked out of the datacenter, they would all leave. So he put an all-cash offer on the table; he would buy my company for $250,000 that day, as well as pay off all our debt to Market Post Tower.

I saw his objective. He wanted our equipment and cage space. Whatever customers would stay would be icing on the cake.

I Choose Hell

I chose Hell instead. I told him no. He said my company might die a painful death and someone would scoop it up in bankruptcy for pennies on the dollar. I said I would find a way to make it work.

Market Post Tower refused to hire a lawyer to write a contract for us because they didn’t want to waste the money on someone who wouldn’t pay them back. I got mad. My integrity was being called into question. My “I’m going to prove them wrong” instinct kicked in.

Four months passed like a blur. I can only explain it like this. Let’s say you’re in average shape, and you decide to run a marathon…tomorrow. Actually, now. You just get up and start running. Somehow, the miles pass, and you feel awful, like you’re going to throw up, die, or have congestive heart failure, or possibly all three at once. But still, you look down and your legs are running. Your support team is long gone. It’s just you and one other dude working together to save everything.

Some nights I got no sleep. Sometimes I broke down and cried in the office. I napped on the couch. We sold everything in the office. Whatever wasn’t nailed down went out the door. We doubled, tripled or more all of the rates of our customers — something I had been scared to do for years. I said nothing about our financial problems to our customers. I only said we needed to do this to stay in business. I figured if 50% of them left, at least our upstream provider bills would be cheaper, and we would still have the same revenue coming in.

95% of them stayed.

I was as shocked as anyone. But something changed in me when our customers pledged their continued use of our service. I started to take pride in what I had built. For the first time, I acknowledged myself and my role in building this company. I stopped believing that the web hosting industry was all about price, and I started to believe in myself.

The $100,000 Check

Things turned around. Just four months later, on September 7, 2007, I sold my company for $1.1 million to a competitor.

Before we signed, I wanted a contingency plan, so I called up the guy who had offered me $250,000 cash four months ago. He knew we were paying our bills on time now. We had signed new customers and were cash-flow positive.

I told him about the $1.1 million offer. He said stoically, “Congratulations.”

I asked him if he would match it.

He paused, considering. Then, “If it falls through with the other company, we’ll do it.”

It turns out I had a third web hosting company wanting to pay me $1.1 million, as well. But Bruce, the owner of Silicon Valley Web Hosting, was the winner and made the deal.

That day, I sat with a check for $100,000 (Bruce’s first payment) in my hands. Bruce grinned at me. “How does it feel?”

I just shook my head. What I was feeling was unreal. Unexplainable.

I paid off every penny we owed Market Post Tower. Shortly after sending the final payment, I received an email from Neil, a managing director at Market Post Tower. He wrote:

Erica,

I think I was the most outspoken cynic regarding the Simpli payment plan. My skepticism is the unfortunate result of having been in commercial real estate for more than 20 years, and in colocation management for the past five. The kind of integrity that you’ve shown in making payment is sadly uncommon.

I am at a loss, except to say “thank you.”

Neil

The End — And Now, A New Beginning

Now, I close the book on the final chapter of my life in San Jose. On July 1, Richard and I move in to our new house in Solana Beach, CA. (Of course, we are still renting.) But my move to Southern California means the era of living in fast-paced Silicon Valley and living the dream of building my own tech company is done.

Frankly, I couldn’t be happier. I proved, through sheer stamina if nothing else, that I could build a tech company from scratch and sell it successfully. Now I’m ready to prove I can build a business that doesn’t kill all my employees and that makes me a happier person. And I’m ready for new opportunities that come my way, like new friends, more public speaking opportunities, and more blog posts.

I am grateful to have lived in Silicon Valley through what was possibly one of the craziest times in history, and I am just as grateful to move on. As they say, it is time. It took 9 years and 8 months to write that chapter of my life. Now it’s time to write the next one.

Web site copywriting secrets; how to get your
web site visitors to buy.

Many times, it’s not your product, price, or site design that make your visitors whip out their credit cards. Instead, your web site’s copywriting — the words used on your site — make all the difference.

Marketing gurus charge a lot of money to tell you how to write better web site copy. In fact, I recently paid copywriting guru Chris Haddad 5 figures to help me write sales copy for Inspiring Innovators and Be The Authority, my two upcoming membership sites.

Today, I’m grateful to be able to share with you two web site copywriting secrets I paid a ton of money to learn — and that will probably make your business a truckload of easy extra money. These work on any web site, by the way, not just on those lo-o-o-ng sales letter sites. After reading them, take a look at your web site. How can you update its copywriting to fit these guidelines?

Web Site Copywriting Secret #1: The Copywriting “Kiss of Death”

Over 90% of small business websites fail this simple test: Who does your home page talk about? If it’s about you, the company, you have failed.

The ironic thing is, as a consultant, if I were to come in to your business and implore you to change your home page from “Welcome to XYZ Blah Blah Company, the leader in the ZYX industry” to something like “XYZ Company helped Maria X of ABC Company deliver 57% more whatchabobs in 2008…learn how we can help you, too”, you might be quite resistant to that! (Another good reason why I don’t want to do big consulting gigs.)

There are two key points why Maria’s story is so much more effective than the stuff about you. One, it gets people interested. How, exactly, did you help Maria deliver 57% more whatchabobs? (If you put a picture of Maria — the real Maria — up, it’s even more effective.) Two, it draws people into your story as a company without hitting them over the head with how great you are.

No one cares how awesome you are, the bulleted list of services you provide, and where you are located. All of that information should be moved off of your front page and onto your About or Contact page. The main information on your home page should be how you helped a customer.

Specific is better. More people are interested in Maria’s story than in the fact that you helped 497 companies last year. Why is that? Whenever people read a story, they unconsciously put themselves in the other person’s shoes. People can’t really picture “497 companies”, but they can picture themselves as Maria, running around like a crazy person until you helped her.

Web Site Copywriting Secret #2: Envision Your Customer — Down to Their Eye and Hair Color!

When I talk to small business owners, I usually ask, “What is your target market?” I am surprised at how often they have some vague, grandiose answer. One friend I talked to recently said, “Women.” When prompted for more information, she said “Ages 18-65. Well, and maybe younger girls too. And moms. Moms who want their kids involved in the program. But maybe moms who don’t want to be in this program with their kids, too.”

