All posts by Steve

Advertising Your Products, Suppliers-Good and Bad, Tips for Your Business

Amazon Is No Friend

September 13, 2013 Steve Leave a comment

As a consumer it’s hard to imagine a better online shopping experience than you get with Amazon. The company does an outstanding job selling and delivering products, while also promoting items that are shipped to you by other retailers.

I’ve always found transactions on Amazon to be fast and trouble-free, and I’ve been satisfied with their customer service for as long as I can remember.

However, because of their market power – and some behaviors that I feel are outright irresponsible – I think that you should approach Amazon with great suspicion when it comes to your online business.

Fierce Competitor

Let’s face it: many consumers would be happy to buy a slightly inferior or more expensive product from Amazon than a comparable product from your website. Amazon makes it so easy to buy and return items – and there’s so much trust in their store – that the risk is practically zero.

This is the natural and deserved advantage that Amazon gets from its good customer service. But it also means that you should think twice about starting an online store if Amazon sells even somewhat competitive items.

Our Mistake

Knowing that customers feel comfortable with items they find on Amazon, we signed up for their Seller Central program to display our ads whenever Amazon visitors searched for items like ours. People who clicked the ads were taken to our website, where they found detailed information and accurate shipping rates quoted in real-time by UPS and others.

Shocked, then Angry

Amazon Affiliate Ad — Soon after we started advertising on Amazon, websites offering fake discounts on our products appeared

Soon after joining the program we found ads appearing on websites all over the Internet, offering bogus discounts and nonexistent free shipping on our products. It turns out that the ads are published by Amazon affiliates, who Amazon pays a commission to bring buyers to its website regardless of the products sold.

So many affiliate websites offer bogus discounts on our products that people who search for our company name on Google often click the results that show enticing fake offers. We know because frustrated shoppers contact our customer service staff, demanding that we make good on the bogus ads.

Amazon Affiliate Paid Search Ad — Affiliates ran ads above the Google search results, showing our trademark alongside the bogus offers

Next, the affiliates began running large ads above Google’s search results, showing our company name and the bogus offers.

Feeling confident that Amazon would handle the issue fairly, we contacted the company to ask that they stop the affiliates’ ads that offer fake discounts on our products. Amazon’s reply was a real surprise.

It Gets Much Worse

Instead of putting a stop to fake offers published by its affiliates, the email reply from Amazon seems to blame our company with the odd pretext that our website, like many stores, offers our customers accurate shipping rates calculated in real time by UPS and others.

We concluded that Amazon makes a thin excuse for paying its affiliates to act irresponsibly. Not wanting to reward that behavior, we stopped our Amazon Seller Central ads.

And then things got really ugly.

The affiliate ads with bogus offers on our products continued after we stopped advertising with Amazon, of course. But now when you search for our product name and click the big ads with the fake offers, you’re taken to Amazon’s web page that displays our product images and names, with the misleading message that they are all “Currently unavailable” and a list of cheap alternatives you can buy from Amazon.

Lesson Learned

Early-on another business owner told us that fulfilling products through Amazon can be a big mistake, too, since Amazon has a reputation for using the data they collect to seek out and replace successful products with their own, aggressively undercutting the original sellers on price.

We could have saved a great deal of time, money and frustration if we’d only heeded those early warnings about doing business with Amazon.

Thank goodness our company’s products have positive word of mouth. It seems certain that Amazon harms our business, but more and more customers still find our products without being lured away by bogus ads.

Next: Focus On Customer Service

Getting Started, Serving Customers

Focus on Customer Service

September 4, 2013 Steve Leave a comment

For your business to succeed, you’ll need to build your online reputation like it’s your most valued asset. Achieving positive word of mouth requires you to respect customers’ money and time, and allows for very few mistakes.

