sufac.com

Craigslist is one of the revolutionary business models of the last decade. They provide text based classifieds and have taken millions of dollars out of newspapers pockets over the years. However, the most interesting thing is that they don’t try to maximize revenue. They only charge $25-$75 for job ads and $10 for apartment listings in New York. In fact, the only reason they charge for apartment listings is because they received too many duplicates and thought it would cut down on them.

Over 26 million people visit Craigslist every month and this translates into an estimated $81 million in sales for 2008. Not bad for a small company that’s still private (although eBay now owns 25%). So how does Craigslist do this? I believe a large part is trust. Of course their site is easy to use, free for most postings and quick because of the lack of images. But it’s also trustworthy. Craigslist is the anti-corporation, they are out there to provide a service, not make the most they can off of you and people love that.

So next time you’re thinking of what you can charge your customers, think instead of what you can provide them with. The resulting changes may just create the buzz and goodwill that your company needs to jump sales year after year like Craigslist.

-Craig Sharkton

You don’t need to come up with your own breakthrough idea to make a mint, you can just steal one. Take for example the Rabbit corkscrew. Originally, the product was called the Screwpull and retailed for $250, but after the patent expired Yet Riki Kane, founder of Metrokane, designed the Rabbit off of Screwpull technology.

She markets it at $50 and it’s now carried by 46 worldwide distributors. Last year she sold around 826,000, which would be over $20 million in sales at the wholesale price. So Metrokane built a product into $20 million in sales in seven years off of a “stolen” idea. Just fabulous.

Another genius idea Kane employs is branding similar products at different price levels. The Houdini is a Rabbit knock off that retails for a cheaper price, but it was created by the same company. They knew someone would create a cheaper similar product (like they originally did to the Screwpull) so they acted first, cannibalized a bit of their sales, but gained overall. Genius.

So next time you think you need a great idea try looking through patents that are about to expire and see if you can find some buried gold. You can start by checking out the US Patent and Trademark Office.

-Craig Sharkton

Felix Dennis wrote an interesting book called How to Get Rich. He’s the guy that started Maxim magazine (among many others) and is now worth around $400-800 million. The book is interesting in the fact that it’s an anti-self help book. He basically says that getting rich is a waste of time. If he had to do it all over again, he says he would work at getting around $50-80 million as soon as he could and then retire.

I have to say it’s interesting to hear someone worth half a billion saying that he’s rarely happy except when he’s writing poetry. I mean we all start small businesses to get out of working for the man and in the hopes of striking it big. But to hear someone who made it say that it’s a waste of time and would gladly give it all up to shave a couple decades off his age is quiet eye opening. I mean wouldn’t most people trade five years for several million dollars?

There are tips though on how to succeed in business throughout the book. Like how ownership is the most important factor, never give up a percentage of your business that you don’t have to. Split up the annual profits to create incentive, but if anyone wants a slice of ownership you have to turn them down. Most of the other tips are common stuff: hire people smarter than you, work hard, look for opportunities where the money is, etc.

However, the most interesting part about the book is the constant undertone that getting rich is not really worth while. So maybe next time you get up at 5am to start working take a minute to think… If half a billion doesn’t make you happy, what will.

-Craig Sharkton

I’ve been reading David Silver’s new book - Smart Start Ups - and he has some great ideas. He believes that the next fortunes will be made building online or mobile communites and I have to agree with him. One of his ideas is an online grammys.

Basically the business would entail building a community of music lovers who would vote on songs by “tipping them.” A maximum of $10 to keep out the wealthy people who want to promote music and then 70% of the revenues would go to the artist and the remaining 30% to the business.

I think this is an interesting business model because of what you could do with it. You could sell music on the site, have video interviews and once a year have a blow out show with awards being handed out. It’s a great idea because of the passion people have for music, the only question would be how many people would actually give tips to place a vote.

Nonetheless it’s an interesting online business model that doesn’t use ads as the main source of revenue. I’d say someone should start something like this and quick. For more ideas and online/mobile community business models check out his book.

-Craig Sharkton

I have to say Toms Shoes is a great example of what entrepreneurs can do. Blake Mycoskie was traveling in Argentina and saw all of these children with no shoes. Their feet were torn up and he decided he needed to make a difference. He started Toms Shoes where for every pair of shoes he sold he would give a pair to a child in need.

He started the business by taking 200 samples of an Argentinian shoe back with him to the US and started going door to door. He made it in a few botique shops in LA, but the real break came when he made the weekend edition of the LA Times. By the end of the weekend he had $88,000 in orders.

