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| Chris Guillibeau, stud entrepreneur. |
The following article is a guest post by
Chris Guillibeau, who’s traveled to 150+ countries and studied more
micro-businesses than anyone I know. I hope you love this piece as much as I did. Enjoy!
Enter Chris
Over the past several years, I’ve been on a quest to study
micro-businesses—small
operations (typically one person) that make $50,000 a year or more
(often a lot more). The quest took me all over the world, at first to a
large group of 1,500 “unexpected entrepreneurs” who volunteered to share
their stories in detail.
I wanted to hear from all kinds of businesses–both offline and
online–to decipher what made them so successful. How did they get
started? What helped them grow into significant, reliable sources of
income? How can you increase odds of success?
After much effort, a small team and I narrowed down the case studies
to a subset of 70 that I focused on for final analysis. All 70 people
had created freedom for themselves: new income and a completely new way
of life. There are formulas.
Here is a highly-condensed list of 17 lessons learned…
The 17 Lessons of $100 Start-ups
Note: Links show the businesses in action.
A gap in the marketplace reveals a business opportunity.
Gary Leff used his Frequent
Flyer Miles to travel all over the world in First Class, and his friends
kept asking for advice. Almost on a whim, he decided to launch a basic
website offering the service of booking travel awards for a fee.
His service is something that people could do on their own for
free—but plenty of people don’t know how it works or just don’t want the
hassle of dealing with airline call centers. This “side business” now
brings in more than $100,000 a year.
Lesson: Provide results (photos, testimonials, details of your own
experiences) and offer to do something for people that they don’t know
how to do or don’t want to worry about.
Latch on to a popular service, then simplify it for others.
Self-described “professional nerd”
Brett Kelly wrote
Evernote Essentials,
the first English-language manual for the popular Evernote software.
Brett was hoping for a $10,000 payday over the course of a few
months—enough to pay off some bills. Instead, he received $10,000 in two
days… and then the sales kept coming.
Originally conceived as a hobby that Brett worked on during nights and weekends,
Evernote Essentials
now earns more than $160,000 a year in net income. Here’s what Brett
says about the results: “The unreal success of this project has not only
freed our family from a decade of debt and financial instability, but
has also given us the freedom to pursue the kind of life we want.”
Lesson: Simplify things and cash in. Brett developed a comprehensive
resource with lots of screenshots and detailed, highly actionable tips.
More than 10,000 customers later, it’s still going strong.
Don’t beg your friends for money!
You probably don’t need
any outside investment to begin. The
vast majority of respondents in the study started their business for
less than $1,000, and nearly half for $100 or less. In Vancouver,
Canada, Nicolas Luff started with only $56.33, the cost of a business
license. Others started only with a domain name and a free
WordPress account.
It wasn’t just online businesses that started on the cheap. Michael Hanna started an
unconventional mattress store
after being laid off from his job in media sales. A friend of his who
owned a furniture store offered him an unwanted truckload of mattresses,
figuring that Michael could sell them one at a time on Craigslist.
Instead of Craigslist, though, Michael found a car dealership that had
recently gone out of business. He was able to rent the space at a huge
discount, and he opened his first store while learning on the job.
Even though Michael originally knew nothing about the mattress
business, three years later Mattress Lot produces more than $1 million
in revenue.
The chart below illustrates the average startup cost from the businesses we examined.
Image Credit: Mike Rohde.
Note: I sometimes hear from people who say that not all
businesses can be started on the cheap. This is true. If you want to
open a factory, you might need more than $100. If you want to found a
VC-backed tech start-up, you might need to woo investors. But the point
remains: you can start many different kinds of businesses without going
into debt. All things are equal, why not take that route if the costs
are low?
Lesson: Whenever possible, start quickly and start cheap. (And most of the time, it
is possible.)
If you do need money, you can find a way.
Emma Reynolds had an idea for a consultancy that would work with big
companies to improve their staffing and resourcing. She calculated that
she would need at least $17,000 to start the new firm. There was just
one problem: Emma was 23 and unlikely to get a business loan.
Emma and her business partner Bruce realized that despite this, they
could probably get a car loan. Bruce proceeded to do just that,
borrowing $17,000 for a car and then investing the funds in the business
with Emma instead. They paid back the car loan within ten months, and
the bank never found out that there was no actual car. Now the
profitable firm employs twenty people and has multiple offices in four
countries.
Another example: Shannon Oakey was turned down for a
small bank loan despite excellent financials and a strong business plan.
Shannon took her business elsewhere: to Kickstarter, where her project was fully funded.
