Category Archives: Entrepreneurship

Supply Side Home Economics

I’m tired of everyone telling us how to save money. What we need is people telling us how to make money.

Like a lot of people today, maybe your budget is tight. Maybe you read Money Magazine looking for a few tips to get ahead. Or maybe you read Get Rich Slowly (one of my favorite blogs). Most money sources have oodles of tips on how to save money and make your fixed budget go further.

Common Tips About Money:

  • Cutting coupons
  • Eat out less
  • Quit buying books and use the public library
  • Bring a bag lunch to work
  • Shop at the Salvation Army and the Goodwill
  • Buy in bulk at a warehouse club
  • Refinance your home
  • Send away for rebates
  • Get DVDs from Redbox
  • Use 0% credit card offers
  • Increase your insurance deductible
  • Keep your used car
  • Limit gift giving
  • Take advantage of matching 401k funds
  • Drink less alcohol
  • Stop Smoking
  • Avoid late payments
  • Replace light bulbs
  • Buy energy efficient appliances

I’m sure you’ve read dozens more. These are great ideas, but… they won’t solve most people’s money problems. They’re too minuscule. Too incremental. They’re a good start at getting your debt under control, or dealing with a lost job, but in the long run, they won’t get you were you want to be. They are temporary fixes to a lifetime issue.

We all want more money for one reason… It gives us freedom to pursue our goals, to travel, to grow, and to create the life of our dreams.

If you focus all your attention and energy on saving money, you aren’t focusing on the solution. You are focusing on the problem. The solution is creating wealth. To create wealth, you need income and you need to grow it. So if you’re focused on coupons and light bulbs you aren’t focused on the long term. You’re focused on a band-aid fix.

What is Supply Side Home Economics?

In 1997, Christine and I decided we would focus 80% of our money consciousness on the supply side. That means – we focused on creating more income for our family – the supply side of money. That doesn’t mean we don’t negotiate. We recently reduced our phone service by $30 per month. We also cut our cable and internet bill by almost $500 a year without compromising service. Focusing on Supply Side Home Economics means spending 80% of your energy on generating income.

Think about it…

If you make $50,000 per year and you spend $50,000 per year, you’re broke. But if you increase your income to $70,000 and you don’t change a thing, you’re solving your money problem. The bigger problem is… too many people spend everything they make no matter how much, but that’s another blog post…

How to start?

Look for opportunity everywhere. Instead of spending an afternoon chasing down a 50 cent discount on milk, work on a business. Sell stuff on craigslist. Sell stuff on ebay. Create new internet sites. Look for ways to help other people get what they want.

As noble as conservation and frugality is, it doesn’t create economic growth. Hunkering down and not spending will not get the economy out of this slump. Creating wealth will. Likewise, hunkering down will not get you or your family on the path to prosperity. Focusing on growth will.

With the technology available today, at near zero cost, there is no reason why you or anyone else can’t create $500 – $1000 in new income in your spare time.

How do you get there?

Ask yourself a few questions:

  • What do you have around the house you can sell?
  • What unique knowledge and life experience do you have?
  • How can you offer that knowledge and experience to others?
  • What value can you provide others?
  • How can you give them more value than you charge for your goods or services?
  • How can you help others sell their stuff?
  • How can you teach others your unique skills and knowledge?
  • How can you gain valuable specialized knowledge?
  • What makes you unique and how can you offer that to others?

Economic Fact:

When you create more wealth for yourself, it makes us all wealthier. It isn’t zero sum. The pie grows for everyone. It’s nothing to be ashamed of. So help humanity by making yourself wealthier. Here’s a great place to start (don’t let the hyped up title throw you off, it’s great).

9 Year Old Helps Pay for Own Heart Surgery by Publishing eStory

Don’t you love stories about children who can face life threatening hardship with bravery, optimism, and cheerfulness? When their young minds comprehend not only the physical challenges facing them, but also the financial challenges, and seek out and find solutions?

Let me tell you about Malkolm.

I first heard about Malklom a couple of days ago when my wife (Christine) was reading the eBay power sellers board.