She is certainly not the only one who has no idea what her target audience is! I would say at least 50% of new web hosting companies define their target market as “small businesses.” Recently, some of them got a little more savvy and said “Local small businesses.”

None of these answers are acceptable!

Learn from Trader Joe’s and the “unemployed college professor”
Recently, I was reading Made to Stick. Its authors mentioned that Trader Joe’s had done this exercise. (If you haven’t been to Trader Joe’s, it’s a grocery store that is rather kitschy and sells good food that’s inexpensive and healthy. in fact, I am eating some of their Baked Cheese Crunchies as I write this.)

The good folks at Trader Joe’s decided their market was an “unemployed college professor who drives a very, very used Volvo.” They gave the guy a name (let’s call him Don for this blog post), a location, an age, named what kind of car he drove, wrote out his career path, and filled in as many details as they possibly could about him. Then they passed this guy’s profile around to all their decision makers.

This made Trader Joe’s decisions easy. What kind of food should they stock? Well, what would Don eat? What would he want in his fridge and freezer?

Where should they open a new location? Well, where does Don live? Probably in suburbia…so let’s open a location there. Maybe near a college…so let’s open in those areas.

What should their marketing be like? What would Don read? (Trader Joe’s delivers a “newspaper” to all their loyal customers every couple of weeks, full of goofy stories about food instead of the typical full-color spread of specials.)

What should their promotions be? What would Don enjoy? (Currently running at my local Trader Joe’s is a weekly drawing that you can only enter if you bring your own reusable grocery bags.)

It’s Scary to Do This!
Most people are scared to do this because they are afraid it will exclude customers. On the contrary — I doubt you’d find too many people who exactly fit Don’s profile walking around your local Trader Joe’s at any given moment. But knowing an exact person that you are marketing to helps you quickly make decisions.

I really thought about this one for Inspiring Innovators. Finally, I decided my target market was me at age 21. I had started Simpli (my hosting company), but it wasn’t really going anywhere, and I doubted it would make it. I wanted to start a different web business, but I just didn’t know anyone who had created a successful online business.

I was struggling to figure out who I was and where I fit in this life. I didn’t have a whole lot of friends and I certainly didn’t have access to any millionaires. Yet I was pretty sure that this Web thing held the key to both a lot of money and a far better job than the one I had just left at Sun Microsystems.

Getting Into the Mind of Your Customer
I took several deep breaths and plunged back in time to that full-of-doubt younger me. I was angry that my boss at my previous job had no respect for me. I was making crap wages and was scared to give my consulting clients my bills. The driver who drove the train I took to work had a higher salary than me. I couldn’t seem to make ends meet.

It was the middle of a recession and there were no jobs. I had just interviewed for a job, aced the freakin’ interview, and then they declined to hire me because they said I would just leave to start my own business. But at that point, I would have happily given up my business for the $74,000/year salary they were paying.

I let all that sink in, and then I started writing. And it all came out…all the emotions went right down there on the page. So frustrated because I knew this web thing would work, but didn’t have anyone to talk to about it. No one I knew was successful. The successful people were hidden far away from me, and I didn’t even have enough money to take them out to dinner!

These case studies Inspiring Innovators was selling were awesome because there I could finally learn from the experts with money that I had available. I could scrounge up the few dollars a month to pay for the interviews and listen to these folks. I was convinced that one of them (or more than one) would hold the key to me getting out of debt and making my life better.

The Big Shift
As soon as I put myself in my own younger shoes and wrote from that perspective, something shifted. I was no longer writing a sales letter. I was writing a story. I knew it would resonate with so many of you, because I knew who my customer was. I was doing this all for that lost, frustrated 21-year-old, and it was an amazing gift for her.

This exercise isn’t easy. Sometimes your target audience won’t immediately be clear. It took me over an hour to get the courage to think that maybe my target for Inspiring Innovators was me at a younger age. I had a lot of doubts — shouldn’t it be someone else? But the younger me fit so perfectly that I couldn’t shake it, and I ended up writing the sales letter with a fervent passion.

Your target may be you. But it probably won’t be. Who do you know who could benefit from your business? Take them out to lunch and listen to their fears and frustrations. Then write the sales letter for them…just them. Even if they don’t buy, if you have the picture of them clear, someone else will. Better yet, they will feel like your web site copywriting was made just for them, and they will be more likely to be loyal customers.

Inspiring Innovators launches next week! Make sure you are subscribed to erica.biz, as I have some amazing free videos, a free Blog Success Manifesto, and even a free case study for you! Stay tuned…

Recommended Reading:

• Here’s how to become rich: Deliver value. Change the world. How I decided to change Simpli’s website to better reflect what our customers wanted. A real-world example of some of the concepts in this post.
• Hypnotic Writing: How to Seduce and Persuade Customers with Only Your Words by Joe Vitale. This is an excellent copywriting resource; I have been referring to it as I write for Inspiring Innovators.
• Why Your Business Isn’t Doing As Well As It Could Be. Why most bloggers and web business owners don’t make a lot of money.

Which cash back rewards credit cards are worth it?

I ended up picking up a Chase Freedom rewards credit card, which offered 3% cash back in the 3 spending categories I used most, plus an additional $50 bonus cash back for every $200 in cash back earned. I paid off my credit card balance in full every month and benefited from thousands of dollars in rewards.

Now, due to the credit crunch, credit card companies have been tightening their purse strings. My Chase Freedom card is the latest victim. There are no more 3% bonus categories. Also, the $50 bonus when reaching $200 in cash back rewards is gone.

The bonus being nixed means my Chase Freedom card essentially becomes just like every other 1% cash back card out there. Thus, I set out on an adventure to find a new credit card that gave me better rewards.

Which Cash Back Rewards Credit Cards Are Worth It?

I looked at hundreds of cards before making a decision. Some of my criteria were:

• No AmEx or Discover. I had an AmEx card when I ran my hosting company. Although AmEx has great customer service, I was frustrated with the few places it was accepted. Discover has similar issues. As a merchant, I hated AmEx — they charged higher rates than Visa or Mastercard and their chargeback policy was asinine.
• More than 1% cash back. 1% is pretty easy to find everywhere, but I wanted a card that paid more than that.
• No restrictions on how to use the cash back. I don’t want to be limited to using my cash back at a certain store, hotel, or airline.
• No annual fee. This goes without saying.

Instead of making you wade through hundreds of credit cards, I will narrow it down to two cards for you. Both have a few caveats, but they are worth it.

