Michael Haislip: Professional Millionaire

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An e-commerce project teaches you great lessons. It can also kick you in the genitals.

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As mentioned before, I’m developing an e-commerce site focused on pro music gear. Though this isn’t my first e-commerce site, most of the lessons never change. Here’s a few things that I’ve learned:

1. The government doesn’t encourage entrepreneurship

I’ve had to acquire the following licenses/certificates/wastes of paper just to get to the beginning stages:

• Tennessee Sales and Use Tax certificate
• IRS Federal Employer Identification Number
• County Business License
• Blanket Certificate of Resale

Also, I’ll be liable for periodic state sales tax filings, federal withholding, self-employment tax, and the oh-so-helpful county business property tax. Thanks, government.

2. You will not get credit from vendors in your first year

You may never get business credit at all. The best way to stay in business is to get Net 30 terms (you get 30 days to pay for inventory). Otherwise, you operate on a cash-only or credit card basis. Cash basis is dangerous because the business is constantly using cash on hand rather than earning interest on it — or saving it for an emergency. Credit cards are a little better, but any significant sales numbers will max out that Visa on a regular basis. Get ready for a string of over-the-limit fees.

3. Incorporation doesn’t shield you from very much early on

This goes back to the business credit issue. Since a new business has no credit, creditors will require a personal guaranty. Even if the corporation declares bankruptcy, the burden still falls on the guarantor.

4. Many vendors still haven’t figured out this Intarweb thingy

With the ease of integrating databases with websites these days, I’m still amazed at how many vendors don’t have online ordering or real-time inventory counts. I’ve encountered some that don’t even have websites.

5. You will always need fax capabilities

Don’t ask me why so many vendors, government agencies, and manufacturers still require me to fax documents. Usually, they don’t even have a toll-free fax number. Thanks, guys, I really didn’t want that extra $25 that just went toward my long distance bill. I’m sure AT&T needs it much more than I do.

6. The real money is in accessories

Margins on most consumer goods are so thin nowadays, that a new business would be foolish to compete in that market. No one makes money on the iPhone; they make money on the accessories and cell contract. Similarly, in the music gear market, no one makes money selling a Fender Strat at 5 percent markup; the real money is in the guitar case that’s marked-up 50 percent.

7. The USA is not the only market

Ever noticed how eBay has multiple country-specific websites? Amazon does, too. With a bit of research and logistical know-how, it’s likely any e-commerce site can expand its market worldwide.

8. Guerrilla warfare works for rebel forces and small businesses alike

To sum up guerrilla warfare: “hit ‘em where they ain’t.” A small rebel force can paralyze a much larger army by striking at weak points in the army’s structure. Similarly, a small business can profit by occupying market space that has been ignored by larger companies (same goes for bloggers, too).

9. Overhead kills

Expensive office space, massive cell phone bills, huge long distance bills — these are the signs that a startup is in trouble. Why? Because these expenses come out of cash flow, and cash flow is the life of a business. A business can live indefinitely with good cash flow (and maybe a credit card or two). Amazon went years without a profit, but it maintained a good cash flow and stayed afloat. Profit doesn’t necessarily mean cash on hand.

10. Insanity is an entrepreneur’s best friend

Don’t worry if your friends think you’ve lost your marbles; after working 16 hour days for a year, skipping showers, and abandoning any semblance of a social life, you’ll be glad that anyone is paying attention to you.

I’m considering renaming this blog “Fail miserably online with Michael Haislip.”

I’ve made $1.60 from AdSense this month. My goal was $10. I’m getting very discouraged here.

My primary search engine queries are about personality types (thanks to my experiment from July). That would be great if this blog was about personality types.
My only recent comments have come from Michelle at Bloggrrl (thanks, Michelle).

Really, I have no solution.

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You’d be surprised at what is not available on the web.

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So, I’m planning this massive outdoor party for August 25 (happy birthday to me), along with a few other co-conspirators. As usual, I’m waiting to the last minute to finalize the details. And one of those details is supplies.

Let me tell you. Purchasing supplies for this party has been a strain on the old credit card. Imagine planning for 500 drunken revelers, 8 bands, a DJ, plus parking for all of them, all the while managing a staff of 6 security guards and 8 volunteers.

So, before I get off topic too much, here are the following products that I could not find either at all or for a good price online:

• Caution tape (cheaper to buy locally, and not much web presence)
• Plastic cups ($4.00 for 50 plastic cups?)
• Porta-potties (ladies don’t like to go in the woods)
• Event staff apparel (I eventually had to make event staff badges out of yellow posterboard)
• Stage lighting (prices are outrageous)
• Extension cords (again, cheaper locally but cheap is relative in this case)

I promise that it would only take a simple search-engine optimized page to rank #1 for most of these keywords. Now, get to it before I do.

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Alcohol is a growing niche on the web, but how can it be fully exploited to make money online?

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Since I’m on a 3-day bender at the moment, I feel it important to bring up a niche market that I’ve previously mentioned.

That’s right. The booze. The drink of the devil. The cause of, and solution to, all of life’s problems.

Once again, this is another market with massive barriers to entry. However, I’m not suggesting that my readers begin their own cyber-booze retail sites. Let’s not re-invent the wheel, here. Let’s use … AFFILIATE PROGRAMS! (the exclamation mark means you should be excited)

Actually, I’m too lazy at the moment to look up any affiliate programs, but I know they exist. Just do a Google search for “buy alcohol online,” and the major sites will all have affiliate programs.

