Amazon Kindle Self Publishing Platform

Amazon allows authors to self publish their material through the Kindle Books platform. You can access this link by visiting amazon.com and then scrolling all the way down to the footer. In the footer section, look for the link “Self-publish with Us”, which is right under the “Make Money with Us” section.

The sign up process is not bad at all, and it doesn’t cost any money. This marketplace is now available to a few other countries outside the United States, and I only anticipate this scope to grow over time as web usage becomes more predominant and common across the globe.

The Kindle Books platform expands your ebook’s use to a whole new world of audience, those interested in reading material on the go on devices such as the Amazon Kindle. In addition, your ebook’s association with a big brand name like Amazon adds instant credibility to all associated with the ebook (i.e. the author and the website).

Because Amazon has a huge preexisting customer base in their marketplace, publishing on their platform gives your ebook instant exposure to the masses. Do not miss on this opportunity to cash in, especially if you already have an ebook.

Google Books Platform

Thou shall never be left behind is Google’s philosophy, so in late 2010 early 2011 Google entered the ebook space with the Google Edition program, which is now called Google Books. This platform allows publishers to publish their books in Google’s library.

Google is the biggest search engine with 70% market share as of 2011. In my opinion, it is foolish to ignore anything they do. So I published my ebooks on Google like a good boy, and months later saw a healthy stream of passive income come in from ebook sales.

The Google Books program is also free, but because it is new I find it very “clunky” and hard to navigate. The Amazon Kindle platform is certainly more simplistic and straightforward. I trust Google however to fix the kinks in the near future.

Concluding Thoughts

If you already have an ebook, not publishing it with Amazon and Google is foolish in my opinion. Both platforms are absolutely free, and offer huge brand name credibility association. That in itself is worth publishing your ebooks in their platforms.

As you can imagine, the incremental effort is little, but the upside is tremendous, especially if you already have an ebook out there. If you don’t, these platforms give an additional incentive to create one today. Everyone has at least one ebook in them! I firmly believe that.

Readers: If you have Ebooks, have you taken advantage of the Amazon Kindle, Google Ebooks or similar platforms? Why or Why not? If you have, how has your experience been?

Take Advantage Of Free Events

New age workers are turning to shared workspaces, entrepreneurial support groups, local meet ups, and paid conferences for these types of human interactions which are all great ideas. Most people don’t realize that there are tons of opportunities to attend free events with companies that are promoting their ecommerce products and services but are extremely valuable learning experiences nonetheless. Did I mention that most of these events have open bars and free hors d’oeuvres?

I recently attended 2 events in New York City that I learned a lot from. Both events were put on by local ecommerce companies along with Magento Commerce, which is the Ecommerce platform/system that I use for my online store. Sometimes the best learning experiences are when you are in a new environment and not distracted by everything going on in your world and this proved true for me at both events.

The first event was put on by a Magento certified partner who integrates Magento stores for businesses selling their products online. I was simply invited to the event because I was on the Magento Commerce email list and in the New York City geographical area. Even though this year I may not have the budget for using the services of the development company, there is no telling what the future holds.

During the event I got to listen to the company CEO present their strategies for launching online stores for their clients. I vigorously took notes and generated about 20 actionable ideas that I took home to implement. We also heard directly from Magento account managers for their Enterprise edition and future releases.

They even touched on the recent acquisition from Ebay and let us know that the Community Edition (open source / free) will continue to be supported as it serves as a great spring board for feature requests and testing for their development team.

But what was the best part of the event was networking with the other online store owners. There were people that had driven 4 hours from Washington DC to New York to attend and everyone was Ecommerce minded just like me. I loved it! I met one gentleman who had an online store that did over $1M selling military supplies that he started himself. It was a really inspiring and fun time, and the food and open bar wasn’t bad either!

Learn How To Improve Sales For Your Online Store

The next event was about a month later and was a conversion seminar that was put on by a company in New York that customizes the search feature for Magento stores to provide better results that convert sales more effectively. The other companies putting on the event were another Certified Magento Developer, and my hosting company Nexcess that I use for my Magento site (and who graciously invited me).

The search results on your Ecommerce website are extremely important and this event reminded me of that. Again, I had instantly gone home and worked on optimizing our search results page after attending this event with fresh ideas.

The Certified Magento developer also did an excellent job in giving us tips for converting sales on our website. As Ecommerce Marketers we all need to know there is more value to converting our current visitors before we start driving more traffic to the site.

They gave tips many of us know such as make your phone number prominent, using trust logos, using video to convert sales. Things I knew but that I also went home and tested such as adding shipping carrier and credit card logos during checkout as additional trust logos beyond our ssl certificate.