PenFed (Pentagon Federal Credit Union) Visa Platinum Card

Highlights: 1.25% cash back; 2.99% balance transfer rate for the life of the balance transfer
Caveats: Must be a PenFed member. If you are not a military service member or government employee, you will need to pay $20 to join the National Military Family Association, and then you become eligible to become a PenFed member. After becoming a member, you will need to deposit $5 in a Regular Share account to open your credit card account.

Summary: My favorite thing about PenFed is its great rates on pretty much everything. They offer mortgages, auto loans (at 3.99%!), and a 5-year CD that pays 4% APY (as of this writing.) Their Visa card is a great deal, too; it offers 5% cash back on gas, 2% at the supermarket, and 1.25% cash back on everything else. The cash rewards are simply credited to your account at the end of the month; you don’t have to request them. It’s definitely worth the $20 one-time fee to sign up with them. I am even considering refinancing my auto loan into PenFed so I pay less every month.

The application process is straightforward, albeit a bit strange if you are not a government or military employee. First, you establish your account and pay $20 for a one-year membership in the National Military Family Association. (You do not need to pay more than the $20 for a 1-year membership to retain membership in PenFed!) This is tax-deductible, so make a note of it for tax purposes. Once that’s done, go through the steps to set up your PenFed account.

PenFed will send you a form in the mail that you then sign and return to them in the postage-paid envelope provided. With the customer number you received in the mail, set up your online account and apply for the credit card. The customer service rep I talked to says that due to their 2.9% balance transfer promotion, it takes a few days to get an account approved. Their customer service was friendly and helpful — an encouraging sign. I am currently waiting for my account to be approved.

Find out more or apply for about the Pentagon Federal Credit Union Visa card.

Since I had already dinged my credit with one account offer, I decided to go for another credit card as well. (It’s always best to apply for multiple credit cards at once so you don’t have inquiries every few months on your credit report.) I chose the Schwab Invest First Visa card.

Schwab Invest First Cash Back Credit Card

Highlights: 2% cash back on everything; 2.99% balance transfer offer for 6 months
Caveats: Must open a Schwab investment account, which has a $1000 minimum (or $100/month automatic transfer). Cash back will be deposited into your Schwab account, which you can then invest, write a check on, or withdraw with a debit card.

Summary: This is a great card for those who want to invest online. I love the idea of investing credit card rewards, since I am a huge fan of my money making me more money! Schwab charges a $12.95 fee for each trade made with your account ($8.95 if you have over $1 million in liquid assets or make more than 30 trades per quarter.) You can buy CDs, stocks, mutual funds, or bonds with your Schwab account.

To apply for the card, you must first open a brokerage account. The online form will take a few minutes to fill out; you’ll need your driver’s license number. During the account setup process, you have the option to transfer a brokerage account from another broker. I have an OptionsXpress account that charges me more per trade, so I opted to move that to Schwab.

Once your brokerage account is set up, apply for the credit card. Schwab says it will approve most accounts in 7-10 days. I am currently waiting for approval.

Find out more or apply for a Schwab Invest First Cash Back credit card.

Which Cash Back Rewards Credit Card Is Better?

The difference between 1% and 2% cash back is $100 for every $10,000 you spend, so it can be well worth investing an hour or two to make the change. As for which card is better, that’s up to you. As an investor, I will probably use the Schwab card more, but your needs may be different. Of course, there are many other cash back rewards credit cards to choose from.

Making The Change Painless: Four Tips

It can be a pain to transfer from one card to another. Here are four quick tips to help make your credit card transition less painful:

1. Set all payment due dates to the same day. When you get your new card, the first thing you should do is call your credit card company and have them switch the due date to the same date as your current credit card has. That will mean it’s much less likely to go past-due accidentally. Do this for all of your credit cards — even store cards — for a totally painless process.
2. Set up online banking and link your checking account right away. Some credit cards can be really annoying to link to your checking account, so do this right after you change your due date. That way you don’t have to send a check in the mail — another safeguard so you don’t miss a due date.
3. Make a list of all automatic bill payments on your current card, and change them over all at once. This should take somewhere between 30 and 60 minutes. it should be straightforward. If you miss one, no big deal — just catch it next month.
4. Finally, don’t forget to cash out any remaining rewards on your old card. Do this preferably after you have an entire billing cycle with no more charges.

Cash back rewards credit cards are an easy way to keep your money working for you!

Recommended Reading:

• Cash back rewards credit cards. Here’s a huge list of rewards credit cards — and you may even get paid to sign up for them!
• Make money lending your spare change. Over 40 other erica.biz readers have already signed up for Lending Club and received $25…don’t miss out!
• What’s the best way to invest money during an economic downturn? I examine various ways to invest your money, from the stock market to housing, from the perspective of the current crash.
• Don’t forget to budget. Your goal should be to pay your credit cards off in full every month, and let the credit card companies pay you, instead of the other way around.

How to choose a business.

V also has a similar question: “I’d like to hear your thoughts about involving in many businesses at once. I’m mostly interested in web-based projects with a high requirement of up-front work (but not necessarily up-front money investment) and ‘passive-income’ potential.”

Instead of some boring stats and humdrum analysis, I thought the best way to show how I chose web hosting — and became successful in it — was to tell you my story.

My Story — How I Chose Web Hosting

I first wanted to start a web hosting company when I was a teenager. I set up my first website in 1996, on Geocities, and called it “All of the Coolest Free Stuff on the Internet.” I was 15 years old. I highlighted everything from free sample offers to free software.

I promoted it by posting on forums and UseNet mailing lists, and I built up a fair amount of traffic! People were emailing me samples they found and asking me to post them on the site. I even had a couple savvy companies ask about promoting their product on my site.

The free software page was the most popular part of the site, and with some birthday money in mid-1998, I registered the domain name thebestshareware.com. My goal was to post a new piece of shareware every week. I also hosted the large shareware files on my server, which resulted in my hosting provider shutting me down!

Even though I could log in and see that I was under my “unlimited” bandwidth allowance in their control panel, they claimed that hosting a download site was against their terms of service. This left a bad taste in my mouth, and I left their hosting service. (Actually, I think they kicked me off!)