Dealing with a constant flow of questions, feedback and criticism isn’t for everyone. Among other things, giving good customer service should require you to:

Respond to each customer message right away, with courtesy and enough detail to solve the issue – regardless of whether the request seems courteous or well thought out. It can sometimes take reading or listening to a message several times to determine how best to answer.
Fulfill orders promptly, and provide plenty of communication about order status. The right shopping cart can help automate this process, sending personalized emails as orders are received and then shipped.
Always be on the lookout for valid feedback that could indicate you’re not providing the right information on your website or enough communication after the sale; start with the assumption that customers are the experts on how your business looks to the rest of the world.
As soon as you can, publish a toll-free telephone number for customer service. You can start by getting a low-cost service that forwards the number to your cell phone, and then eventually forward those calls to trained staff that you contract, say, at an outsourcing service.
Provide a sensible money-back warranty and fast, hassle-free refunds.

You’ll find that some emails requiring individual answers – for example, requests for exchanges or returns – are repeated many times. For these questions, save examples of your best replies to paste into new messages.

Above all, start with the understanding that your real job is to make customers happy. Never allow a service issue to stay unresolved long enough to result in bad word of mouth or a customer calling the payment card issuer.

Our next article about problem customers talks about a few special cases.

Next: Problem Customers

Running Your Business, Serving Customers

Problem Customers

August 26, 2013 Steve Leave a comment

Early on you’ll start to encounter occasional problem customers. Your fair and courteous treatment of difficult situations will help establish your online reputation and could have a big impact on your job satisfaction and peace of mind.

Real ‘Problem Customers’ Are Rare

In nearly all cases, customers who seem combative, irrational, or even dishonest are really normal people who are under unusual pressure or are having a bad day. It’s important to put yourself in the position of your customer, never assume that people are being dishonest until there’s real proof, and ask yourself whether their communication could be justified under difficult circumstances.

In our business we’ve found only about one individual in 5,000 to be a real problem customer. However, this can definitely be influenced by the type of products you sell. For reasons described in my article about Good vs. Terrible Product Ideas, I encountered far more problem customers when I ran a different category of online business. Since dealing with problem customers can be a big source of frustration, you should consider this possibility as you choose your product idea.

Here are guidelines I’ve learned for different types of difficult customers.

Good people who are having a bad day really aren’t a problem at all, and will comprise nearly everyone who at first seems irrational or confrontational. These individuals might, for example, have an unusually urgent need for your product or be unsure about the safety of shopping online. It’s important to respond to these individual quickly, with the utmost courtesy, in a way that assures them you’re honest and fair.
Truly abusive customers are rare, and will usually make themselves known early-on. An example of abusive behavior is to demand a big discount and to imply a threat or use profanity if you don’t agree. Once an individual displays abusive behavior, your best option is to to communicate with courtesy and respect but to avoid making the sale. If the individual is already your customer you’ll be tempted to refund the purchase in hope of ending the abuse. However we’ve found that combative customers can continue to cause problems even after you’ve refunded their money and let them keep the product for free.
Self-destructive consumers are rare but can be a big concern. With improper use almost any product can cause injury or financial loss. If you receive a communication from anyone that suggests they might use your product in a harmful way, always explain the potential outcome in clear and explicit terms. If the individual seems determined to proceed, do everything possible to avoid making the sale.
Customers who commit outright fraud are rare, but require you to always be meticulous in your record keeping. Fortunately a good payment processor can prevent your dealing with the vast majority of cases where, for example, someone claims that they’ve never bought your product. In cases where an individual says that your product was bought but never delivered, we’ve found that while UPS isn’t perfect overall, they have been very reliable in either issuing an insurance payment or, after investigation, getting the customer to admit a mistake.

In every case, your best option is to communicate with respect and recognize that email can be dangerous if you’re not careful with your communication.

Next: Email is Dangerous

Serving Customers, Tips for Your Business

Email Is Dangerous

August 17, 2013 Steve Leave a comment

Even though our online store publishes a toll-free number on every page of our website, we still find that most people prefer to communicate by email before and after a sale.