Christine said, “There’s this woman who sells DVDs on the eBay power selling board. She has a 9 year old son with a heart problem. His heart muscle is thickening and he needs surgery or he could die. His mom has insurance and it pays 80% but they are still going to have a difficult time paying the other 20%. Malkolm was worried about the cost of his surgery. He had written some award winning stories at school, so he asked his mom if he could sell one of them on eBay to help pay for the surgery. His mom was so overcome with emotion she had to fight back the tears. With encouragement from other eBay sellers, they decided to give it a go. Now he’s selling his story on eBay for $10. They sold over 100 in the first 12 hours.”

“Should we buy one?” Christine asked.

“Go for it! It’s only 10 bucks and you’re sure it’s legit, right?” I said.

“Yeah it’s legit. Lot’s of people know her on the power sellers board. She’s been there a long time and other sellers are helping” she said.

So we bought one. And I must say… It’s fantastic writing for a 9 year old. Here’s an excerpt:

I keep on striding down the road, and a nice little house steps into my view. There is a closed window, and a small candle glows inside. I hear a voice: “Goodnight, Katie.” A small voice replies: “Goodnight, mommy.”

I think to myself, “I think I’ll take a peek.” I jump toward the window, trying to get their attention. As soon as I smack against the window, I black out.

It’s the best 10 bucks we’ve ever spent.

You can read more about Malkolm here, he has a blog, and you can buy Malkolm’s story here.

His surgery date is March 24th 2010.

Last I heard he has sold over 250 copies.

How to Grow Your Business on a Small Budget

Have you ever heard, “You have to have money to make money?” I suppose it’s true. But you don’t have to have much. We started christinesbooks.net in 2003 with $500.00, haven’t incurred a single dollar of debt since, and grew it organically. How did we do it? Persistence, patience, and a lot of frugality.

In America today, patience isn’t a virtue. Getting things done now is, regardless of the risk. Unfortunately, that type of thinking has led us into the economic mess we face today.

Since the last post on our move from a home based business into a showroom/warehouse operation, we’ve made some changes.

Some things we needed to get off the ground.

  • Shelving in the warehouse
  • Equip and furnish the office
  • Get the internet operation running profitably
  • Build out the showroom.
  • Host weekend, discount liquidation sales

Warehouse shelving – $1000

Buy pallet racking – After checking some suppliers on Craigslist, we discovered the pallet racking would cost $1000s, would be too bulky, and wouldn’t be appropriate for our products (books, DVDs, CDs, and games).

Build shelves ourselves – I started down this path, but quickly discovered I didn’t have the time and the quality wasn’t high enough.

Contract someone to build custom shelves – After careful planning, we estimated this would cost us between $10-20K, and it didn’t make sense for a company our size

What we did:

I built some shelves from kits – about $300.

It took time, but we found a couple dozen commercial grade shelf units for $700 at a local private school. They decided to downsize their library.

Here’s what the warehouse looks like now:

Furnishing and equipping the offices -$570

  • Desks – Free from a out of business karate school
  • Office Chairs – Free – see above
  • Shelves – Free – see above
  • Computers – Free – We moved one from home, and I built the other from recycled parts.
  • Computer Monitor – $140
  • Powered Computer Cart – $250 – Scratch and Dent (Original price $2000)
  • Wireless Router – $70
  • Play area for the kids – $10 – Play Station, Older CRT TV, Coloring Books, Crayons

When we began, we discovered we could easily have spent tens of thousands of dollars equipping the warehouse and office, but we found a way to do it on less the 2K.

In upcoming posts we will talk about:

  • Getting the internet operation running profitably
  • Building out the showroom.
  • Hosting weekend, discount liquidation sales
  • Our new brand for the business

Sorry for the lack of posts lately, I needed to prioritize some things in life – too much on the plate. But we plan to post more frequently in the coming weeks and months. Thanks for reading!

Finding The Right Location For Your Business – At The Right Price

In this post, I am going to detail my experiences finding the right place for our business at the right price.

We found it, and last week, we signed the lease. We are remodeling and moving in over the next six weeks.

We’ve been planning to move christinesbooks.net from our home to a commercial bricks and mortar operation for years. The most perplexing question we had was:

How do we find the best possible location at a price that will allow us to grow?

The problems we faced:

High Taxes

Several years ago, we almost opened a traditional retail book store, and we wrote this post on negotiating rent. We never signed the lease. The rent was right, but the taxes were too high. In Minnesota, retail tax rates are out of control. In our case the taxes were 4x the rent. High tax rates keep small family owned business like ours out of the prime locations. The problem is, no one in government seems to care. When I recently mentioned the problem to a government official, she replied, “If you can’t afford the taxes, you can’t afford to be in business.”