Shannon printed out a copy of the final results and mailed it to the
loan officer who had rejected her—with a lollipop inside the printout.
Lesson: If you really need a loan, don’t take “no” as the final
answer. Consider alternatives. Bootstrap. Hustle. Figure it out. (Note:
Borrowing money for a non-existent car is at your own risk!)
Get to the first sale as quickly as possible.
Nick Gatens put up a portfolio
site for his photographs and sold a $50 print for the first time. What’s
the big deal? When you’ve never sold something before–i.e. never had a
stranger comes to your website and hands over their credit card–the
first time is flooring. Here’s what Nick said:
“It took me a long time to add the order button on my site. For a
while I kept blaming it on technical issues—a WordPress glitch, the need
for design improvement, and so on. Finally I realized I was waiting for
no good reason. I put the offer out there and made a sale. It felt
great!”
Lesson: Does your site have a
PayPal button on it? If not, add one today!
A trend or controversial idea can also reveal a business opportunity.
Jason Glaspey was a follower of Paleo, the controversial diet that is
both loved and ridiculed. Jason noticed a common problem among fellow
devotees: because of the requirement for regular shopping and planning,
Paleo was hard to follow on a regular basis.
Jason created
Paleo Plan, a
membership site that offers shopping lists and ongoing guidance. The
goal of Paleo Plan is to keep its customers on track, with detailed
shopping lists and ongoing recommendations. The project now brings in
more than $5,000 a month.
Lesson: When large groups of people love and hate something, it’s a
good sign there’s a business model hiding in plain sight. Get paid by
making things easy for the people who love it.
You can be one person… or maybe two.
Nathalie Lussier had lost weight and discovered a new way of life by
following a raw foods diet. She then set up a successful business
teaching people how they could do the same thing, using webinars,
courses, and personal coaching. One of the tipping points came when
Nathalie discovered that the initial name she had chosen,
Raw Foods Switch, could also be rendered
Raw Foods Witch. Nathalie jumped into character, dressing up with a broom and pointed black hat.
Within a year, the business grew to more than $60,000 a year in net
income. What’s not to love? Just one thing: Nathalie liked raw foods,
but that wasn’t all she liked. She was also a programmer who had set up
the entire database and backend operation for Raw Foods Witch. She
wanted to put those skills to greater use, and she felt like she could
help aspirational entrepreneurs build their business.
Instead of shutting down the raw foods business, however, Nathalie
put it on auto-pilot, using auto-responders and repeating webinars to
essentially market the business on its own. Then she switched over to a
new site,
NathalieLussier.com, where she offers specific consulting services based on business-building and technology.
Nathalie now earns a good living from both businesses, with
RawFoodsWitch.com essentially running on its own as she focuses her efforts on the new site.
Lesson: Clone yourself for fun and profit. It’s not necessarily about
doing more, it’s about
being smart.
Notice what frustrates you, then figure out a way to correct it. [TIM: This is my business model for almost everything]
In Portland, Oregon I met Sarah Young, who opened a yarn store at the
height of the recession despite no business background. When I asked
Sarah, “What made you think you would succeed?” her answer was astute.
“I wasn’t an entrepreneur,” Sarah said, “But I was a shopper. Other
yarn stores were cramped and unfriendly. There wasn’t really a space you
could go to hang out. I knew I wasn’t the only knitter who felt this
way, so I decided to create an alternative.”
Sarah followed up, renting retail space and decorating for the grand opening of
Happy Knits,
a welcoming space for knitters and their families. The last part was
important: most (though not all) knitters are women, so Sarah set up a
play area for kids and a WiFi area for non-knitting partners. Customers
are welcome to stay as long as they like.
You can see Sarah and hear more about Happy Knits in
this video trailer.
[Note: in the trailer, Sarah tells the story of her first $1,000 day.
We filmed this a few months ago, and when I recently caught up with
her, she told me about the store's first
$10,000 day. Business is great and Happy Knits now has six employees.]
Lesson: See something missing? Maybe you’re not the only one. Pay
attention to inefficiencies, which may be opportunities to provide
something better.
To make an extra $35,000 a year, be open to change.
One of the most insightful stories came from a source who preferred to
be anonymous, a gent who tweaked a single variable in his sales page.
Everything else was constant:
On one sales page I had $49, and on another $89. Nothing
was different at all—same copywriting, same order process, same
fulfillment. To be honest, I thought that $49 was a better price, but I
had set that price somewhat arbitrarily. Guess what? Conversion went
down [for $89]… slightly. But overall income actually increased! …
I then decided to test it at $99. Why not, right? But from $89 to $99
I saw a bit more of a drop-off, and I got worried. I’m now back at $89,
and even with the lower conversion factored in, I worked out that I’ve
given myself a $24 raise on every product that sells.