Email definitely has advantages, but we’ve found that it can present so many potential problems that you need to use special care with your messages to avoid misunderstandings and bad word of mouth.

For all of your business and personal email, we recommend that you always start by following one primary rule.

First Rule of Email:

Never write anything in any email that you wouldn’t want the whole world to see.

Because email creates a permanent record that can be forwarded to anyone on the Internet, it’s important to write only clear, courteous messages that reflect positively on you and your company. People we don’t know have published excerpts of our emails online, so we’ve learned that every sentence we write, even if taken out of context, must sound positive and professional.

Here are some other guidelines for writing customer emails.

Say something positive to start. Even if it’s only to say thank you or we’re sorry, setting the right tone will encourage readers to give you the benefit of the doubt as they read your text.
Put action items very near the beginning. If you need, say, for a customer to provide more information, make your request within the first few lines to improve the odds that it will be read.
Be as brief as you possibly can, while taking care to fully answer all of the customer’s questions.
Say that your company will take responsibility for any problem without blaming suppliers or individuals, using the word “we” instead of “I” whenever possible to help your company look bigger than you are.
Don’t assume that a person is combative just because their email sounds harsh. The tone of email is difficult to control when writing, and even harder to interpret when reading. If an email sounds argumentative, consider responding with a helpful phone call. Regardless of how you follow up, be prompt and polite.

It’s perfectly OK to monitor your business inbox by forwarding messages to a personal web mail account (like Gmail or Yahoo!) but you should only reply using the company email account provided by your web host.

Email Scams

Be on the lookout for email scams, of course. Fraudsters constantly evolve their tactics, and as noted in our story about keeping your money safe, it’s essential to treat all email links and attachments with utmost suspicion, even if the message appears to be from someone you know.

As your business grows, you’re likely to encounter one especially annoying email scam that starts with an innocent sounding product inquiry. Often the message is poorly written, and the writer might use a web mail account with a common, domestic sounding name.

Once you reply to that first inquiry, you’re likely to get an urgent request for pricing on a large quantity of your product. You also might get the feeling that the writer is copying text from your website with no idea what your product does. These are clues that you could be dealing with a fraudster. A Google search for that email address might reveal that others have seen similar requests from that account. If so, stop the communication right away.

What’s Next?

As your online business grows you’ll need to balance the demands of your day job with your new business. We’ll talk more about this topic in the next article about moonlighting tips.

Next: Moonlighting Tips

Getting Started, Running Your Business

Moonlighting Tips

August 8, 2013 Steve Leave a comment

It can be a challenge to start an online business while you keep your day job. At times the process could feel like a juggling act; you’ll need a lot of energy and determination.

The general rules for starting a company while you keep your day job might seem like common sense, but some of these items can be easy to overlook and dangerous to ignore.

Get a decent smart phone with an inexpensive plan. Keep this phone completely separate from all day job activities and don’t share the number with anyone at your day job. Set the phone to vibrate, not ring, when you receive calls and emails during the day. Prepaid Android* smart phones with generous data plans are currently available for around $50 per month, plus the cost of the phone.
Set up a primary customer service email address through your web host, carefully choosing one primary address for customer service inquiries (like ‘service@example.com’). Configure your web host control panel to forward those emails to your smart phone.
Rent a mail box service close to your home that offers addresses that don’t look like drop box numbers. Ideally the store can give you an address like “100 Main Street #1103” and not “100 Main Street, Box #103.” This helps you avoid looking like a tiny company online, and it prevents the rare problem customer from showing up at your home. Expect to pay around $100 per year in most areas to rent your drop box.
Never publish your home address on your website for your own safety. The moment you do, web directories will capture that address and publish it online forever.
Get an inexpensive toll-free number to publish on your website, and forward those calls to your smart phone – at least to start. You might not be able to answer calls and emails right away, so respond to the most urgent messages during daily breaks from your day job. Answer every inquiry as soon as you can, and in every case within 24 hours. You can get a toll-free number starting at around $10 per month.
Tell no one at work about your second career if you’re a salaried employee, and also avoid telling anyone who is even a casual acquaintance of your co-workers. Humans are naturally jealous, and you could quickly find yourself fired if you tell the wrong person.
Keep online social networks separate, using care to never discuss your moonlight career on any of your personal social networking pages.