Did you know that “BuyAlcoholOnline.com” is a considered a premium domain by GoDaddy? It’s true! For only several thousand dollars, you, too, can waste money on a premium domain.

OK, I have to go drink more. Check in tomorrow for more bitter, sarcastic rants which might help you make money. Or enemies. One of the two.

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How can a blogger stay dedicated even when the desire to get out of bed in the morning has gone?

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There’s a quote I’ve had stuck in my head for years. Though I can’t recall the speaker, I do recall that he was a professional comedian. When asked what was the difference between a professional comedian and a regular funny person, he replied, “A comedian is funny even when he doesn’t feel like it.”

I’ve always thought that was a brilliant observation. Comedians tend to be a depressive lot, and they certainly don’t feel like being funny every time they step onto some crappy stage in Nowheresville, Montana. Yet, they do it anyway.

There are days/weeks when I awaken after a few hours of restless sleep, blurred fragments of dreams still in my mind. I raise my fists to the heavens and scream, “Why, God, why have I lived to see another day?” Then I think of fluffy bunnies and shiny rainbows, and I feel better.

No, actually, I think of that quote from the comedian. If you want to call yourself a professional at anything, then you must do it and do it well, even if your first instinct is to curl up with a bottle of whiskey and watch Match Game reruns on the Game Show Network.

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Digg is a wasteland of pop culture, ignorant political discourse, and recycled ideas.

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1. Digg keeps Paris Hilton and Lindsey Lohan famous.

2. Digg is essentially controlled by cabals of Evil Digg Overlords. They decide which stories live and which stories die.

3. Digg permalinks describing a story often show up higher in search results than the actual story.

4. There are too many “OMG WTF is this KEWL PICTURE” type of stories. These are the Web 2.0 equivalent of those massively forwarded chain e-mails from your grandma.

5. Digg continues to corrupt the English language. “Dugg” is not a word. “Dugged” is not a word. Just stop it. You people are just going to seem silly when Digg is no longer around.

6. Digg’s freeloading, unappreciative traffic destroys bandwidth, melts servers, and drastically lowers click-through rates for AdSense. Digg traffic is worthless.

7. Digg is responsible for the propagation of those damn “Digg it” buttons on every website. It is my greatest wish that a savior will create a browser plug-in that automatically blocks that tool of Satan.

8. Digg’s black rot long ago infested blogs. Thanks to their evil influence, every blog post is now a how-to, a numbered list, or a diatribe against [INSERT POLITICIAN HERE]. We must appease our Digg overlords!

9. On the off-chance that an actual informative story is submitted, it quickly buried under an avalanche of vapid technology news or celebrity crotch shots.

10. “Digg” has consolidated too much power. When it is inevitably purchased by Microsoft, Time-Warner or News Corp., who will control the flow of traffic then? [evil laugh]

In short: screw you, Digg. And, in the ironic chance that this is actually submitted to Digg, screw you Digg freeloaders, too.

Just a note: I’ll be updating daily starting Sunday, August 12.

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Knowing some basic economics can help you know where the big money is hiding online.

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Warning: you may have flashbacks to college econ courses.

In economics, there’s a term called “barrier to entry,” sometimes known as “cost of entry.” It refers to the obstacles that a person faces when entering the market (not the grocery store; the general economy). For example, a doctor’s barriers to entry are years of expensive medical school and government licensing.

These barriers restrict the available supply of doctors. Of course, low supply means higher prices for that supply. Doctors make the big bucks because they overcame those entry barriers.

What the hell does this have to do with making money online, Michael?!?!

Hey, calm down. I’ll tell you. We can apply this same concept to making money online by determining the entry barriers for various online enterprises. It’s science!

Blogging

It seems as if everyone is trying to blog their way to riches, or at least some beer money. However, blogging has the lowest cost of entry. A person can go to Blogger and be competing in the market in 5 minutes. That is a near-zero cost of entry.

Of course, this means that the supply of blogs is massive. Remember: more supply, lower prices. If we average out the revenue generated by all the blogs in existence, the number would be somewhere just above jack squat (that’s an official number; look it up if you don’t believe me). Even though the John Chows and ProBloggers of the world are raking it in, the other quadrillion blogs with no revenue are the norm.

E-commerce

Ah, now we’re getting into the real money online. If a blogger made $10,000 revenue in one month, he’d be ecstatic. If an e-commerce operation made that, the CEO would likely be beaten with sticks, perhaps with rusty nails in them just to give it that nice tetanus feel.

Here’s the question: why is there exponentially more money in e-commerce than in blogging? If you’ve been paying attention at all, you know the answer is “cost of entry.”

Take me for example. I’m currently building an online music supply store, with a shopping cart and a database and all that jazz. My barriers to entry:

• Federal, state, and local licensing/registration
• Cash on hand for inventory
• Vendor credit applications
• Shipping supplies
• New telephone line

The list goes on. However, even if I’m moderately successful, I’ll be making way more money than can be expected from a blog.

Let’s wrap it up already, Michael

I’ve only shown two examples here. As the barriers get higher, the profits get higher. Consider online currency trading (minimum: a budget of thousands), high-end domaining (minimum: a budget of millions), etc.

OK, class dismissed. Remember to sign up for my Econ 204 class for the fall semester.