How we solved this problem:

We decided against renting traditional retail space, in high rent areas (for now). Even in a recession, when the landlords reduce rent to attract tenants, the government doesn’t budge on taxes. The only viable solution for us was to rent a location zoned showroom/industrial where the taxes are 1/3rd of traditional retail.

Over Leveraged Commercial Property Owners

During the real estate boom, investors bought up properties under the false assumption that real estate couldn’t drop in value. Many made these investments using unsecured debt. During our search we found several owners sitting on vacant properties, but unwilling to negotiate a reasonable price.

In one instance, the owner had purchased an entire corner of a busy intersection. It included four buildings which all sat vacant. When we investigated, we learned that the owner had purchased the property at the peak of the boom planning to flip it to a national retailer. When the economy went sour, so did his plan. Christine and I and others tried to make an offer that would generate income for both us and the owner, but were flatly refused. Being over leveraged gave the owner no room to negotiate when tough times hit. I wish him the best, but the properties are still sitting vacant today.

How we solved this problem:

We had to be patient and keep looking. We sought veteran landlords who are likely to own the property outright, who have been through economic downturns and understand the current conditions, who have seen successful startups rise from the depths of a recession, and who understand the power of building long term business relationships.

Cities Are Bulldozing Low Rent Areas

In recent years, affordable commercial property became harder to find. Cities like to pick off older low-rent properties with eminent domain, bulldoze it, and replace it with new high rent/high tax property. It is another case of shortsighted greed. To grow, our economy needs low tax/low rent commercial property to serve as incubators for bootstrapping entrepreneurs.

How we solved this problem:

Persistence. After a while, we didn’t bother looking at the new developments, and focused our search on older areas. And the recession helped. While in recent years we’ve watched old retail and industrial parks knocked down and replaced, right now, there is almost zero commercial development.

Last Minute Lease Changes

For whatever reason, be it mistakes, disorganization, or outright chicanery, the lease terms you verbally agreed upon are different the day you sit down at the table, ready to sign. My father-in-law, who has negotiated dozens of commercial leases over his lifetime warned me about this. It is standard procedure – expect it. These last minute changes are NEVER in your favor.

How we solved this problem:

Don’t sign the lease. Walk away and keep looking. Think about it. Imagine, at closing you said, “I looked the lease over, and I made a mistake, it’s more money than I can afford,  and much of the square footage isn’t useful, so I adjusted the rates down 20 percent, and I need you to cover the utilities, so I wrote up a new lease for you to sign today.”

Leasing Agents Didn’t Help

I talked to at least a dozen of them. Some of them were great… others… not so much. But none of them represented us. They each offered a few properties out of hundreds of possibilities. Some gave us bad information, but mostly they gave us incomplete information.

How we solved this problem:

We had to do the search ourselves. We found property on Craigslist and other websites. The property we eventually rented was a property I drive by every day but I didn’t bother calling. I thought it was out of my price range based on information leasing agents had given me. One day, I decided to call, and the leasing agents were wrong, we could get 3000+ sq ft, at a price we could afford. Never quit searching and never accept the word of experts without finding out for yourself.

Keeping Costs Down

In business you need to make more money than you spend. If you can’t do that, you don’t have a viable business. And if you need a bricks and mortar location for your business, rent/mortgages can wipe you out.

But keep in mind it has to be a win-win for you and the property owner and finding the right location is going to take time. We have been passively looking for years, and actively searching for over nine months. When I first started calling leasing agents, I didn’t think this was possible. For a comparable space, agents were asking for 2-4x the rate we eventually negotiated.

It isn’t trendy, or hip, or pretty, or posh. But it’s functional and affordable

And we’re cleaning it up

We are going to remodel, knock down some walls, put in a new floor, and paint.

And it’s a great spot for a 4 year old to ride his bike.

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Lessons in Organic Bootstrapping – Growing Your Business

Have you heard that 50% of small businesses fail in the first year and 95% fail in the first five years? Let me tell you why.

Most small businesses fail becuase they can’t handle debt, get buried by rent, or get pushed into risky decisions by impatient investors.

I’ve seen a lot of business fail taking the “Big Bang” approach to small business start up. They put together a fancy business plan and they execute it perfectly. They take out a bunch of SBA loans, have trendy digs, hire talented people with a proven record, maybe even build a building or two. Sometimes this approach works, with dramatic success, but more often than not, it fails.