Finally the hosting company we used went into detail about how to optimize your Magento store for performance which was very helpful. They showed us how to minimize your css, javascript, and all the calls to the server for images in Magento. They also went into using web caching and clearing log tables in the database to increase performance.

In the future as our traffic grows we may also use their Content Delivery Network to improve performance of our content by placing it on servers all over the world. Keep in mind we pay $25.00 per month for our hosting so it’s not over the top by any means. The hosting company presentation really enforced the importance of fast performance of our store for both converting sales as well as for search engine optimization to make sure Google and other search engines get fast load times when they index our site.

The networking at this event was also top notch. I even ran into store owners from the previous event and we shared some laughs about enjoying all the free food and drinks together. After both events I now have about 10 other Ecommerce site owners I know that I can reach out to and stay in touch on Social Networking sites and continue to learn from (and learn about the next free events).

How Can I Find These Events?

My best advice is to find out who the local Ecommerce companies are in your area. If you live close to a large metropolitan area this is even easier. Sign up for their email lists and learn from them online, but when there’s a free local event take advantage and attend, you won’t be disappointed. Every online store started at $0.00 but it was the people who persisted and continued to push themselves to learn more and in different ways that reached new heights.

So don’t do all your learning online, find some free events to attend and network with other Ecommerce professionals in your area. Once you build up your sales then you can bring it even further and purchase yourself tickets to some of the most coveted events such as Internet Retailer Conference, Shop.org, and E-Tail. Best of luck with all of your online stores!

Affiliate Marketing Sites Are Fragile

As Amazon has demonstrated with the cancellation of their affiliate program in many states, affiliate marketing is fragile. You are entirely at the mercy of the company you are marketing for. At a moments notice, the company might decide to lower their commissions or cancel their program altogether. Is that the way you want to try and make a dependable income? Don’t you want to be in control of your own destiny?

Very few people can make a living as a pure affiliate marketer and if you ask, most of them will advise you to diversify your affiliate sources in order to not put all of your eggs in one basket. The problem is that most niche websites are specifically created to sell a specific type of product. That and it also takes a tremendous amount of time and effort to get your niche site ranking in Google.

Sure, you can put up multiple affiliate sites but that requires a lot of effort, effort that you could be spending building a real business for yourself. After all, wouldn’t you rather concentrate all of your efforts on your own products that you have full control over?

Let’s be straight about one thing. Affiliate marketing is not a business. A business is an organization engaged in the trade of goods, services, or both to consumers. When you are an affiliate marketer, you’re just a salesman.

Online Store Income Is More Predictable

When you are deciding whether to quit your job, predictability of your income is important for proper financial planning and your sanity. Having run our business for almost 4 years now, I can tell you when our busiest months are and when business will be slow. In addition, based on the first 3 or 4 months of the year, I can usually make a fairly accurate prediction of how the rest of the year will play out.

Why is this important? It’s important because predictability allows you to plan out your expenditures and to know what to expect. I don’t have to worry about the income from my store drastically fluctuating from month to month. I generally know when certain products are popular and I can base my purchasing decisions based on data as opposed to pure guesswork.

In the event that I’m having a slow month, I can also make the necessary adjustments. The biggest advantage is that online stores get to set their own prices. If I need income, I can artificially increase demand by having a sale. If there’s a ton of demand for my products, I can raise prices accordingly. With affiliate marketing, you’re stuck with the terms and conditions of your affiliate which can change at any time. You have to wait for your affiliate to have a sale in order to have a sale.

Opening An Online Store Will Make You More Money

Selling your own products will make you more money simply because you get to pocket more of the profit. The combination of being able to set your own prices coupled with the fact that you are purchasing your goods at wholesale prices means that you are in full control over how much you can make in a given sale. The other side benefit is that you can freely re-market or re-position your products in a different light in order to command premium pricing.

If you look at our online store, we sell handkerchiefs. But since we market our handkerchiefs as wedding hankies, we can charge an extra premium on our products. With affiliate marketing, you have to abide by the terms and rules of the affiliate. Most of the time, the affiliate will not allow you to get too creative with your ad copy. In addition, most affiliates expressly forbid you from purchasing PPC ads using their product names in the ad. That means that the only way to get traffic to an affiliate site is through search or by blasting your affiliate links to your email list or followers.

The ability to set prices and the freedom to market your store in any way you like generally leads to higher income and revenues if you play your cards right.

But Wait, Doesn’t A Online Store Cost More To Open?

