Another business model adjustment

I hired Gian this week as a Virtual Assistant. He’s a young man living in the Philippines.

The initial task I gave him was to post Groupon offers on our site with our affiliate link. He also attempted to contact the business owners through their website or Facebook page to let them know we were promoting their offer on our site, and ask them if they would be interested in reducing the commission that Groupon keeps for every transaction.

It wasn’t long before he got a response from a man who represents a company who sells massage vouchers on behalf of over 200 providers. He claimed he was selling $10 million worth of vouchers annually on Groupon who kept 30% of sales. So my 20% offer sounded pretty good.

I was elated at finding our first potential client — and a large one at that — but soon began to wonder if we could make a profit after subtracting advertising costs.

I decided it was way too risky to start with a 20% commission so offered to do a 30-day test at 40% commission, and then reduce it to 20% after that, depending upon the results.

Although Groupon will often keep 50% or more of sales, it turned out that they were only keeping 30% commission for this client, so my 40% was not too attractive.

I began to think about ways we could maximize profit in order to make the 20% commission work. It occurred to me that using a sweepstakes to promote the product might be the answer.

I had planned to offer to run a sweepstakes for a client, but only after I had established a relationship with them. But now I began thinking about starting out with the sweepstakes.

Strangely, this was starting to look exactly like the business model I was pursuing without success over 2 years ago when I was calling the business LocalStakes.

I had made a couple of false starts in running a sweepstakes. My best effort to date had been over a year ago when I was holding weekly “live” drawings on Facebook and awarding a few prizes every week (items I purchased on Groupon). I was simultaneously trying to build my “Shop ABQ” Facebook group.

After a couple months, however, I became discouraged because it didn’t seem to be going anywhere. The problem was a familiar one, namely that my business model was only half-baked. It was not a complete model.

I knew how to run a sweepstakes, but I didn’t know how to get businesses interested in participating, nor did I know how to make it profitable.

I knew it was essential to award “consolation” prizes after the drawing. That was part of the plan last year, but I didn’t have anything to offer without a client — or so I thought.

But now, having actually found a potential client who was selling Groupon deals, I realized that the consolation prize could simply be his Groupon deal — or better yet — his deal sold on our website.

And I also realized that I could add scarcity — by making the deals available for only a limited time — to make the consolation prize more attractive.

And to further increase the odds of running a profitable campaign, I could have multiple prizes (and multiple consolation prizes).

Suddenly, I had a completely different business model, not an unusual thing for me to do, unfortunately. But this time, I have the strong feeling that my business model will work.

More Business Model Uncertainty

My quest to start an online business has taken so many twists and turns that it makes me dizzy.

Truthfully, I’m feeling like the Israelites who wandered in the wilderness for 40 years before entering the promised land. There seems to be absolutely no logical reason why it has taken me so long to get something off the ground. I either have a secret flaw (secret to me anyway) or perhaps have angered God. Neither is good.

It seems that I’ve tried and rejected every conceivable business model out there. “Tried” wouldn’t be quite right, though. My tries are lackluster at best. I usually waste time, money and energy on every idea, eventually talking myself out of it for a variety of reasons.

The one idea that I’ve come back to over and over again can be described as marketing and advertising services for small local businesses. This type of business can take on many forms and I’ve trouble decided which model to choose. Plus I tend to make thing so complicated that nothing ever gets completed.

I also put way too many restrictions on the business model I choose. It can’t require much personal contact or sales ability. It needs to be something that can be run from anywhere in the world with just a laptop. It shouldn’t require employees. It should have the potential of becoming a household name, and be worth millions of dollars, and it shouldn’t have much competition. Lastly, it needs to be completely ethical, requiring no hype, and no false or misleading claims in order to lure clients/customers to purchase.

I’m under pressure to get something going. Ever since we moved to Albuquerque nearly 3 years ago, we’ve been living beyond our means, surviving off of savings and the sale of the family farm. The majority of the waste (by far) has simply been my business venture follies. Way too much money has been spent on training, products, and design & developer services.

In addition, I knew we needed to move by the end of October with the real possibility that we couldn’t afford to do so. Plus Susan has been wanting to quit her job for some time. She burned out with it.

So, in March I began to panic, and decided to take action. But instead of taking sensible actions, I ended up wasting more time and money.

First I decided to get into the solo ad business. Why? I happened to come across a mentorship offer on Warrior Forum which promised good income, and quickly. The cost to get started? $2500.

I wouldn’t say the offer or the solo ad business was a scam, but nevertheless, after I got into it, and really started to understand the business, I didn’t feel comfortable with it. A solo ad is an email that you send to people who have expressed an interest in a particular subject — in this case “how to make money online”. You are sending this email to your subscribers with purposely vague sales copy in an effort to get them to opt-in to your client’s list.

What I had a problem with is that I had little control over what was being promoted, and I knew from experience that virtually all offers presented to these subscribers had false or misleading claims.