The problems are:

  1. They never tested the market, so when the sales don’t materialize immediately, they are under capitalized, and go bankrupt in a few years.
  2. They spent too much on fluff. In the quest to look professional or hip, they overspend.
  3. Instead of adding employees once demand is established, they add them before the first dollar is earned, banking on potential sales to pay the wages, and burn through too much capital too quickly.

Making mistakes is the secret to learning. You learn what you need to know about business through your pain and failures. Organic bootstrapping allows you to learn as you go without going broke, the “big bang” approach does not.

Christine and I are pushing hard this summer to grow Christine’s Books. We’re moving her store out of our house.

It needs to move because:

It’s taking over the kids play areas

And is creeping into every other area of the house

To expand, we need employees, and our house wouldn’t be a good place for others to work.

In 2003 when she first started selling books on the internet, she invested $500.00 in inventory, and kept it on a 6 ft table. By 2004 we had run out of space in our house, and bought a new house that was triple the size. That gave us five more years. Now we plan to lease a showroom and warehouse space that is as big as our entire house. We are hoping that will last 3-5 years and allow us to quadruple sales and add several jobs to the local economy.

While looking for the right location, I’ve had the chance to meet a few entrepreneurs who have grown the same way we have, by organic bootstrapping. Roger at Business Systems International sells refurbished phones. He started in his garage and now owns multiple commercial properties, and has branched out into the software business. Opportunity begets opportunity and success begets success. Roger said, “Every time I moved to a larger location my revenues doubled.”

I talked with Brian at Sunlite Windows and Doors and he had a similar story. He started in his garage, then built a bigger garage with the profits, then leased a shop and warehouse. He said, “When we rented our first shop, I said, we’ll never use all this space. Three years later it was time to move. Now I have triple the space and we own 50% of the window market in this area.”

If you are interested in how small businesses start and grow organically, you’ll be interested in the coming series of posts.

Next post: we’ll talk about finding the right location at the right price.

Christine and Steve Olson on Career Renegade TV

Jonathan Fields was kind enough to interview us on Career Renegade TV. We loved doing this interview. Jonathan is a great guy and makes you feel at ease. We planned to do audio only but at the last minute we decided to go for the video. Let us know what you think.

We talk mostly about Christine’s home based business, Christine’s Books and we also talk about entrepreneurship, family life, social media, and the current economy.

We’re grateful for the opportunity to talk with Jonathan, a published author who has interviewed web superstars like Gary Vaynerchuk.

Here’s the interview:

Safety is a Trap

Safety is a trap. It is also an illusion that is turning many of us into spineless blobs.

Safety watches re-runs. Risk writes the next smash hit.

Calculated risk turns mediocrity into excellence.

Life reminds me of crossing the Missippippi headwaters on stepping stones when I was a kid.

First you must decide to get to the other side.

Then you size up the risk. How far is it? Can you make the leaps? Are the rocks slippery? What’s the worst case scenario? Do you know how to swim? If you fall, do you get wet or do you drown?

You make the first first leap. You land safely. The water’s rushing by. You make a few more leaps. You’re halfway there. The next leap is much farther than it looked from the shore and the rock you need to land on is covered in slime. The water is deeper than you realized. You look back at where you came from. You look forward again. You focus. You find faith. You leap. Your foot lands on target, but slides out from under you and you fall backward into the water. You grasp at a boulder and catch a ridge in you finger tips and crawl back onto the rock. With bruised pride, dripping wet, you look back again, you look forward, you find that same faith, and make the same leap again. This time your foot sticks. From here the rest of the leaps are easy. You stand on the other shore, knowing you’ve accomplished something difficult looking for the next challenge.

Andy Liu inspired this post today.

Life is so much more refreshing and invigorating when there is risk involved.

Hop over and read his post.

What The Rich Know About Money That Most People Don't

Financial intelligence is mostly counter intuitive. Take everything you feel about the economy and turn it on its head.

You’ve heard “buy low, sell high,” right? Sounds easy enough, but how do you do it? Most people buy high and sell low.

This is why the rich are rich and most of us aren’t.

The rich…

Sell when everyone else is buying. Buy when everyone else is selling. Save when everyone else is spending. Spend when everyone else is saving.