Desperate, I called the owner of a local ISP in my small town, and convinced him to colocate (put in his garage and hook up to fast Internet, basically) my old 80486 desktop computer. He did so, but then his wife found out, got mad at him, and he returned the computer to me. My sites were down for over a week while I figured out what to do next. As a high school kid with little money, I didn’t have too many options.

My Third Try At Finding Web Hosting

I searched online for a colocation provider that was really cheap, and eventually stumbled on one that charged $59/month to colocate a server — money I could barely afford, but figured I would make via advertising. (It wasn’t a far stretch — my sites were already bringing in about half that much every month from advertising.)

Everything went fine for quite a while with that provider. I turned 18 and moved to California to seek my fortune. But one day, over a year after I had originally signed up with this provider, my websites went down. I called the owner of the company, and he said he and his wife had had a fight, and she had gone into the datacenter in a fit of rage, unplugged all the servers, and driven off with them in the back of his truck!

(Looking back now, I realize I had a bad run-in with two women who were threatened by their husbands talking to me about web hosting — likely a business they didn’t understand. In neither case was anything untoward going on, and I was naive enough to assume that the males involved didn’t see their relationship with me as anything but business. I certainly was never interested in anything other than cheap colocation.)

But this was all okay, because I had backups…right? Well, I did, but I didn’t ever think to test the restore process, and only a handful of files restored properly. Devastated, I let my domain names expire. I was angry and hurt, and distrustful of the web hosting industry as a whole.

2001: I Choose To Start My Own Hosting Company

Fast-forward to 2001. I was working with a particular web design client who was pushing the limits of his shared hosting account. Like many clients before him, he asked me to recommend a web hosting company. I finally told him I couldn’t recommend one. The experiences I had had in the past were not just bad business experiences…they had emotionally scarred me.

I was colocating my own sites again, this time in San Francisco, on a server a friend had given me in exchange for “free web hosting for life” (a deal I’m still honoring for him today!) I told my client I would host his sites on my colocated server. Then I wrote him up a contract, charged a price about 25% lower than the other web hosting companies had quoted him, and moved his sites over. His sites were super-fast because he lived close to the datacenter, and he was happy because he was getting charged a comparative bargain from someone he could talk to face-to-face.

I realized I needed to get serious about opening a web hosting business, and I set up a simple website at simpli.biz, a domain name I had bought when .biz domains were first available. I designed the site myself, wrote my own shopping cart, and with the help of my uncle, created a product and customer database. I opened for business…and the rest, as they say, is history. (Or at least another blog post!)

Why did I choose to start a web hosting company? Frankly, I was angry at the state of the industry. I felt ripped off, abused, and disgusted by it. These emotions created a perverse sort of drive within me; a determination to make the industry better however I could.

There was also the dream I had had of starting a web hosting company since I was young. This dream mostly stemmed from the monthly fee model — where, if you do things right, your revenue goes up every month. Monthly income excited me like no other business; even today, I won’t start a business where there isn’t a monthly revenue model.

How To Choose A Business: Four Guidelines

1. Follow your “passionate disgust.” Some would say “Follow your passions,” but in my case, it was more like “Follow your passionate disgust.” It’s important to choose a business in an industry that excites you in some way.

   Maybe it’s exciting because there are new things happening all the time, like Twitter or iPhone apps today. Maybe it’s exciting because it’s totally broken, like web hosting was when I started Simpli in 2001. Or maybe it’s just personally exciting to you because you know you’re on to something.

   Whatever it is, that excitement better hold you over on those days where you don’t want to get out of bed. You should be powerfully moved to get out of bed and kick some butt every single day in whatever business you choose. In my case, I was so moved by my bad experiences, and so excited to show customers that we were different, that I had no problem getting out of bed.

2. Start a business in an industry where you know you can be a leader. You should absolutely know you can rock your business better than whoever is out there. If you start a business selling books, you better have a lot of ideas of how you can do it better than Amazon and Barnes & Noble. You should become a customer of all those services that are like yours, and write out pages and pages of what you do and don’t like about those companies.

   I have nearly 50 pages of other web hosting company websites printed out, marked up, and notated in an old folder I simply call “Competitive Analysis.” I used to have them hanging on my wall, taking up about a 5′x6′ section of my living room. That meant every time I walked in my front door, I saw what others were doing right…and it motivated me to do better.

   For my new business, Inspiring Innovators, I joined three other websites similar to mine and wrote pages of notes on what I liked and didn’t like about each one. Do I know I can do it better than they do? Can I actually corner the market in a way that will inspire them to change? Yes. If I wasn’t confident in that assertion, I wouldn’t start a business in that industry.

3. Choose one idea, and do it better than everyone else. If you spend your time working on 10 businesses, or even 2, you won’t get as much done on any of them as you would if you picked one and wholeheartedly committed to making yourself the best in that industry.

   I learned this pretty quickly with web hosting. When I started, we did every kind of web hosting — shared; dedicated; Windows; Linux; BSD. By the time I finally sold Simpli in 2007, we were a lean, mean web hosting machine, doing only dedicated servers and colocation over $200/month, and catering to Silicon Valley’s hottest startups.

4. Be prepared to stick with your business for years. Once your business gets going, it may really take off — but remember, it took me 6 years to build my business to the over-$1-million mark. Great successes do not typically happen overnight. If your business is growing at a strong clip every year, you’re doing something right; just have patience.

If you stick to these four guidelines, learn some marketing, and listen to the feedback your customers give you, I have no doubt that you can choose a business that will make you a million dollars.

Recommended Reading:

• 20 Ways To Make $100 A Day Online. You CAN make money online without being a geek! This is a comprehensive, 247-page guide to making your first dollar online. I bought it and devoured it. It’s one of the best “getting started” guides I’ve ever read on Internet marketing. As an added bonus, it’s written by top Internet marketing experts, not scammers. Well worth the price.
• Why Your Business Isn’t Doing As Well As It Could Be. What’s the #1 problem most businesses have? I discuss it and how you can avoid it.
• Three Business Ideas That Will Thrive In A Recession. Which businesses will work well now? Here are three…

Frank Kern shows off his Porsche.

Frank, like many of the Internet marketing “gurus”, got his start in the old days of Internet marketing — which was actually something like 1998, or maybe 1999. Back when, as Frank and the other gurus will tell it, nobody thought it was possible to make more than $100,000 in a day. Now that record has been shattered, and Frank and many of the others who speak at these conferences have made $2 million, $3 million, or even $5 million in a single day from a product launch. Typically, they also all promote other gurus’ products to their huge mailing lists.