As a solo ad seller, I had to go to other solo ad sellers to build my subscriber list. So it seemed that these poor subscribers were just being passed from one marketer to another with little respect or concern about their needs or ultimate success.

At that point, I started looking for ways that I could truly help my subscribers, and I gravitated toward affiliate marketing. I learned about Igor Kheifets who had successfully made the transition from solo ad seller to affiliate marketer, and I decided to purchase one course, and later a second course from him — each costing about $1000.

I created a Facebook group for my subscribers where we could talk about our failures and successes. I created a website where I wrote articles about successful entrepreneurs, and also promoted their products. The website also had a quiz that was designed to help match people up with opportunities that best suited them.

I was in the process of creating a Youtube video ad that I believe could have driven a lot of traffic to my site, and generating a lot of affiliate commissions.

Then I began to doubt. For one thing, I knew that most people who purchase these kinds of offers end up with nothing to show for it. While it can be argued that the only reason they fail is because they don’t take the required action, I couldn’t be sure of this because I had no control over the products I was promoting nor did I even have firsthand knowledge as a user. I didn’t really know how good the products were.

So, basically, my conscience ruled and I decided to back out. Some may argue that my concerns were unfounded and that the real thing holding me back was myself. This is at least partially true, but I just can’t promote something I don’t believe in 100%

Around the first of June, I saw an ad in my Facebook newsfeed for “Luxhomepro”, who advertised “Start a Luxury Vacation Rental Business!“. This intrigued me, though I think the main reason is because I knew it would intrigue Susan. It was about leasing luxury property and then listing it on Airbnb — also sometimes known as “home-sharing”. We watched their webinar and became more interested so I did a little digging.

My research led me to Brian Page and his “BNB Forumula” training course, which we decided to purchase.

We both liked this business model, but probably for different reasons.

Susan has long had a desire to find something that 1) she loved doing, 2) she was qualified for, and 3) could support her if something happened to me. This issue has been a bigger concern for us than the question about where to live.

This opportunity seems to satisfy the requirements. Although there are some aspects of the business that don’t quite suit her, she loved the idea of helping people furnish and decorate their homes to make them attractive to renters. Also, the possibility of working with high-end properties was especially intriguing. Since this isn’t a job, there are no education requirements and getting started is affordable. Lastly, the income potential is huge if you’re willing and able to hustle.

I was interested as well, but not because I like to beautify properties. My reasons included 1) the income potential, 2) opportunity to use some of my technical skills, 3) opportunity to work as a team with my wife, and 4) (perhaps most important) it’s an opportunity for Susan to use her skills and give her a sense of worth and accomplishment.

The short-term rental business, on the other hand, seemed like something that would allow us to offer real value almost 100% of the time.

There are 3 basic models for this business:

  1. Landlord/Tenant Model — you are the tenant and signing a long-term lease with the landlord. You run the business without any landlord involvement — this is the riskiest way to do it, but potentially the most profitable.
  2. Co-host Model – you and the landlord are partners, each having specific responsibilities, and sharing profit (or loss).
  3. Consultant Model – the landlord hires you as a consultant only. You do not run the business or share in the income.

Susan seemed to be completely sold on starting this business. I was much more skeptical and nervous about it. Issues that I feared included, 1) picking the wrong property, 2) physical and mental stress in trying to perform all tasks in a timely manner (especially cleaning and maintenance), 2) potential problems related to dealing with guests and employees, and 3) geographic and legal constraints, and finally 4) the possibility that we wouldn’t make a profit.

Susan was able to meet with Tia Bradley , one of Brian Page’s students, in Redmond while visiting Washington State, although she departs significantly from what he teaches. Tia successfully combines models 2 and 3 above, which Susan and I both like. Connecting with Tia has helped boost my confidence that we can do this. I believe we’re going to follow her model.

Deciding on a location to start the business is also an issue. For one thing, it’s illegal is some areas, and greatly restricted in others. When we discovered that it’s prohibited in the St. George area, that contributed to our decision to not move there.

I think we are in agreement that it’s okay to start here in Albuquerque if we are only providing consulting or educational services, and not trying to manage a property. When we move to Olympia, we might change the model.

The Landlord/Tenant model starts with a search for desirable properties, and then revealing to the owner/landlord that you would like to make the property available as a short-term rental unit.

The co-host and consulting models, on the other hand, require a different approach and more passive. In both cases, the search for the right partners and clients comes before any concern about the properties they own.

And rather than searching for partners or clients, the best approach is to attract them to you. This is done by joining groups like BNI, Chambers of Commerce, Rotary Club, Lion’s Club, etc., and then building relationships. You also offer free information and training and wait for them to come to you.

Despite having made some progress toward getting this business off the ground, there is much to be done. And while I’ve been thinking about it, I’ve found my mind drifting back to my old business model — that of providing marketing and advertising services to small businesses.