I just met an entrepreneur who positioned himself perfectly for this economy. He said,

“This is great, I just bought a 2.5 million dollar building for 800K. I
hired a dozen unemployed construction workers off craigslist to gut it
and remodel it. I just hired 5 .NET developers for half the price I
would have paid last year.”

What will you do next time? Mark my words, this will all happen again.

That’s how you build wealth. It’s simple, but most people won’t do it. The social pressure to spend when the Jones’ are spending is too great. Most people can’t bear to show up at hockey practice in an old mini-van, when everyone else has a shiny new Denali.

Then when the bust happens, they are broke and paralyzed by fear of unemployment and they miss out on the cheapest prices in a decade.

My neighbors are doing a major remodeling project right now. As I write this, I am looking out the window, and there are four pickups parked outside and even more men inside working. So in this economy, how can they afford it? I don’t know, but I can guess they saved during the boom and they are now paying half the price they would have paid two years ago.

Booms and busts are as certain as night and day. They are the natural cycle of economic life. Trying to rid the economy of booms and busts is like trying to rid the world of night and day.

This is simple if you build self-discipline and refuse to be herded into the latest stampede.

2006 was the top of the last boom. Most people I knew were buying new cars, buying new homes, remodeling, and spending like the good times would never end. About that time I had a conversation with a real estate agent about investment properties that went like this…

“Sooner or later the price of homes will drop.”

“It isn’t going to happen. It hasn’t happened since the 1930s.”

“Doesn’t mean it can’t happen again.”

“It’s happened in a few localized markets, but not one like ours.”

“What goes up, must come down. The higher it goes the farther it has to fall.”

“Unemployment would have to skyrocket and I can’t see that happening, not now. They are projecting a million more people in the metro area in the next 10 years.”

“Hmm, so buy now, it’s only going up?”

“If you buy this house (600K), it’ll be worth 30K more by the time you close. You can’t lose. You don’t want to get left out. Don’t leave money on the table.”

“I’ll pass.”

The words “you can’t lose” were the trigger.

You see, if I had done what I knew was right, I would have sold him my home and rented an apartment.  I didn’t sell because it would have been too disruptive to my family and Christine’s business. In retrospect I
should have, I would have made a pile of dough, and right now I’d be buying the 600K house for 300K.

But no matter what you do, you can lose, and you should be willing to accept responsibility for your loss. Take calculated risks, not blind gambles. Responsibility for the results of your actions, good or bad, is the foundation of freedom.

Be Decisive With Your Life

I struggle with this question everyday, “What am I going to do with all my opportunities?”

Sometimes I ask, “What am I going to do?” But I wonder if that’s the right question. Maybe it is “What do I need to stop doing?”

You can’t focus on everything that has potential. If you try, you’ll spread yourself too thin and you’ll get nowhere. So maybe it’s another way of saying, “Indecisiveness/procrastination is a major problem for most of us.”

We all choose something to do, but most of us choose what is easy, what is comfortable, what is known, what we feel is predictable, and what we were taught to do in school. But it’s a trap, isn’t it? As many of you are finding out right now, what you thought was safe and predictable, isn’t. The go to school> get good grades> get a cushy cubicle job path is as risky as any other path.

That’s the silver lining in a bad economy, it educates us about what is important, it shows us new opportunities, and it forces us to grow. Some of you may not want to hear this right now, but we need recessions in the same way we need forest fires. They are as natural as birth and death, necessary parts of growth and regeneration.

Christine was at our accountant’s office last week getting our business taxes done, when the subject of the economy came up.

Our accountant said he lost his job in a bad recession and he couldn’t find a new one. He was forced to start his own accounting firm from home. It was difficult, but he eventually grew into an office space and hired employees. He said losing his job was the best thing that ever happened to him.

His son went through the same thing during the dot com bubble. He lost a 40K per year job, and couldn’t find another. He eventually gave up on the idea of ever having a job, and instead went freelance. Today he owns his own company and makes 300K a year.

A friend’s father was an engineer and lost his job during a long ago recession. He had three kids at home, a house payment, and a wife who didn’t work. He couldn’t find a job, so he started freelancing and grew his practice into to a respected local engineering firm that lasted decades.

Not one of these success stories is internet related. Two of them happened before the personal computer had been invented. Today, with the internet and social media, your opportunities are exponentially greater than ever before.

So what are you going to do with all your opportunities?