With some hard work and luck, your business will grow to the point where you can no longer handle all of the work and still keep your day job. Surprisingly this doesn’t mean that you have to quit your day job… if you find the right outsourcer.

Next we’ll talk about tactics to grow your business at a reasonable cost.

Next: Keep Starting Costs Low

* This is not a paid endorsement.

Your Money

Keep Starting Costs Low

July 30, 2013 Steve Leave a comment

A key to survival while you test your product idea and grow your business is to minimize your starting costs. This gives you the chance to try different business ideas, if necessary, without too big a drain on your family finances.

As long as you possibly can, work entirely from your home using your family computer and inexpensive software. Stay away from any non-essential services that charge a monthly fee, and especially avoid those that charge a percentage of your sales.

When you open your first web store you should expect to pay less than $10 per month to your web host, less than 3% in transaction fees to your payment processor, and that’s all.

Consider taking on additional expenses only after you’ve proven that you can sell profitably and satisfy your first few customers. Once you’re confident that you can grow your business, your next investments might include more online advertising, along with basic items to help you work efficiently.

Equipment for Selling Physical Goods

If you ship physical goods, you’ll need basic equipment to fulfill orders.

Inexpensive tables and shelves to store and prepare products
A reliable laser printer to make shipping labels and packing slips
Dispensers for packaging tape and wrapping paper
An accurate postage scale

Business Software

Software can be a big part of your startup costs. I recommend searching online and in warehouse stores for the best deals – and even buying discounted versions that are slightly out of date – but always find a way to license your software legally. Software that you might need early-on includes:

Spreadsheet and word processor programs
Image editing software to help make images on your website look more consistent
Once you start to generate sales, accounting software like QuickBooks

If you search online for open source image editing software you’ll find free alternatives to Photoshop, the program that many professionals use despite its great cost and complexity.

You’ll also need up-to-date antivirus and a way to frequently back up your computer files, as discussed in our story about keeping your money safe.

Part of growing your business is striking the balance between making investments to help you work more efficiently, while conserving your personal funds until you know that you can succeed. We’ll talk next about a few key services you can buy that will make you look bigger than you are.

Next: Look Bigger than You Are

Running Your Business, Your Website

Look Bigger than You Are

July 21, 2013 Steve Leave a comment

To be successful your online store needs to inspire confidence in each visitor. Since you’re probably starting as a one-person company, this really amounts to looking bigger than you are online.

The challenge is for your website to show as much of a big-company image as possible, while keeping starting costs low. Fortunately you can inspire confidence by attention to detail as you develop your website, and through a few basic investments.

Look Big Online

Many of the essential steps to help make your company look trustworthy online are discussed in other articles, and are summarized here.

Choose a memorable, professional-sounding website address, as discussed in our article about getting the right company name.
It can be easier to give your website a modern, clean layout if you choose the right content management system (CMS), as noted in the article about how to set up your website.
Use consistent, good quality images that you create or license, as noted in the article about website legal stuff.
Publish a toll-free number on each page of your website, as described in the story about focusing on customer service.
Get the right sort of mail box address to publish on your website, as told in the article about moonlighting tips.
Be on the lookout for customers’ frequently asked questions so that you can provide the answers on your website, as noted in the story about customer service.

Here are some other suggestions to consider.