As you listen to Frank, or any of the other “gurus”, recount their stories, you can’t help but notice two things: All of the gurus seem to be male, and pretty much all of them are white. At Mass Control, for instance, there aren’t any female speakers, and probably 85% or 90% of the attendees are male.

Today, I was speaking to one of the attendees, and, in a moment of attempted bonding, he asked me the following question:

“Erica, don’t you think Internet marketing is just an old boys’ club?”

I looked at him, surprised. “No, I don’t think so,” I said. “But you have to remember, I came from web hosting.” As I state in my speaking gigs, as far as I know, my company was the only female-owned web hosting company to make over $600,000 in revenue in the first nine months of 2007.

As I thought about it more, however, I realized how insidious his comment was. It would only be said by someone who 1) isn’t successful in this industry and 2) wants to bond by commiserating with someone else of a like mind. His comment is a “mind trap” designed to let him off the hook for his own failure.

The Real “Sucker Punch” That Causes Most of Us to Fail

Frank talked this weekend about negative influences: the news, for instance, which constantly reminds us that we’re in a recession and that people are getting laid off. But there is another, deeper influence that many of us have to deal with, and that is the voice in our own heads that constantly reminds us how terrible we are at whatever we attempt.

That voice is the real sucker punch that causes most of us to fail. It reels you in with “You can’t be like [insert guru's name here] because you’re not [whatever they have already accomplished.]” It can be as simple as “You couldn’t have won the race because you can’t bike like Lance Armstrong” or as deep as “I don’t need to make a million dollars because I don’t want to sacrifice my entire life to my work.” (News flash: Most millionaires don’t, either!)

Whatever your version of these thoughts are — and I guarantee you either have them now or have had them at some point — they stop you cold when you attempt to achieve your goals. If you really want to make a million dollars, travel to 60 different countries, or quit your job, the primary thing holding you down isn’t “The Man”, but your own thoughts and fears.

So, What About Internet Marketing?

Is Internet marketing just an “old boys’ club”? Well, there is sure a preponderance of evidence that it is. All of the speakers here are male. They have already bonded with each other. They all promote each others’ products. They love to sell high-ticket items, shutting out those who don’t have an extra $2,000 to $5,000 laying around.

That’s the story you could tell yourself, and it would be “true” in a sense. But I choose not to participate in telling myself that story, because I choose to make my success or failure my own problem. Instead of using this story as a crutch, I choose to let it empower me. There are no female speakers here? Great: I choose to be the first. No woman has done a multi-million dollar launch in the Internet marketing industry? Thank you; I accept your challenge.

It is an honor for me to be a part of this industry. When I discovered Internet marketing last year, and signed up for Mass Control, I had no idea what I was getting myself into. Later, as I spoke at two Internet marketing conferences, I realized what an amazing group of people had found each other. Here were people with similar life goals to mine: work less; make more money; work from anywhere; enjoy life. I have met some of my closest friends and mentors via Internet marketing.

Here is just a partial list of people whom I consider friends. All of the people on this list have made at least several hundred thousand dollars in Internet marketing, and many of them are millionaires. Yet, they are amazingly approachable, friendly, and considerate:

• Pat O’Bryan
• Ken McArthur
• Ben Mack
• Chris Haddad
• Simon Leung
• Eric Farewell
• Adam Urbanski
• Bob “the Teacher” Jenkins
• Carrie Wilkerson
• Steven Wagenheim
• Elmer Hurlstone
• Willie Crawford
• Ross Goldberg
• Jason Moffatt
• Dr. Mike Woo-Ming
• Travis Sago

I am continuously awed by the generosity this community provides. Last year at this time, I remember turning to the person next to me at Mass Control 1 and asking, “What is a continuity program?” (Turns out it’s what us web hosting folks call MRR, or monthly recurring revenue.)

This year, I have built a list, added over 1,000 new subscribers to my blog, and am getting ready to launch my own continuity program, Inspiring Innovators. When I have a question, I call these guys, or ask them on Twitter. If I need help, they are there for me. When I speak with them, I know they are committed to helping me make my next million dollars in this industry. They want me to succeed even when I am down on myself. And really, that’s all I could ask for from any friend.

Shaking Out Your Own Story

There was probably at least one person who read this blog post and is now thinking “Yeah, but Erica, they like you because you’re already a millionaire” or “Yeah, but you’re a cute girl,” or something else that you aren’t. Clearly, that’s why I’m successful and you’re not.

Or maybe it’s just a story you tell yourself to make your failure okay with you. I choose to not accept failure. My story says, “These people are my friends because we can help each other. I am there to support and listen to them, and they are there for me. We enjoy sharing in our mutual successes and encouraging each other to get up and try again when we get knocked down.” Which one is “true”? Well, does it matter?

The real question is: Which story will help you achieve your goals?

Recommended Reading:

• Perfectionism is Your Worst Enemy. My most recent update on achieving my goal of making $1,000,000.00 a year in Internet marketing.
• You Are Worth More Than You Think. Think you can’t afford to hire other people? Think again.
• Finding Time to Pursue Your Dreams: Free Up 750 Hours A Year With One Simple Change. Don’t have time to start a business? Try this on for size.

Last year, when I stated my goal of making $10,000/month online via writing and creating my own products, I felt it would be a goal that I could accomplish by the end of 2008. When 2009 rolled around, I again felt confident that I would hit the goal quickly. It’s April, I still haven’t hit it, and here’s why: I am being too much of a perfectionist.

Let’s roll back to 2008. I first had the goal of creating a pay site called HardworkingMillionaire.com. Then I decided I didn’t like that name, so I scrapped it and went back to Inspiring Innovators–a domain name I have owned for a while. My desire was to create a site where I could interview top entrepreneurs about their business, charge a small monthly fee, and have a few hundred or a few thousand members. I would do two interviews a month, publish them, have them transcribed, and people would pay something like $8-9/month for them.

I did some interviews and they turned out fantastically well. Doing the interviews was straightforward, and the monthly fee was a bargain for the content my members would be getting. With the help of Richard, my boyfriend, we built out a complete membership site at InspiringInnovators.com and sold a couple of interviews via the Warrior Forum. My interview with Tony Laidig, selling for $7 as a standalone product, sold over 120 copies!