These days we are selling at least four copies a day. If everything
else remains consistent, I’ll make $35,040 more this year . . . all from
one test.
This single, unexpected tweak resulted in more than $35,000 a year in
net income. His last words to me were: “I’ve decided to try some more
tests.”
Lesson: Test everything. If you’re not good at testing, however, at
least test pricing. [TIM: Here's one helpful tool you might get obsessed
with:
Unbounce.com]
Give them an offer they can’t refuse.
What separates a decent offer from a compelling offer that you simply
must purchase? I learned this lesson in Anchorage, Alaska, when I talked with Scott McMurren, co-founder of
Alaska TourSaver, the leading coupon guide for visitors coming to Alaska.
Scott explained how it worked. Every year, more than a million
visitors head to the frontier state, and many of them travel
independently. Alaska is a beautiful place, but it’s also expensive. To
keep costs down, Scott worked with hotels, restaurants, and tour
providers all across the state. He put pressure on them to provide real
savings instead of the usual minor discounts that other coupons offered.
(In the TourSaver guide, most deals are Buy-1-Get-1-Free or 50% off.)
Then Scott make an important decision: instead of pricing his coupon
book for twenty bucks or so, like some competitors did, Alaska TourSaver
would sell on an annual basis for just under $100. Because the deals
are so valuable, it’s a no-brainer for most travelers to pick up the
package. Scott’s pitch is: “Get this coupon book, use it once, and it
will pay for itself. Then you’ll have hundreds of additional coupons to
use as well.”
Lesson: Make your offer so compelling that buyers have no reason to
say no. Give them an offer they can’t refuse. (Bonus tip: every
compelling offer includes an element of urgency, the reason why buyers
should take action right now. “Supplies are limited! Don’t wait!”)
Give people what they want (not just what they say they want).
Kyle Hepp is a wedding
photographer who travels the world from her home base in Santiago,
Chile. Kyle’s clients tend to be young and hip, and they’re drawn to her
work because it is non-traditional. Sometimes they even say they don’t
want
any traditional wedding shots. “We’re not into old-school,” was how one couple put it.
Kyle agrees with them and spends her time at the wedding getting fun,
candid shots that she knows the couple will like. But that’s not all.
Having done this for a while, Kyle knows that what her clients want and
what they say they want may be different—and she also knows that the
families of the bride and groom may have preferences of their own.
Here’s how she handles these competing desires:
On the day of the wedding, I’ll grab them and say, “Let’s
get your family and just do a couple of traditional shots.” I’ll make
it quick and painless. I make sure everyone is laughing and having a
good time and it’s not those awful,
everybody-stare-at-the-camera-and-look-miserable kinds of shots. And
then after the wedding, when I deliver those photos, either the bride
and groom’s parents will be thrilled to have those pictures (which in
turn makes the couple happy), or the bride and groom themselves will end
up saying they’re so happy that we did those shots.
Kyle goes above and beyond by giving her photography clients what they really want… even if they hadn’t realized it themselves.
Lesson: Dig deeper to uncover real needs. Give people what they
really want.
Put happiness in a box and sell it.
What do people really, really want? They want something positive added
to their lives or something negative removed. The best microbusinesses
do this in different ways—making it easier to travel the world, for
example, or making customers feel special. But when you talk with
business owners, many focus on the descriptions of their business
instead of how their product or service will actually help people.
Consider these different approaches in explaining the mission of the
V6 Ranch, an unconventional vacation destination in Parkfield, California:
Descriptive (Boring): Our business enables visitors to ride horses and sit around the campfire.
Benefits (Inspirational): Our business helps visitors be someone else
for a day. The message we try to send is “Come stay with us and be a
cowboy.”
Isn’t the second option so much better? Sell happiness (benefit) instead of merely describing your business (features).
Lesson: As much as possible, focus your business messaging on adding
something positive or removing something negative from customers’ daily
routines.
Forget traditional demographics. Focus on psychographics instead.
In Arcata, California, Charlie Jordan and Mark Ritz teamed up to start the
Kinetic Koffee Kompany. They had great coffee, but that wasn’t enough—these days, there are plenty of small businesses making great coffee.
What set the Kinetic Koffee Kompany apart was their target market:
they focused specifically on the outdoors community, pitching bike shops
and “gear retailers” on carrying their stock. They showed up at races
and made a name for themselves among groups interested in active
hobbies. Instead of competing with Starbucks, Charlie and Mark made
their own market.