Use a professional designer to create a company logo for your website. If you search for freelance logo designers and browse for portfolios that you like, you might find a good designer to do the work for $100 or less.
As you develop your website, get feedback about its usability from friends who don’t work at your daytime job. A simple book about website usability, written by Steve Krug*, has some good advice.
Carefully check for grammar mistakes, misspellings, and broken links before publishing any web page.

As your business starts to grow, it can be helpful to publish customers’ product reviews on your website. Some of the shopping carts mentioned in our previous article provide this feature at no additional cost.

Next, we’ll talk about more strategies to grow your business.

Next: Grow Your Business

* This is not a paid endorsement.

Getting Started, Running Your Business, Tips for Your Business

Grow Your Business

July 12, 2013 Steve Leave a comment

Once you start to sell online and prove your product idea, you can help your business grow by following some simple advice from a really smart CEO at a company where I once worked.

This CEO is unusual because he shares so much information about running a company with his workers. It’s no coincidence that so many of his former employees now run businesses of their own.

Here is a key piece of advice that the CEO told us about running a business.

A CEO really has only two jobs:

choose a small number of real priorities to focus on right now, and
find and retain the right people to work with.

This concept sounds simple, but it can be a real challenge in practice – especially since time is limited and new priorities often arise.

Choose Your Priorities

The CEO’s first job is to not get too distracted by day-to-day issues that don’t impact the survival of the business. There are plenty of things you can focus on that might bring some improvement; your job is to choose a very few priorities that can make the greatest impact.

That doesn’t mean that you should ignore the many lower-priority issues you’ll face every day. However, you should focus enough of your efforts so that those few really critical concerns get all the attention they need.

As our business grew we found that our top priorities changed significantly. When the company first started I had to focus on building enough products by myself to meet demand, and finding ways to begin advertising without draining the family’s savings.

Today the challenges have shifted because the business is so much larger. Right now the priorities include maintaining the same good levels of customer service, working with suppliers to keep enough components in stock, and positioning the company for longer-term growth.

Find the Right People

If you’re starting a company that sells physical goods, finding the right people at first will amount to choosing your suppliers carefully. Our early priorities were to find one or two reliable suppliers, and to treat those businesses unusually well by communicating frequently and paying promptly.

We found it very helpful to call key individuals at those companies often enough to develop a good business relationship. Eventually I asked those contacts to recommend other suppliers in the marketplace who didn’t compete. I’d also ask if I could mention the referrer’s name as I approached those new suppliers. With those introductions from other suppliers, I found it much easier to get larger, lower-cost vendors to work with us.

As your company grows, you may soon reach a point where you can no longer handle manufacturing, fulfillment, and customer service by yourself. At this stage you’ll need to decide whether to hire your first employees, or find the right outsourcer.

Next: What’s an Outsourcer?

Running Your Business, Serving Customers

What’s an Outsourcer?

July 3, 2013 Steve Leave a comment

What's an Outsourcer? As your business grows, you could find there’s too much work to handle while keeping your day job. And, if you sell physical goods, you might run out of room to store and prepare those items at home.

At this stage, your choices can come down to enlisting family members or hiring employees and perhaps renting warehouse space, or finding an outsourcer (also called a fulfillment company).

About Outsourcers

An outsourcer can handle warehousing of your products, assembly, packaging, fulfillment, and most customer service requests. Depending on your product, you may still need to provide frequent guidance about handling individual customer service issues.

The outsourcer will likely charge a small fixed fee every month (say, for phone equipment) plus variable fees that depend on the number of items assembled and shipped, and the number of customer calls answered.

A good outsourcer can bring several benefits.

You’ll have vastly fewer management and record keeping headaches compared to hiring employees and renting warehouse space
Because most of the fees will depend on the quantity of items shipped, you’ll have far fewer fixed costs to worry about as revenues change
The outsourcer should already have trained staff and nearly all the equipment you’ll need, so setup and training could be much easier

However there are also some disadvantages.