Most people are afraid of hard work and high startup costs. Opening a niche affiliate site costs almost no money at all which makes it extremely attractive. But most people aren’t aware that starting an online store can be just as inexpensive. My wife and I started our online store for around $630 including initial inventory costs and we managed to make $100K in profit during our first year of business.

If you are concerned about shelling out too much cash up front, you can try drop shipping which requires no inventory costs at all. In fact, you can open up a drop shipped store for the same amount of money it takes to start a niche affiliate site which is about $7 a month.

Either way, if you want to make a significant income in a shorter amount of time and quit your job, opening your own online business trumps affiliate marketing every time. With your own online store, you’ll never go out of business because someone else decides to cancel their affiliate program. You’ll never go out of business because someone else decides to lower their commissions.

While nothing is guaranteed in business, having your own online store is more viable in the long run. Does it require more work than a niche site? Definitely. But along with hard work comes higher profits and greater barriers to entry.

Photo by Clover_1

Because he was a hard worker and extremely focused, his discipline and dedication to his day job at the electronics store eventually paid off and he was promoted to manager of the car stereo installation department. While this promotion carried with it a decent raise, he still found himself struggling to save money and meet the ever increasing needs and costs of raising a family.

Even though the electronics store where he worked became the top selling car stereo store in the area due to his efforts, he found that he had reached a plateau in terms of salary. In order to increase his net worth and make more money, he had to think of another way to make ends meet…

Taking Action

So one day, he sat down and brainstormed. Looking over the cars he’d worked on for the past few years and all of the car stereo installations he’d performed, he started noticing some trends with certain makes and models of cars. In fact, he discovered that he was doing an unusually high number of repairs for one particular American made car model.

And strangely enough, they all had the same problems…. As it turned out, this one particular car model had reliability issues with its tweeters. Over the span of a few years, these tweeters would blow out and have to replaced with the same faulty set of factory tweeters which would then blow out again 1-2 years later. In fact, there was always a constant line of these cars getting their tweeters replaced on a regular basis.

One day on a whim, he decided to create a set of replacement tweeters on his own to see if he could make something better and more reliable than the original factory made speakers. Sure enough, his speakers not only produced better quality sound but they weren’t plagued with the poor reliability problems of the factory tweeters. And on another whim, he decided to throw up a website to see if could sell these tweeters online.

With just 6 bucks and a free 100 dollar gift voucher for Adwords, he launched his website with a small PPC campaign. And within a day, he sold 6 kits for 100 dollars a piece! Because his costs were extremely low, most of that money was pure profit. After noticing that his Adwords conversion rates were through the roof, he decided to max out his Adwords campaigns and managed to make over 60K in his first year of business with just a single product.

With the success of his first product, he decided to launch several more car related products based on his car stereo expertise. Today, he earns 5-6 times the salary of his day job with his small side business alone.

His Killer Niche

Because this man happens to be my brother-in-law (technically he’s the brother of my brother in law), I’m really happy to see how well he’s done for himself these past 3 years. Just for fun, I did a quick evaluation of the small niches that he now dominates with his store. According to the Google Keyword Search tool, only 36 people search for his tweeter product on a daily basis but since it’s such a tiny niche, he converts at well over 20% because he dominates it completely.

The other products that he sells have similar conversion rates because his customer is so targeted and so laser focused that he owns almost the entire market. His success clearly demonstrates why opening a niche online store is so powerful! Unlike people who launch niche informational sites and try to make money with affiliate marketing or online advertising, you don’t need a large niche at all to be successful with an online store.

Whereas you typically need to target keywords that yield hundreds or even thousands of searches per day to make money with a niche affiliate site, you can easily make a decent profit with keywords that yield just 50 searches per day with an online store that sells real product.

Because you make significantly more profit for every sale you make with an online store, you can get by pursuing a much smaller niche. And because you have to source your own product in addition to creating a high traffic site, the competition in the online store space is much less than running a niche advertising site where anyone can just throw up a WordPress site in a matter of minutes.

Many Opportunities Are Still Out There

The reality is that there are still many opportunities to be had. Not every niche is taken and the market is far from saturated. If you sit down and think hard enough, you can find your own profitable niche, start your own side business and take control of your life. My brother-in-law is the perfect example of someone who was tired of the rat race and decided to pursue a little something something on the side. And the best part?

• He knew absolutely nothing about the web and how to launch a website when he first started
• He did not invest a huge amount of money to launch his side business
• He picked something he was knowledgeable about and went with it
• He is way better off and much happier now than when he only had his day job

Today, my brother-in-law lives in a much bigger house, has no problems providing for his family and owes it all to his side hustles. If you can relate to his story, now is the time to get off your butt and take a chance.