From there the company has exploded. It’s such a good story that it’s been covered by Time, Elle, Vogue and even Oprah. This has led them to sell over 60,000 shoes since May 2006 and they’re looking at selling 200,000 shoes this year. At about $48/shoe that’s $9.6 million in revenue in their second full year of business. Great growth and it’s all based on a model that will give back to the world indefinitely.

They’re now selling t-shirts and even a tote bag that if you buy will support a child to go to school and eat for a year. And they’re making money doing this. And having a great time. So this all brings up the question can you build a profitable business while helping the world. Absolutely. I’ve been trying to think of ways you could mimic this model, but it’s difficult.

Originally, I thought you could replicate it by selling LED lights. They’re low powered and last for years so they are being used in location rife with poverty so people can study at night. However, they are expensive and you can’t differentiate them enough. That’s the key I’m sure to this model. You need a product that you can differentiate. Toms Shoes are similar to a lot of shoes made out there, but they’re branded and come in different styles so people will spend a lot more to buy them.

If you have any ideas on products that could support this model leave an idea, or let us know what your experiences have been with social entrepreneurs. I can’t think of a better mark to leave on the world than an organization that supports itself and helps the world.

-Craig Sharkton

In the last 10 years the number of wine brands has doubled, while half the distributors have disappeared. So we now have 5,000 wineries with 7,000 brands and only 450 distributors to go through. This has created a large problem for micro-wineries because they often lack the volume a distributor would require.

Due to legal changes smaller vineyards can now ship direct to people in 37 states. However, there is a problem of excess paperwork. For example if a micro-winery shipped a case to each state they would have to fill out 725 forms to conform with sales, excise and state income tax.

But wherever there is a problem there is often a business opportunity. I believe that the current environment - lots of micro-wineries, ability to ship direct, lots of paperwork - presents a beatiful business opportunity. Someone should start a website that is a micro winery retailer/inter-state exporter. Wineries would sell through your site and ship direct to customers. You could provide merely the store front and take a commission or process the required forms as well and charge a fee. If resources were available you could start a distribution hub as well, but it would require a fair amount of capital.

With the popularity of wine continuing to rise and the constant movement to micro-brewed products I think a company that could help the little guys sell to the world could be extremely profitable. You could even provide amazon type reviews to build a community.

The hard part would be working out the tax and legal forms, but that’s where the real value would be added. I’d be interested to hear people’s thoughts on the idea, so leave a comment if you have time.

Winery Statistics:Forbes - June 2/08 issue

Related Post: Business as War

-Craig Sharkton

When I think of successful small businesses I don’t think in terms of revenue, I think in terms of lifestyle. If you’re only taking home $90,000/year, but work eight months you’re in better shape then the guy brining in $250,000/year on 80 hour weeks. We only get to live each day once and if you’re not enjoying it you need to re-evaluate.

In fact Steve Jobs, the founder of Apple, wakes up every morning since he was 17, looks into the mirror and asks himself “If today were the last day of my life, would I want to do what I am about to do today?” If he says no too many days in a row he knows he needs to change something (link to full speech at bottom of post).

There’s a ton of ways you can reduce your work load, but I thought I’d list three that successful entrepreneurs used.

1. Leave the employees in charge: Paul Orfalea, the founder of Kinko’s, was expanding his company and kept getting calls about every little decision. Finally, he realized he’d never be able to grow the company if he had to do everything so he left. He jumped in his car and went on a vacation. The first week he said people just said “he’ll come back,” week two was “Oh my, he’s gone.” Then in week three something magical happened. The employee’s handled everything. It took Paul a bit of time when he came back to get over the fact that his employee’s didn’t need him. But he was able to take longer vacations and his employees were empowered, a clear win for everyone.
2. Fire a customer: Tim Ferris ran a nutritional supplement website and was working himself insane. One of the tactics he used to go from working 14 hour days to 4 hours each week was to evaluate his customers. He profiled the most profitable ones, then searched for more of those. He also evaluated his most stressful customers who wasted his time and either stopped calling them or simply fired them. He’d tell them that if they weren’t going to follow his process or respect him to go somewhere else. A bit gutsy, but it worked for him. He’s got a great book out, check it out if you have time - The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich.
   
3. Design a better business model: John Chow is another interesting entrepreneur. He started a tech related blog and quickly realized people were interested in how to make money with blogs. A few years later and presto he writes a couple posts a day for his site johnchow.com and last month brought in over $40,000 in ad revenue. With almost no costs, he’s living the life. He’s totally mobile and although he doesn’t state how much he’s working… I can almost guarantee it’s less than you.