Then I went to a women’s business networking event in San Francisco, and excitedly told them about my new business. Having just sold 120 single interviews, I felt this was a no-brainer. But none of the women seemed that excited about the project. I asked them what they wanted instead, and they said they wanted me to consult with them. That night, I ended up showing them a few Google tricks I know to rank #1, and the said they wanted me to teach them that.

My Business’s Fatal Mistake

This was where I made a fatal mistake. I ended up second-guessing my interview project, and instead tried to create a complex membership site where I would teach people how to dominate the Web. And then things spiraled from there. I hired a copywriter, Chris Haddad (who is amazing!), and worked with him. Chris said Inspiring Innovators didn’t sound like the right name for a membership site dedicated to teaching people online marketing tricks — and he was right! So I spent weeks coming up with a new name, and finally negotiated and acquired BeTheAuthority.com.

I absolutely love the name “Be The Authority”. However, this kind of site takes a significant time investment to launch! I’ve currently spent weeks working on the idea for the site, finally coming up with the following two products:

• Be The Social Media Authority, a 3-month course that teaches you how to use Twitter and Facebook for business and not just to connect with old friends.
• Be The Website Authority (working title), a 3-month course that teaches you how to rock Google and get #1 search results for relevant keywords for your business.

These are in high demand from business owners, and I have confidence I can sell them. But they also take some personal time, as part of the package is regular group webinars with me.

Hindsight is 20/20

In retrospect, I should have launched Inspiring Innovators last year and tweaked it along the way. I took my own advice and started talking to people to find out what they want, but I forgot the most critical part — I needed to launch something, and iterate it based on suggestions, not hold off on launching!

Perfectionism took a great, simple business idea and made it into a killer monster — a noose that hung around on my neck and tightened as I talked to more and more people and got more opinions. The more opinions I got, the more frustrated I became; a sure sign that I was going in the wrong direction.

The project has grown out of control. Currently, I am juggling several projects at once, instead of just creating a simple business and promoting it. Worse yet, none of those projects are getting done, and I’m watching more TV than I have in the past — another sure sign that I’m headed down the wrong path with my business.

Are You Heading Down the Wrong Path?

Here’s the scoop. You know you’re heading down the wrong path when…

• Your business doesn’t excite you. If you’d rather watch TV than work on your business, you’re in the wrong business.
• You seem to “work” for weeks at a time but don’t release a project. Something, anything, is better than nothing. Release! Ship! Get feedback…but only after you release your first iteration.
• Your business idea keeps growing, and growing… Your first iteration should be small and simple. Add features later.

I originally intended to launch Inspiring Innovators in January, 2008. It is patently ridiculous that I let this grow completely out of hand instead of getting something out there. If I have any consolation, it is that I know thousands will read this post, and hopefully it will stop a few of you from doing the same thing. Whatever you are working on — release it quickly, even if it doesn’t have everything you need. Your perfectionist instincts may cost you thousands of dollars.

My Commitment

To combat my perfectionist instinct, I WILL RELEASE INSPIRING INNOVATORS WITH ITS FIRST INTERVIEW BY THE END OF THE MONTH! That means I have two weeks (less, actually, as I will be traveling this month) to get it up and running with two interviews, a membership component, a payment system, etc. NO MORE EXCUSES!

Also, since I know there is a ton of interest in Be The Authority, I will release that quickly, too, with one 3-month system available for purchase by May 22. Why May 22? I’m speaking at UnSeminar6, and would love nothing more than to launch it there and honor Pat O’Bryan, as he took a chance on me and gave me my first Internet marketing speaking gig last year.

If there’s one thing I wish I could implant into your brain in big, flashing, red letters, it’s that perfectionism is your worst enemy when it comes to launching a business. Don’t do what I did; it will cost you more money than you will make by launching quickly and iterating.

I currently have completed interviews with marketing maven Ben Mack and blog whiz Steve Pavlina, so those will likely be my launch interviews. I’d appreciate any feedback you have on what you’d like to see on Be The Authority, or any person you would like me to interview for Inspiring Innovators.

See my previous posts about my goals.

Whenever someone asked me why I didn’t own real estate, I would simply point out that no properties near me cash flowed. I first started blogging about real estate in 2003, noting that a property in the same condo complex where I was renting was actually more money to own than to rent. I pointed out, correctly, that this meant I could not possibly cash flow on it as a rental with a 30-year fixed mortgage. (Those condos have already lost value, as I predicted, and are poised to drop further.)

Even though many looked at me like I was crazy for “throwing my money away”, I continued to rent. In August 2006, I predicted the real estate crash year by year, and also predicted that I would buy a house in late 2010. So far, my predictions have been eerily accurate; I predicted that Fannie and Freddie would crash, housing values would drop by at least 35%, and saw the recession coming.

I spent hundreds of hours accumulating data, confident that the coming crash would represent one of the biggest opportunities to buy property in our lifetimes. Here, I take my accumulated knowledge and answer your five most common questions about buying real estate.

Even better, I am also giving you a free copy of my rental property income worksheet. Frankly, it’s so worthwhile I could probably sell it, but I’m happy to give it away to you, my loyal reader. The worksheet allows you to plug in a few numbers and see quickly whether any property cash flows. You can download it after reading this post.

1: When is it a good time to invest in real estate?

The simple answer is “When you can get the lowest price to rent ratio for the property you are buying.” Here’s how to find the ratio:

Find a comparable rental (craigslist is good for single-family home rentals.) Find the purchase price of your property. Take the purchase price and divide it by the lowest price of the comparable rental in the same neighborhood. For instance, if the property price is $199,000, and the rental price for a similar property is $1595.00, your ratio would be 124.76.

Ideally, look for a ratio of 100 or less. 80 is awesome. Anything better than 80 and you’re probably looking at significant repairs; factor any repair costs into your purchase price. Anything over 150 isn’t worth buying; it won’t cashflow well as a rental. Anything over 200 isn’t worth buying even if you plan to live in it, since the house will most likely lose value over the next 3-5 years to the extent that renting is a more worthwhile option.

This is my first step in plotting out a potential investment, since it fairly quickly weeds out overpriced properties.

2: What type of real estate should you buy?