I realized that if we are to be networking with people in various business and community groups, then it wouldn’t be hard to also be talking about other services such as marketing and advertising services. In fact, I’m pretty sure that if I begin talking about Facebook advertising in these groups, that I’ll likely get more attention than if I’m talking about home-sharing.

So I began thinking once again about my previous model, which seems to be my first love. Specifically, I think it would make sense — and could be very profitable — to run Facebook ads for select types of businesses.

I was also reminded of an approach that I had thought about implementing several months ago — namely to contact businesses who are running Groupon deals, and offering to market their deal on my platform, charging a lower commission.

I hired to developer about 18 months ago to develop a website that could do this, but it still wasn’t finished — partly because of changes I kept making, but also because the developer was too busy with other projects (I think).

But then I discovered a WordPress theme that had the essential functionality built into it, namely that it could be a Groupon clone. Then it occurred to me that I could post Groupon deals on my site as an affiliate and promote it on Facebook. At the same time I could begin contact businesses and ask if I can post the same deal except that I would also handle the sales transaction. Then I’d go a step further by asking them if they’re interested in a Facebook ad, and offer a free trial.

I could also talk about this offer when I get a chance in the business groups.

Mind you, I’m not going to give up on home-sharing, but I think it is possible to do both – Susan primarily representing the home-sharing business, and me primarily representing the marketing and advertising business. Frankly, doing it this way — together with Susan — gives me the courage to do it at all.

Partner vs Mentor

I’ve often wished I had a partner to help me start an Internet business. It seems that all the successful businesses I’m aware of were started by two partners rather than a single person.

Notable examples would be Steve Jobs and Steve Wozniak who started Apple, Bill Gates and Paul Allen who started Microsoft, and
Larry Page and Sergey Brin who started Google, but I’ve seen many other lesser examples.

On the other hand, Jeff Bezos started Amazon pretty much by himself, but he seems to be an exception.

Of course, partnerships are fraught with danger. They often don’t work out. One of the partners may feel overworked or under-appreciated, or that he’s being taken advantage of by the other.

Business partnerships are like marriages–most end up in divorce. However, those partners that find a way to make it work always say that they couldn’t have achieved their success without the perspective of their partner.

Some people are better at finding partners than others. They just naturally a drawn to someone with similar interests and talents. For whatever reason, it hasn’t happened to me.

While my wife has been supportive, and will help out where she can, she doesn’t really share my passion for entrepreneurship — at least not the same type of entrepreneurship. I think the closest I ever came to having a business partner was in 1993 when I asked David Eid if he would like to partner with me in expanding my “call-transfer” telephone business. He politely declined, but later decided to get into the business anyway – on his own. We remained friendly competitors, however. Though we loved sharing experiences and business ideas, we rarely agreed on the best way to run a business. We’re still friends to this day, but might not be if we had become business partners.

I’ve also read countless stories of people who failed in their business attempts until they finally found a mentor — an experienced entrepreneur that is willing to hold your hand, so to speak, and tell you exactly what you need to do and when you need to do it.

The advantage of having a mentor over a partner is that the relationship is designed to be temporary. The mentor only needs to be in the picture long enough to help you get off the ground. After that, you can connect on an as-needed basis.

A mentor may be a friend or relative who has expertise you need, and may not charge you for his advice. Oftentimes, however, it’s a business relationship, and you pay for your mentor’s help.

Last Saturday, I hired a mentor — Adam Marvin. He’s a young guy, living in Switzerland, and found some good success in selling solo ads. He actually got his start from another mentor. Now he’s teaching what he knows to people like me. I’m hoping it goes well.

Why am I interested in selling solo ads? Truthfully, I only had a vague understanding of what a solo ad is up until a few days ago. What got me interested is that I was looking for ways to build a large list of subscribers without spending a lot of money. I considered affiliate marketing as a way to recoup my ad cost fairly quickly, but then I stumbled on solo ads.

If you’re selling solo ads, you have to be expert at building a large list of subscribers, but you don’t have to be an expert at selling them anything. That’s the job of those who purchase the right to promote an offer to your list.

I was intrigued, but still felt uncomfortable about getting into the business until I came upon Adam’s advertisement in the Warrior Forum. I used to visit the forum a lot, and learned quite a bit, but it’s full of people promoting products that are more hype than substance.

Anyway, Adam didn’t offer a lot of information in his ad, but I was intrigued enough to schedule a call with him. He also sent this video to me where he gives an overview of his program. On the call, I was impressed with his sincerity and honesty.

Of course, I was also impressed with what he was offering to do – namely get my solo ads business completely set up and running within 14 days — and even seeing some income in that amount of time.

I decided to go for it. This represents, yet again, another shift in my business plan. Most recently, I’ve been working on Localzi and Dining Deals, which I’ll explain in another post. I’m not giving up on those, and am hoping my solo ads business will aid in getting the other off the ground.

We’ll see how it goes.