Should the outsourcer’s staff, business terms or work quality change significantly you could find it difficult to replace the service
Outsourcers work for profit, so they’ll almost certainly cost more in the long run than handling the work in-house

Your Decision

Your choice of outsourcer – and whether to use an outsourcer at all – is absolutely critical to your business. Start by searching online for fulfillment companies that are close enough that you can help with setup, training, and taking physical inventory a few times per year.

It’s essential to meet with management at each potential outsourcer, tour the facility, and get a feeling of whether you’ll get the attention you need.

Most importantly, get at least three references of other businesses who use each outsourcer candidate. Call each business owner, and ask that they, too, give you the name of another company you can call for a reference.

Prepare a list of questions to ask each reference and write down the responses. It pays to ask as many questions as time allows, for example:

How did you first find out about this outsourcer?
How long have you worked with them?
How many of your shipments and calls do they handle per day?
What can you tell me about the quality of their work in general?
How promptly have they fulfilled your orders so far?
How well do they communicate with your customers by phone? Email?
How is the quality of their communication with you?
What can you share about their management, and any staff turnover?
What have been your biggest surprises working with this company?
Have you worked with other outsourcers? How do they compare?
Is there anything else I should know about the outsourcer?
Are there other companies I might call who have used this outsourcer?

Should you find the right candidate, be sure that you both sign a letter that covers obligations and costs, confidentiality, protection of customers’ personal data, termination, and other critical points.

Use of an outsourcer isn’t for everyone. One of my former coworkers created a successful business by first bringing on family members, then renting a warehouse, then hiring full-time staff and quitting his day job.

Next, we’ll cover strategies to manage your money as your business grows.

Next: Manage Your Money

Running Your Business, Your Money

Manage Your Money

June 24, 2013 Steve Leave a comment

After the first full year of running a moonlight business, I found that we’d earned a nice profit. The money wasn’t yet as much as I earned from my day job, but it represented more spare funds than our family had seen in a long time.

Unfortunately, anyone who knows US tax law* will tell you that the extra income you earn as a sole proprietor is taxed at your highest marginal rate, and is subject to additional self-employment taxes.

This means that while the IRS might take, say, 20% of the of the earnings from a typical day job, you’re likely to pay closer to 40% of your additional business earnings in federal tax. Once your business starts to earn a real profit, you could be shocked by your federal tax bill.

Your Secret Weapon

Fortunately, if you can do without spending some of those extra earnings right away, the US tax code currently offers a powerful way to postpone – and almost certainly diminish – the taxes on much of your moonlight earnings. Your secret weapon is the Solo 401(k) .

Similar to the 401(k) savings plans offered by larger employers, a Solo 401(k) allows sole proprietors and their spouses put money from pre-tax earnings into a savings plan. That money and any dividends aren’t taxed until you withdraw the funds at a later date.

This helps you avoid paying federal tax on those earnings right away, and since you’ll likely be in a lower tax bracket when you retire, could help you avoid paying much of the total tax in the long run.

The amount of income that you can shield from immediate federal taxes with a Solo 401(k) changes each year, and depends on your age and net business profit. In general, your maximum contribution can range from $20,000 to over $50,000, plus more for a spouse.

I’d urge you to set up a Solo 401(k) as soon as your business shows a profit. It’s great to know you’re avoiding taxes and contributing to your security. You can search online for Solo 401(k) Providers to help create your account.

More Money Tips

The following suggestions are covered in depth in other articles.

You can avoid bad investments by heeding Steve’s First Rule of Money.
Read our story about how to keep your money safe.
If you sell physical goods, be careful to avoid the inventory trap.
To stay out of QuickBooks Hell, use your accounting software only for the things it does well.

Next, we’ll cover those important guidelines to help keep your money safe.

Next: Keep Your Money Safe

* I am not a CPA. This information changes with different circumstances, so please find a good accountant or tax professional to help you.

Moonlight CEO