Photo By DLR_de

Anyways, I first wanted to thank everyone who made it to the live telecast. Believe me, I was terrified that I was going to be broadcasting to no one. Actually, I can’t really say that. My mom was there and she wasn’t going to miss it so I was guaranteed at least one viewer.

But still, putting yourself out there for a scheduled event is pretty nerve racking especially when you have viewers all across the globe in different time zones. I received at least a dozen emails that morning from people apologizing that they couldn’t make it for some reason or another which made me feel really discouraged.

But the telecast went well. I had about 90+ viewers and broadcasting live was the best feeling ever! I write a lot about entrepreneurship on this blog, but honestly I haven’t put myself out there in quite some time. And boy do I miss it! I love the fear, the anticipation, and the knots in my stomach prior to a launch. I love the uncertainty and the exhilaration of taking a gamble and jumping off a cliff. Makes me want to do it over and over again.

The Master Plan That Didn’t Pan Out

Since it was my first launch, I wanted to do it right. So I planned a 5 prong strategy to sell the product.

• I wanted to publish a series of incredible posts leading up to the launch
• I wanted to put together an affiliate team to help push the product to a wider audience
• I wanted to give a live launch telecast to answer any questions in real time
• I wanted to create anticipation by creating a separate email list of interested readers offering exclusive content from the course
• I wanted to publish a series of guest posts and have a series of interviews available leading up to the launch

There was nothing fancy about my strategy…except for the fact that I grossly underestimated the amount of work involved. My first mistake was setting a launch date that was a bit aggressive. Truth be told, the course materials were complete a while back and I should have released my course a long time ago but I’d been really lazy about it. So to get my butt in gear, I decided to set an aggressive launch date to force myself into action. And it worked…..except my awesome 5 prong launch became a 2.5 prong launch.

Problem 1: I Got Bogged Down With Technical Details

I grossly underestimated the amount of technical work involved in setting up a membership site and working out the exact checkout process for my customers. You would think that since I set up online stores all the time that I would be able to throw up something quickly, but selling my course was different than setting up your average online store.

For one thing, it was my first time offering an affiliate program so I wanted to make sure that the platform I was using was tested and robust. As a result, I chose E-junkie simply because many of my fellow bloggers recommended it as a great way to sell digital goods with an easy to use affiliate program. In addition, E-junkie offers a PDF stamping feature which allows you to watermark your digital download with a unique signature to discourage piracy.

But while E-junkie is great for selling digital goods, it isn’t that straightforward to sell memberships and digital goods at the same time in a single transaction. What was supposed to be a quick 20 minute setup ended up taking me about 3 days to implement. The actual typing only took like 20 minutes but figuring out what to type took forever. In addition, it was my first time dealing with video as well which meant that I had to learn how to record, edit and process video with the right tools and programs. That, and I also needed a way to protect my content so it couldn’t be stolen by others. None of this stuff was exactly straightforward.

Why did I decide to do this all myself instead of hiring someone? It’s because I’m a control freak and I always want to understand exactly how everything works. It’s my personality and I can’t help it. Whenever something goes wrong, I want to know exactly how to fix it. In this particular case though, it probably would’ve been beneficial if I had hired an advisor to point me in the right direction since I had so many marketing tasks on my plate.

Problem 2: Time Was Running Out

Since it took so long to work out the logistics of running a membership site, I had much less time to market my product. I immediately had to cut out several prongs of my 5 prong strategy. Having the launch telecast was probably the most important item on the list so I made sure that it was still a go. But I ended up cutting out a few key pieces of my launch strategy. For example, I didn’t have time to write the awesome content leading up to the launch. I also neglected to create a separate email list for interested parties and probably pissed off a few of the members of my blog newsletter with sales spam.

Probably the worst decision I made was skipping out on a few interviews I had scheduled. In retrospect, I should have just sucked it up and done them but at the time, I felt like I needed further preparation for my live telecast and more time improving the post-purchase experience for the customer.

The Launch Day Disaster

The actual launch day was pretty relaxed. Since I work a full time job, I decided to take off a little early on Wednesday to prepare myself for the live telecast via UStream. All systems were go and I think the live telecast went really well. But after the telecast was over, I accidentally closed the UStream browser window before electing to hit “save”. DOH!!! I had lost the recording of my launch telecast!!!

At that point, I was freaking out and panicking like crazy. Those of you who stayed on until the end of the telecast might have accidentally heard me cursing loudly live via UStream. I was a complete wreck. I ended up spending the rest of the night trying to recover the recording. Thankfully, I discovered that I had inadvertently setup my webcam to record everything onto my hard drive and fortunately I was able to convert the video into a format for display on the web.