So look in the mirror tomorrow and pretend it’s your last day here. Are you looking forward to the day? If not perhaps it’s time to see if you can reduce the hours you spend working. Start looking for little ways to leverage the internet, your employees or your assets. Hire an outsourcing company. Leave a promising employee in charge for a couple weeks. Redesign your business model.

If you have any tips of your own please leave them as a comment. I’m sure the other business owners are interested to see how you’re getting home early or taking that vacation to Europe.

-Craig Sharkton

Related articles - Steve Jobs Commencement address

Car washes seem to be great businesses and a recent article in Calgary Inc revealed some interesting numbers. For example a new two-auto bay car wash in Sylvan Lake (small town of just over 10,000 people and a million tourists/year) was set up for $1.4 million. It’s expected that each bay brings in approximately $15,000/month. At that rate it would be paid off in about 47 months or just over three and a half years ignoring interest. Not too bad.

Self washers however seem a bit too pricey, they cost about $4,000/month to run and the average one brings in about $4,000/month. Not too grand a margin there. But if you have some money in your community you could think about starting a full detail service like TLC Auto Detail. They charge between $400-$1,000/detail and will even do wet sand polishes, where they dismantle the panels and polish each one. Crazy.

And since your customers won’t travel far you’ll need to dish out enough for a great location. In fact that’s the number one cost of a car wash, the dirt underneath. Overall, I’d say they’re an okay businss, but there is lots of competition, you can only reach the customers within a few miles and it costs a heck of a lot to get started. I’d much rather leverage an innovative business model rather than my bankroll and pursue something similar to Threadless.com (check out our post on threadless.com).

-Craig Sharkton

There’s a great book by David Bach called the Automatic Millionaire. It’s entertaining, easy to read and important in this crazy day of spend, spend, spend. The book can basically be summed up in two phrases. One, save 10% of your salary automatically - Here’s a side lesson for everyone, find a good concept, write 200 pages around it and make millions. Two, stop spending $5/day on latte’s, you’ll save thousands you can invest and presto change-o, you’re a millionaire.

Already, first off I agree with the “save 10% to become a millionaire”. Conventional wisdom says invest 10% to retire, 15% to retire comfortably and 20% to retire early. It’s right and you don’t need me to post all of the stats that are everywhere. Put the money in equity index funds when you’re young, then add a bond fund as you get older.

However, I disagree with Bach’s second statement, “don’t buy latte’s” (okay, bit of paraphrasing there) because not buying coffee doesn’t set you up for financial freedom. Planning your big purchases does. For example, if you buy a new car like me, you’re silly. You drive them off the lot and they’re worth half of what you just spent. And then look at the cash flying out the door, I spent $340/month paying off my car, so you’d need to make $6,000/year before taxes just to pay off your car. I could buy a latte every day and spend less than half this amount.

The fact is most people need to invest automatically, but they also need to realize that buying a $500,000 house on a ford focus budget doesn’t work. If you don’t plan your big purchases, you’re screwed. So spend less on your house and car, invest automatically and enjoy every day. You’ll be wealthy in no time and you didn’t even have to sacrifice every dinner, latte or movie to do it.

You can check out David Bach’s book if you want to spend money. Or you can re-read the two phrases at the start of the post. Pesonally, I’d read the start of the post and go enjoy the day, it’s better spent enjoying a latte.

-Craig Sharkton

There was an excellent article recently on Netflix in Backbone. Apparently in its infancy Reed Hastings met with Blockbusters executives and offered a majority position in the company for $50 million. They said no and signed an exclusive video on demand deal with Enron for 20 years. Blockbuster is now worth $345 million, Netflix $1.9 billion.

Amazing. Think of what Blockbuster missed out on because they weren’t willing to believe in a new business model. Even if they didn’t buy the large chunk of Netflix, they could have easily worked out a partnership with them. Netflix’s business model is so effective because they have less employees and fixed assets. Back in the old days you wanted a ton of stores so you could get economies of scale. Nowadays that’s not always a competitive advantage. It’s a perfect environment for small business.

Neftlix earns about $1 million in revenue per employee because they don’t have tens of thousands of locations, Blockbuster earns about $100,000 per employee. So when you’re looking at your business look at adjustments to the business model and challenge the status quo. People thought Netflix wouldn’t work because no one would wait days for a DVD. People did. And now Netflix has become so good at distribution that they can guarantee one day delivery to 95% of the US. So Blockbusters main “strength” - locations everywhere - has quickly turned into its weakness. Too many locations tying up too much capital.

A great business model can make the business. For another great one check out our Threadless.com post.

-Craig Sharkton