I wasn’t sure, so I asked an expert: Jim the Realtor. Jim is in the business of selling real estate, but he’s also honest and blunt — characteristics I appreciate! He said two things that I hadn’t heard previously:

1. Jim recommends buying a single-family home with at least 1500 square feet, with at least 3 and preferably 4, bedrooms. Here’s the key: The bedrooms should all be on the ground floor. Jim says that a lot of older couples will be selling their homes and looking to rent; by owning a rental property with all the bedrooms on the ground floor, you can attract them. Older people also make great, consistent tenants.
2. For most “owner-occupied” mortgages (which are much easier to qualify for at this juncture), you need only live in the property 1 year from when you purchase it. Then, as long as you keep the same mortgage, you can rent out the property.

If you plan to do this, there are a couple of caveats. First of all, not all mortgage documents have a 1-year timeframe, so check your mortgage documents before you sign them! Secondly, assuming you plan to buy another property and start a “property ladder”, remember that your next mortgage company will only let you count 75% of your rental income as income for your next mortgage. Also, since you already have one mortgage, your credit score will probably be lower, which might impact your rates on your next house.

Study the implications of this before you decide to rent out your first property and “ladder” — preferably with your accountant — but even with the restrictions, this may make sense for you.

HOA fees

I don’t recommend buying an investment property with HOA (Home Ownership Association) fees if you plan to own it long-term. A $100/month HOA fee may not seem like much, until you do the math for 30 years: it’s $36,000! That’s a huge chunk of profit flushed right down the drain. If you insist on buying a property with HOA fees, make sure it’s discounted by at least $20,000-$30,000 compared to a property with no fees. Also, when performing your price-to-rent calculation, subtract the HOA fees from your potential rent price.

3: Where should you buy a property?

Most people tend to assume their immediate area is best for buying real estate, when it may not necessarily be. What should you look for in a place to buy real estate? Here’s a short list:

Job growth: Look for an area that has had better-than-average job growth over the past 10 years. Use caution when buying in an area overly dependent on one sector of the economy, such as Silicon Valley and the tech industry. If the general metro area hasn’t had job growth, but the neighborhood you are looking to invest in is desirable, that might also be a decent choice. Unemployment rate ideally should be lower than average.
Median income: Higher isn’t necessarily better; look for a neighborhood with a steady median income.
Good schools: Many families renting will pay more for better schools. Find a school’s API rating. Make sure it’s better than surrounding zip codes. GreatSchools.net has this information.
Proximity to public transit: This will become critical as gas prices go back up (and since you’re buying for the long term, expect them to!) Ideally, your house would be located close to at least two types of public transit…but not so close that the house shakes every time the train comes in.
Walkability: Another factor that will become more critical in the future. WalkScore.com gives you this information, on a scale of 0 to 100. Ideally, your property would have a 60+ score.
Property tax rates: Consider state property tax rates, and state government health, when making your decision. For instance, California can only increase your property taxes 2% per year thanks to Prop 13, but the state is bankrupt and is currently seeing a mass exodus of citizens to other states. Due to government issues, California probably isn’t the most ideal state to buy property in.

4: Should you buy right now?

There are definitely some properties that are cashflowing right now, but many are in out-of-the-way areas that require a car, where rent prices haven’t plunged as much as they likely will in the future. While there are certainly investors in the market right now buying great properties, there’s also a frenzy for lower-priced properties. First-time buyers, lured by the $8000 Obama tax credit and 3% down FHA loans, are competing with investors. Higher-priced properties, on the other hand, have farther to drop.

While I don’t deny that there are a few folks out there getting amazing deals right now, I think small-time investors should wait until the first-time buyer frenzy has subsided and better, closer-in properties start to really drop. I don’t think you have long to wait; 12 to 18 months should be sufficient to buy your first property, and the good deals will continue for 3-5 years past that. Don’t rush; there are plenty of deals to go around.

Spring has far more buyers than winter; savvy buyers will wait until the end of the calendar year to buy, no matter what year it is.

5: What’s most critical?

The most critical component of investing in residential real estate is cash flow. Will rents continue to stay the same, or will they plummet since everyone is leaving the city you want to invest in?

In my spreadsheet, I don’t account for potential gains in property value as a component of a real estate investment. That’s because I know that in a sane market, real estate only appreciates about as fast as inflation…and over the next few years, it’s likely that any property you buy will actually depreciate a bit.

If there is one lesson I can impart to you, it’s don’t buy real estate based on potential appreciation. Ever! Even if the only calculation you do is the price-to-rent ratio, you’re still better off than those who buy hoping for appreciation.

Always buy a property that cash flows well as a rental, even if you never plan to rent it out! Why? Having the flexibility to rent the property gives you the ability to move and start your own property ladder instead of paying 5-6% to sell. Buying a property with a low price-to-rent ratio also protects you, to some degree, from price depreciation.

Are you in the market? Waiting? Have you purchased income property recently? I’d love to hear your stories in the comments!

Download my rental property cash flow worksheet for residential real estate investing.

Read my previous posts about real estate.

This post was featured in the Carnival of Personal Finance.

I think you have every right to be mad as well.

During these times, I’m probably not alone when I say what I am seeking most is a feeling of control. Despite selling my company at the top, I didn’t realize the stock market would plunge over 50%. I lost a bunch of money there — and you probably did, too.

I am also disgusted with how most banks have performed, and that disgust has fueled a passion to clear myself of debt. From over $100,000 of revolving debt in 2007 (most of it used to finance my business), I’ve come a long way — I now have no debt other than a low-interest car payment, and I plan to pay that off this year.

With banks paying meager interest rates and the stock market bouncing around like a pinball, you are right to look for other places to invest your money. Particularly with small amounts, investing in the stock market doesn’t really make sense; the transaction fees eat up profits for any investment under $1000 or so. I can invest a small amount — say, $25 — in my business, but it’s iffy whether such a small amount would show a measurable return.

What Alternative Investments are Out There?

I spent months researching alternative investments. Finally, a few weeks ago, I came across Lending Club. You can take as little as $25 and lend it out to other people. What intrigued me is that this allows you to form your own tiny bank of sorts. You read each potential borrower’s profile, including their credit score and history. They tell you why they want a loan, what interest rate they have agreed to pay, and how much they wish to borrow. Just like a bank, you can then decide whether that borrower gets your $25 (or whatever you’ve decided to lend.)

But the best part is this: Just like a bank, you get to collect interest on the loans you fund — from 8% to 16%. Lending Club claims that a well-diversified portfolio should earn you an average return of 9.05%. Since CD rates have dropped so dramatically, Lending Club seems like a viable option for diversifying your portfolio.