It All Turned Out Well

Despite everything that went wrong, the launch was a success! I received several orders even before I gave the telecast which made me feel really good. Immediately following the telecast, I received a bunch of orders as well which meant that it was well received. After putting up the recording of the telecast on the sales page, I received yet another burst of orders as well. Today, the class stands at about 80% full and it’s only been a week. If you still want to sign up, there are some spots available but I anticipate that they will fill up this week.

Click Here To Watch The Live Telecast And Sign Up For The Create A Profitable Online Store Course

All said, I was extremely happy with the launch. I hit the four figure mark very early on launch day and hope to fill up the first class very soon. Honestly, I was pleasantly surprised by how well the course has been received. At $299, it’s definitely not an impulse buy. But as I mentioned in the telecast, I only want people who are absolutely serious about starting an online business. This first group of students will be special and I will do my best to make sure that everyone is successful.

Photo By Andres Rueda

While these mind games work for the average individual, when it comes to running a small business, credit cards are an absolute must. My personal opinion is that if you lack the self control to watch your spending, then you have no business becoming an entrepreneur either. When running a small business, it’s important to watch what you spend closely and carefully to control your burn rate. But even more important, it’s crucial that you be able to completely separate and track all business transactions apart from your personal purchases. Keeping your business purchases on a separate credit card serves three main purposes.

• Come tax time, it’s extremely easy to extract out your business expenses on your Schedule C or other business tax forms.
• If you ever get audited, you have a much better case if you can show that you keep your business and personal expenses completely separate.
• It makes bookkeeping easier because your credit card company automatically tallies up and in most cases categorizes your expenses for you.

Using credit cards for as many purchases as possible allows you to streamline your bookkeeping. Plus, there are many rewards and money saving benefits to using credit cards for your business as well. Having done a fair amount of research on credit cards over the past decade, here’s a list of the best credit cards for small businesses that I could find in terms of cash rewards and savings with no annual fees.

Note: If you spend an abnormally high amount on business travel, then there are probably other cards that can save you more money on plane fare. For the purposes of this analysis, I focused on cards that provide you with cash back or savings off of your purchases rather than perks. Cash is king for any small business and you want to conserve as much of it as possible.

CostCo Business American Express Card

By far the best credit card that I’ve found is the Costco American Express card. This card is the perfect card for small business owners because it provides rewards for some of the most common expenses that entrepreneurs incur. Here’s a list of benefits for this card.

• 4% cash back off your first $6500 worth of gas at any Costco or domestic gas station
• 3% cash back off of eating out and dining at restaurants
• 2% cash back off all travel purchases which include plane tickets, lodging, cruises, tour operators etc…
• 1% cash back off of everything else
• 90-day coverage from date of purchase against theft and accidental damage up to $1,000 per occurrence
• Extends the terms of the original manufacturer’s warranty up to one additional year on eligible purchases with warranties of five years or less that are eligible in the U.S.

The main disadvantage is that you have to be a Costco member in order to apply for this card. But if you have a family like I do, chances are that you have a Costco membership already so it’s a no brainer. The other thing you need in order to apply for this card is proof that you have a business. This proof can come in the form of an LLC filing, proof of incorporation or a DBA. In addition, to establish your credit limit, you will need to submit your prior years business tax return. The Costco business American Express card is the card that my wife and I use for almost everything and there is no limit to the amount of rewards you can accumulate.

Chase Ink Plus Unlimited Rewards Card

Not every establishment takes American Express, so it’s important to also carry a Visa or Mastercard as well. My wife and I have found that the Chase Ink Plus card offers excellent cash back rewards. The main benefits are as follows

• 3% cashback on gas stations, restaurants, office supply stores, hardware and home improvement stores
• 1% cashback on everything else
• Unlimited cash back rewards
• Unlimited cards for employees and the ability to set individual spending limits per card

The benefits aren’t quite as good as the Costco Amex card but since it’s a Visa/Mastercard, you’re likely to be using it quite a bit at smaller establishments. Once again, you’ll need to provide proof of your business along with your application. In addition, you’ll have to send your business income tax return to establish your credit limit.

Honorable Mentions

The following credit cards received an honorable mention:

• Citibank Dividend Rewards Card – Offers 5% off of gas, groceries, drug stores, and utilities for 6 months. Then it becomes 2%. There’s a 1% cash back for everything else
• Chase Freedom Card – 3% cash back on gas, home improvement and department stores
• American Express Blue Card – 1% cash back off supermarkets, drug stores and gas for the first $6500. After $6500, it becomes 5% cash back. You get 1.25% off other purchases

What Credit Cards Do You Use?