Lesson: Figure out who “your people” are and serve them. Don’t group
them according to traditional demographics unless you have a good reason
to.
Offer a “no pain, all gain” refund option to build confidence.
Nev Lapwood was a
snowboarding instructor who created a set of instructional DVDs that
sold around the world. Nev had a good business model almost from the
beginning, but he decided to kick it up a notch, offering to refund his
customers 110% of their purchase price if they didn’t like the product.
Sales increased, and Nev applied the same approach with foreign
translations of his DVDs.
I asked Nev if this had become a problem with people requesting
habitual refunds. His response: nope, not at all. The business now
produces more than $240,000 a year in net income.
Lesson: Build trust by making it easy to trust you. Offer a strong
guarantee, and don’t make people jump through hoops to get a refund.
[TIM: 110% sound familiar? Check out the below. Congrats again, Nev!]
“Marketing is like sex (only losers pay for it).”
This quote, originally from a 2010
Fast Company article, aptly
describes how the roles of marketing and paid advertising have changed.
The vast majority of business owners I surveyed had built their customer
base without any paid advertising at all. Instead, they did so largely
through word of mouth.
I tested this hypothesis through my [Chris] own $10,000, Ten-Hour
“Marketing and Sex” experiment—placing a series of paid ads for a travel
service I operate and comparing them to the efforts of “hustling,” or
connecting with friends and readers in a free, organic manner. The
results were clear: I made far more money through the hustling efforts
than through the paid advertising methods.
Lesson: If paid advertising proves to work for your business, by all
means, don’t quit. But before you go down that road, consider “hustling”
instead—the gentle art of self-promotion, and making something
interesting that others will be eager to share for free.
Plan your product launch long in advance, and make people line up to purchase.
Like a Hollywood movie, you want to build anticipation before launching
anything. Use the “dark and stormy night” approach to tell stories and lead people into a great experience—not just a sale.
Adam Baker and Karol Gajda’s
Only72.com
project illustrates this concept well. Twice a year, they line up
affiliates and partners to push through a megasale of discounted online
products… for only 72 hours. Each sale produces a six-figure payday for
Adam, Karol, and the affiliates—because they’ve learned to build
anticipation.
Free bonus: wondering how to launch your first product? Here’s a 37-Step Product Launch checklist. Pay it forward by making a great product or service and launching well.
Lesson: Get people excited! Then give them what they want.
Turn disaster into recovery—then sell recovery.
Ridlon “Sharkman” Kiphard was on an island in Fiji, operating his first big tour for
Live Adventurously,
an alternative tour operator for those who like to play hard. The first
half of the trip had been great, but then the call came: the chief of
the neighboring island, which they were scheduled to visit the next day,
had died. His death called for a mandatory 100 days (!) of mourning.
Suddenly, Sharkman had nine high-paying guests… and nowhere to go.
In Sharkman’s words, here’s how the story unfolded:
“This was when doing our research earlier, and really
knowing the area, paid off. We managed to extend our stay where we were
by one night and spent the time feverishly cobbling together plans. We
chartered an aircraft; contacted numerous hotels, resorts, and dive
operators; got recommendations; did some more research; and booked the
group into a newly opened property on a remote island. The transition
went smoothly, the entire rest of the trip came off without a hitch, and
it was as if it had been planned that way the entire time.”
Over and over, I heard stories like these—of how an impending
disaster turned into a moment of strength. In Sharkman’s case, his
guests were highly impressed with how the team managed the problem. Some
of them offered to pay extra to cover the additional costs incurred
with the change, and all went on to provide strong referrals for Live
Adventurously.
Lesson: Stick it out! (Bonus: The value of failure is overrated.
Everyone always wants to know about failure because of some convoluted
theory that you must fail more often than you succeed. “You learn more
from your mistakes…” etc. Why not succeed from the beginning? Some
people do. [TIM: In other words, learn from
other people’s mistakes instead, when possible.)
***
Wrap-up: Your Turn
The constant themes in our study were freedom and value: freedom is
what we all want, and value is the way to achieve it. Over and over, I
found business owners who had created their own freedom (and a great
income) by making something useful and desirable for their customers.
It’s easy to think that these are isolated examples, or that you
can’t achieve the same results, but the micro-business phenomenon is
happening all over the world in different ways.
Follow the path of these stories and make
actionable plans. Pick one thing, get it on the calendar, and do it in the next week. Just do
something.
Lesson: Don’t kill the dream! Live the dream!
) Ten years from now,