But was Lending Club really worth it? I funded my account with $100 and dug in deeper.

To sign up (which is free), you must go through a 4-step process that verifies your identity. Once your identity has been verified and your bank account confirmed, you can fund your loans.

If you have ever used Kiva.org, this process will be straightforward. Let’s take a quick walk through it…

How Lending Club Works

Once you select “Invest”, you can either choose LendingMatch, which is Lending Club’s proprietary tool to help you get the exact return you want, or you can browse all available loans. I prefer to simply browse loans.

When you click “Browse”, you will see some options on the right, where you can filter loans by their interest rate, credit score, etc. When someone applies for a loan, Lending Club sets their interest rate. The loans with the least risk (as judged by Lending Club) carry the lowest interest rate. To balance your portfolio, you will want to make several loans to different people at various interest rates — just as you wouldn’t put all of your investments in one stock.

How do you know which loans to fund? A few tips, most garnered from other lenders, are below. These tips are subjective, but you can use them as guidelines:

1. Don’t loan to anyone who seems desperate or needs cash “now!”
2. A person who has had a lot of credit report inquiries in the last 12 months is likely more risky.
3. Business loans, especially for someone with no previous business experience, are more risky than personal loans.
4. A high debt-to-income ratio means the person is more likely to default, since they are carrying a large amount of debt relative to their income. Ideally, the debt-to-income ratio should be less than 20%. Use the “DTI” checkboxes on the right side of the loans page to adjust for this.

Why Lending Club?

Why should you invest in Lending Club and not in the stock or bond market? In my opinion, it’s not an either-or situation. Lending Club fits best when you have a savings account and a retirement account and want another option that doesn’t involve you losing your entire investment to transaction fees. Let’s put it this way: very few of us would miss $25 a month. Usually, those small amounts just sort of disappear from your checking account. But investing $25 a month every month means that, with just a few minutes a month, that $25 could be making you money instead of being wasted. If you’re a fan of paying yourself first, Lending Club even has an auto-deposit feature.

How much can investing just $25 a month really make you? At Lending Club’s 9.05% average return, investing $25 a month for 3 years will earn you $170.13 in interest. That’s free money…just for taking the “spare change” you already have and sweeping it into Lending Club instead of frittering it away. And if $170.13 doesn’t excite you, try $50/month or $100/month!

As if gaining interest on your money isn’t enough, Lending Club is offering you a $25 bonus just for signing up! It’s free to sign up.

What’s the Catch?

As with any high-yield investment, Lending Club does have its pitfalls. First of all, you are lending to individuals, who can default on their payments. Lending Club builds in some defaults to its 9.05% average return promise, but your default rate may be higher or lower. Remember to diversify your portfolio, and keep in mind the guidelines above, to be safe.

Lending Club charges a 1% fee on every payment they collect from a customer, which equates to a 0.7% interest loss per year. This isn’t that big of a deal, but it’s something to be aware of.

Finally, there are some investor requirements. You must be a resident of one of the following U.S. states to participate as a lender:

California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Minnesota, Mississippi, Montana, New Hampshire, Nevada, New York, Rhode Island, South Carolina, South Dakota, Utah, Virginia, Washington, Wisconsin, West Virginia, and Wyoming.

Lending Club has filed for registration with the appropriate State securities authorities in all other states and expects to be adding more states over time.

In addition, individual lenders who are residents of states other than California must (a) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000. Individual lenders who are California residents must (a) have an annual gross income of at least $100,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $100,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000.

As far as I know, Lending Club has no way to confirm what your net worth actually is, but stating your net worth is required by the Securities and Exchange Commission.

All loans have a 36-month repayment term, so consider this somewhat like investing in a bank CD. Lending Club has a trading platform where you can sell your notes for quick cash (which I may explore in a later blog post, if there is interest), but you’ll lose a small amount of your principal by doing this, and it may take a few days for your loan to sell.

Conclusion

I have been enjoying using Lending Club as an alternative investment vehicle for the past few weeks. Already, I have loaned out $100 and received $0.83 in interest. My greatest joy, however, is the satisfaction of becoming my own tiny bank — and beating the big banks at their own game!

For me, Lending Club is a way to regain control over my finances. I may not be able to control higher tax rates, gas prices, or our government spending money like it’s going out of style, but I can make wise investment decisions for myself. Every loan I help to fund on Lending Club is one less loan that greedy banks get to cash in on…and one more way I can help someone else improve his or her life.

Helping people and making money…and getting a free $25 just for spending 10 minutes signing up? To me, it doesn’t get any better than that.

Now, to do something I don’t do very often: I’d like to ask for your help.

Here’s the deal: I want 80 of you to sign up for Lending Club and collect your free $25. Do this today, because every day you delay, you lose potential interest payments. Since it’s free to sign up, you have nothing to lose.

Beat the banks! Sign up today as a lender and collect your free $25.

If 80 people sign up through my link and collect their $25, I will celebrate by giving everyone who signed up a free copy of my first ebook, which is due out this summer. Its working title is “Pay Less For Life,” and it’s all about how to effectively save tons of money on everything from banks to bills to better food.

To claim your free copy of my ebook, sign up using the links in this post and then comment on this post. Leave a valid email address, and I will email you my book when it is released. This will save you at least another $20!

How can you help? Who do you know who could use a free $25? Tweet this post, post it on your Facebook account, Stumble it, and email your friends. Your friends will appreciate you sending them a link to get $25, and you will all win by getting a free copy of “Pay Less For Life.”

Sign up now — don’t let someone else collect your interest payments!

Thank you in advance for your help!

If you’re interested in signing up as a borrower and getting a loan, please sign up for Lending Club via this link. It won’t get you a free $25, but it may get you a loan!

Disclosure: I collect a small amount of money for every person who signs up for Lending Club through one of the above links. Per my advertising policy, I have personally reviewed, actively use, and endorse Lending Club, and have not been paid to write this post.

This web site is only intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any securities. The author has taken all usual and reasonable precautions to determine that the information contained in this website has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes affecting data availability and information may be available which is not reflected in this website. Consequently, the author does not make any warranty as to the accuracy or completeness of information, analysis or views contained in this website or their usefulness or suitability in any particular circumstance. This website should not be relied upon for any investment or portfolio assessment or other transaction. Please consult your financial advisor directly to review any proposed investment or transaction. The author accepts no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this website in contravention of this notice.