If any of you use credit cards that provide greater rewards than the cards mentioned above, let me know. I excluded Discover cards from consideration because so few places accept it.

Photo By Edward Kimuk

Fortunately, my wife and I both share the same principles when it comes to spending money (ie. we don’t spend frivolously). Otherwise, we would be seriously screwed. But after analyzing last year’s expenses using Quicken, I feel all frugalled out. We have pretty much cut back as much as we possibly can without drastically affecting our lifestyle.

If we look closely at last years expenses, we cut spending by another 4% over the year before. We are going out to eat less thanks to my wife’s desire to cook and we don’t really spend that much on entertainment anymore because the kids have to be in bed early. We haven’t bought a new car in ages and I can’t remember the last gadget that I’ve purchased. All of this for a measly 4% savings. While one could argue that 4% is a lot of money overall, I wouldn’t have minded cutting loose a little bit more.

On the other hand, if you look at our business, our profits grew 41% last year. And this profit increase should have been around 75% had my wife and I not shut down the store to take care of a family emergency. We had a 41% increase and it didn’t really require that much more incremental work to earn a much larger payout. The numbers don’t lie. Why should we bust our butts to pinch every penny when we could just transfer that energy into additional income with our business?

Being Frugal Can Only Take You So Far

I love being frugal, I really do. And I love following all of the frugal blogs out there. In fact, one can really learn a lot about saving money by just taking a few extra measures. But after a while, there’s nothing left. You are just tapped out. Unless you started out spending money egregiously, there is a fundamental number that you simply can’t go below without greatly sacrificing your lifestyle.

For example, I love eating out. Sure, we could cut going out to eat entirely out of our budget but where would that get us? While I truly love my wife’s cooking (hope she sees this), I don’t think I could eat at home every night. I wouldn’t be happy and I’d probably get cranky as a result.

Maybe I could cut out an additional few tenths of a percent by driving less and carpooling or riding my bike, but that would be a major pain as well. And quite frankly, I love buying new gadgets. Why shouldn’t I cut loose a little bit and get that Android phone I’ve been eying for several months now?

How To Have An Unlimited Upside

The problem with using frugality to increase your bank account is that there are diminishing returns. Sure, being frugal is easy to do and that’s why most people try to build their bank accounts by cutting spending first. But will being frugal lead you down the path to riches and a better lifestyle sooner rather than later? Is it worth the sacrifice? One might argue that frugality coupled with a sound investment strategy is the way to go, but for me it’s a no brainer. The best way to accumulate wealth is to simply make more money.

Instead of focusing all of your energies on clipping coupons or searching for the absolute best deal, why not channel that energy into starting a business or freelancing on the side? Why not spend time on something that has limitless earning potential?

Even though my wife and I run a successful online business, I still fall into this trap all of the time. Hell just the other day, I spent 2.5 hours looking for the best deal on a new crib for my son. Sure, I ultimately saved about 50 bucks but with that 2.5 hours I could have been working on my brand new course on how to create an online store (my current project). I could have been writing new blog entries. I could have been optimizing our online wedding linens store. All three of these activities would have easily made me much more than the 50 dollars I saved.

Food For Thought

The truth is that many of us waste time on projects that return very little and we need to step back and to focus our energies on what will give us the most gain. By sticking with what is “easy”, we are limiting our potential. So the next time you are driving around town looking for the best deal or looking for ways to eek out another few extra bucks in savings, think about better ways you could be spending your time. Don’t get me wrong, frugality is not a bad thing but you can always make more by expanding your top line rather than focusing on your bottom line.

Photo by Chasing Fun

That’s right! Most people don’t consider the tax savings involved in running a business. Most people don’t realize that having a day job is one of the worst ways to save on taxes because Uncle Sam takes a huge chunk out of your paycheck BEFORE you pay for anything. On the other hand with a business, you can effectively pay for everything using pre-tax dollars which can save you up to 35%. So while on paper your business may not be making any money, in reality you could be saving big bucks by purchasing goods with money that is not taxed at all.

But talk is cheap! I thought that it would be interesting to throw some numbers into the mix by calculating how much the average American could save by starting their own business.

The Average American

First off, the average American makes roughly $63,091 before taxes. If we assume that they fall under the 25% tax bracket, the average American is also getting reamed up the wazoo by Uncle Sam to the tune of about $11960 before they can even use this money leaving themselves with only $51131. Even worse, the average American spends roughly $49638 a year which doesn’t leave much savings. It’s no wonder that the average American household is just barely scraping by!

In order to calculate the tax savings associated with running a business, we must break down each and every expense of the average American to see what can possibly be written off with a business and assume a certain percentage of savings. Below is my analysis.

Transportation – Gasoline And Oil Costs

The average American spends roughly $2384 on gasoline and oil related products. If we assume that gas is $3 a gallon and that the average car gets 20 miles per gallon, the average American drives roughly 15893 miles per year. We’ll round this number to 16000 for simplicity.

Currently with my business, I’m able to expense roughly 22% of the miles I drive on my car for business purposes. How do I do this? Whenever I need to drive some place or run some errands, I make sure that I try to take care of something business related along the way. For example, if I need to go to the grocery store, I also make a trip to the office store or other related establishment where I need to pick up something for the business. It takes a bit of planning and excellent documentation but you’d be surprised by how easily you can find ways to use your car for business.

For the average American, 22% of 16000 miles is roughly 3520 miles. For 2009, the IRS mileage tax deduction is 55 cents. 3520 * $.55 equals a tax writeoff of $1936.

Housing And Shelter

The average American spends $10,023 on housing or shelter every year. Currently, my wife and I expense 20% of our rent for business related purposes. In actuality, we use more than 20% of dedicated business space in our home but we keep things at 20% to prevent the likelihood of an audit. In any case, 20% of $10023 equals $2004.60 of tax writeoffs for the average American.

Food – Eating Out

The average American spends roughly $2668 a year eating out. For my wife and I, we love discussing business over dinner. In fact, we make many of our key business decisions at restaurants because it’s a more relaxed environment and easier for us to concentrate.

As a result, we are able to expense some of our meals every month. For this analysis, let’s assume that the average American can expense 10% of their meals. Because meals and entertainment can only be deducted at 50%, this effectively equals a 5% writeoff. $2668 * .05 equals $133.40.

Travel

The average American spends roughly $1600 on summer vacations every year. While travel expenses purely for pleasure can not be expensed, any vacation can be made to be business related with the proper planning. So what my wife and I usually do every year is plan our vacations around our business travel.

For example, a few years ago my wife and I had to meet with linen and textile vendors in Japan so we made a vacation out of it. We purposely planned our meetings every other day and used our free days to relax and pamper ourselves. If you do things right, you can pretty much expense almost the entire vacation!

Because I’m not sure how the $1600 a year is broken down in terms of airfare vs food/entertainment costs, I’m going to assume that 75% of this cost is deductible for the average American. Total tax deduction $1200.

Utilities

Since we use 20% of our house for business, it’s only fair that we deduct the same percentage for utilities. In addition to water, gas and electricity, we also have a dedicated phone line for the business which can all be expensed.

The average American spends $3477 on utilities every year. Once again, the exact breakdown of this number is unclear so we need to make some assumptions. For example, a business probably wouldn’t be able to expense the cable tv bill. However, most other items are fair game. To be conservative, I’m going to assume that at least 10% of this amount is deductible which puts the deduction at $347.70.

Computer Equipment And Household Furnishings

Unfortunately, this category is extremely vague. Computer equipment and household furnishings covers everything from furniture all the way to decorative items and computers but excludes major appliances. Because this category is so broad, I’m going to be conservative here and assume only 15% of this amount is deductible.

Thanks to section 179, computer equipment and other furnishings can be expensed 100% up to a six figure dollar amount every year. Chances are, if you have a business and purchase a computer, it can be written off in its entirety in the same tax year. The average American spends $1797 in this category. 15% of $1797 is $269.55.

Adding It All Up

Obviously, I have not included every possible business expense in my analysis, only the common items. If you really want to get nit picky, in reality you could probably expense far more than what I’ve mentioned in this article.

In any case, if we total all of the categories mentioned above, this comes out to $1936 + $2004.60 + $133.40 + $1200 + $347.70 + $269.55 = $5891.25.

Based on an income of $63091, this represents almost a 10% writeoff on the average American’s taxes! Putting all of the numbers together at a 25% tax bracket, this is a savings of $1472.81 every year. Keep in mind that most of the deductions I calculated above were on the conservative side. In practice, my wife and I actually deduct a good amount more especially under the computer and equipment category.

If you are worried about getting audited, the best thing to do is to arm yourself with an accountant and document every expense carefully. Your accountant should be able to tell you with high confidence whether or not an expense is actually deductible. This is free money folks, but only available if you have a business. Stop giving your money away to the government now!

Further Reading

• How To Save Money On Taxes

Disclaimer: As one reader pointed out, this article is not meant to encourage people to haphazardly make tax deductions for their business. In fact, I discuss the flip side in depth in my article on Is Your Business Just A Hobby In The Eyes Of The IRS. However that being said, the deductions mentioned in this article are not exaggerated. In fact, I believe that the majority of people don’t take tax deductions that are rightfully theirs because they are afraid of the IRS. Talk to your accountant! They will know how to help you figure out how to make the most out of your deductions.

Photo by MarkyBon

In fact, the media tends to portray entrepreneurs like lottery winners because that’s what makes the news. Because the chances of creating a company like You Tube or Facebook are so slim, most people shy away from starting their own business because they think it’s just way too risky with very little chance of success.

Just the other day, I had one of my readers email me that they were afraid to go out on their own because they didn’t want to risk everything for a measly 1% chance at success. A 1% chance at success? Where the hell did he get this number from? Turns out that he read that “99% of small businesses fail within their first year” which made him believe that he only had a 1% chance of succeeding.

Listen to me. This 99% statistic is complete and utter BS! Starting your own business doesn’t have to be the next big thing. And if you do things right, your business doesn’t have to be that risky either.

You Don’t Have To Hit A Home Run

The first thing that you have to understand is that your business idea doesn’t have to be the next Google, You Tube or Facebook to make money. If you are planning to start a company for the sole purpose of getting acquired for a billion dollars, then your chances truly are one in a gazillion. So instead of buying a lottery ticket, start something that you can make profitable within a short time frame.

Instead of setting your sights so high, focus on what can make you some money now with very little risk. Ignore the glamor and the hit or miss ideas. Divert your attention to simpler things. The simple things that people are looking to buy. Your idea may seem boring to your friends and family and it may even be mundane, but who cares? Find something that you can do and do it well.

Take a look at Tony Hsieh of Zappos. The man sells frickin shoes over the internet and makes billions of dollars a year. He’s successful because he sells shoes in such a way that people want to buy from his company. If you need a smaller example, take a look at our wedding linens business as well. We sell frickin handkerchiefs over the internet and make six figures every single year.

You don’t have to invent the next big thing. You don’t even need to do anything fancy. Look for a small niche and exploit it. If someone has already taken your idea, don’t let that stop you because the market is probably big enough for the both of you.

If you still don’t believe me, take a look around the next time you go shopping or go out to eat. My wife and I just ate at our favorite Chinese restaurant the other night. But did we go there because it’s the only Chinese restaurant in town? NO! In fact, there are probably 50 Chinese restaurants within a 15 mile radius of our house. And all of them have been in business for years. Despite the heavy competition, they still all make money.

By choosing a business idea that is simpler and easier to execute, you can improve your chances of success by several orders of magnitude. You might not strike it rich or make instant millions, but you can make a nice comfortable profit and be your own boss.

Keep The Upfront Costs Minimal

Keeping the risk factors low means keeping the expenses low as well. By creating a presence online, you can easily start your business for only a couple of bucks a month. Our wedding linens store is an online only store and costs only 80 dollars a month to maintain. If business were to suddenly stagnate, we could literally keep our store open indefinitely at our current burn rate.

When we first started out, our upfront costs were even less. Our web hosting only cost us $6.95 a month at Bluehost and we paid absolutely nothing in development costs. If you just take the time to look around, you can find a lot of free open source software already written for you and ready to use. These days, it’s extremely easy to Create Your Own Business Online. Read my tutorials and get a head start!

If you want the absolute lowest risk business possible, then start a blog or an affiliate marketing site. At $6.95 month, you can keep your website up for as long as you want until you are profitable.

Don’t Quit Your Job Until You Are Ready

If you need even more of a safety net, work on your business while you have a full time job. Take your time! Incubate your business within the comforts of your full salary and launch only when you are ready.

My wife and I worked on our online wedding linens business while we both had full time jobs. There was no pressure whatsoever for our online business to make any money early on because we had our salaries to back us up. Had we not had this cushion, we probably would have made more rash decisions just for the sake of money.

Some people can only be motivated by placing themselves in pressure situations. But if mitigating risk is your most important criteria, then don’t quit your day job until your business is already making money.

What Does It Mean To Fail Anyways?

My biggest beef about the “99% failure rate” statistic is that all businesses are lumped into one large category. I’ll bet that if this statistic was compiled again for just internet businesses alone that the failure rate would be far less.

These days, it doesn’t take much money to start a business and it doesn’t cost that much to maintain one either. If mitigating risk is your number one concern, then play it safe and start a low cost internet business. Pick something simple and build upon it. Businesses take time to grow and you can turn any boring old business into something huge if you have the time and patience.