Entrepreneurs-Journey.com

I have a quick personal update today. I’m heading back to Brisbane Australia Wednesday so I’ll be offline for a day or two. Edward Chalmers my friend in Brisbane who has been manning the phones and checking the post office box for the Australian queries will be watching the email while I’m travelling.

It’s unfortunate Australia and Canada are so far apart. I’d like to live in both countries and if it was simply a matter of flying between say New York and Toronto it would be much easier. But it’s a 20 hour flight to get from one end of the world to the other. Anyone that has ever visited Australia from pretty much anywhere in the northern hemisphere I’m sure can concur with my situation. It’s not a fun trip and you don’t want to be doing it more than a few times a year.

I’ll be making the most of my flying time by reading some of the books I have piling up. I’ll also spend a bit of time working on a resource for this blog. I’ve been getting some questions regarding running and/or buying an online business so I thought it would be useful to put together a step-by-step case study of what I did to get my business off the ground. I’ll be looking at all the tiny details with the hope that you can learn and emulate what I did right and avoid my mistakes.

I find tips and story like advice from other online businesses and entrepreneurs to be very helpful. Often what other people write about business spark the best ideas for your own business so I thought I might give some of the kudos back. I’m sure many of you out there plan, dream or currently operate an online business and may find some guidelines helpful from someone that is currently walking the Entrepreneur’s Journey.

Lastly tonight I’m going to send out a quick recommendation for a piece of software you may or may not have heard of. It’s called SKYPE and I think it is one of the most exciting services currently unfolding via the Internet. It’s a voice telephony over Internet software that is completely free for software to software and also has a very affordable (about 3c AUD/CAD per minute) for Internet to landline calls. I’ve been using it in Toronto to keep in touch with family and friends in Australia and I’ve even used the paid service to contact clients in Australia. For example I made a call to a client’s mobile phone (cell phone) in Sydney from my laptop which was using wireless Internet access from my home in Toronto. It cost me about 10c to sort out the query. I’ve talked for about an hour using the service and it’s cost me about $2 so far. I’ve talked for countless hours using the free service. It’s still a bit buggy at times when talking Australia to Canada but considering the distance more often than not it’s pretty damn good.

I expect this sort of service to eventually replace standard landlines and in the not too distance future we will be having video calls over Internet networks at prices so cheap it will be ridiculous. The best benefit - this technology can be rolled out in third world countries using satellite and wireless Internet access points. It’s an exciting time to be working on the Internet!

Yaro Starak

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I was just reading a post about click fraud at the Young Entrepreneur forums. It mentioned some pretty nasty things your competitors could be doing to you if you use pay per click (PPC) services such as Google Adwords.

Statements like this are an example of a possible method that your competitors could be taking advantage of your PPC advertising budget.

I know of SEO companies who have scripts that will click on their clients competitors Adword ads until the competitors have hit their daily max spending limit. They do this to the ads above their clients ad, and once the competitors maximum spending budget is reached, Google removes the competitors ads, and the clients ad is at the top, and the program stops.

I myself use Google to bring in some traffic but I’ve never given too much thought to fraud since I hoped (perhaps naively) that Google and the other PPC providers kept on top of fraudsters. They say (that’s the word on the street, dawg) that Google has some fairly sound technology behind their programs which offer good protection.

The key thing is to be smart when using PPC. You need to be tracking your campaigns and monitoring results carefully. You should notice some indicators fairly quickly if you are a victim of fraud. You can’t just turn Google PPC on, throw some money at it and hope that you get more sales as a result. It takes time and maybe you should even consider hiring an expert or having a dedicated staff member manage your campaign, especially if you don’t know your CTs from your CT%.

If you can’t afford to hire specialists and don’t have the staff to do it for you, then do like most of us small business folk do, get educated so you can maintain your own campaign. A good place to start is the Google Adwords FAQ. You might also try third party sites such as Pay Per Click Universe.

Yaro Starak
BetterEdit Manager

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An interesting development here in Toronto regarding poster laws. As I have mentioned previously postering in Toronto is pretty rampant and you can basically stick a poster on any telephone pole in the city and well, everyone does! It’s pretty crazy how many posters are out there. The same certainly can’t be said for other cities in the world. In my hometown Brisbane if you stick up posters on public property chances are the city council will fine you so it’s not a wide spread practice.

It appears that Toronto is heading the same way as the city council has been slowly debating and now implementing new poster laws to restrict the amount and type of posters allowed. Currently the plan looks to be restricting postering to approximately 2% of the total telephone poles in Toronto. As you would expect there has been an uproar against the plans and a campaign was launched to fight the polices. Most of the complaints are about restricting freedom of speech and making it so only corporate business can afford to advertise (referring to billboards, buses and other outdoor advertising options).

I find this an interesting development because of my relationship and past contacts with some of the postering businesses in Toronto. If this law was passed and enforced fiercely I can see poster businesses really hurting.

Personally I do think something needs to be done to curb the somewhat ruthless and excessive postering going on in downtown Toronto but the current proposals do not seem adequate. You can read what some of the local GTA bloggers are saying too.

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I’m trying something new for today’s blog entry, a book review. I find myself constantly referencing books in most of my blog posts. Books often provide me with inspiration for blog topics and people have been telling me they sometimes buy the books after reading my comments. In particular my constant ravings about The Perfect Store: Inside eBay by Adam Cohen has led to a few extra sales of the book (I’ll do a review of the book soon for sure) and I think I should get a referral fee!

I enjoy reading and I’m more than happy to give a brief review of each book as I finish it. I’ll be focusing more on business related books in my reviews because this blog is about entrepreneurship. I do read other books but they would not be appropriate for a business blog (Discworld anyone?). In each review I will comment on how the book impacted me, what I learnt from it, and how I can apply it’s teachings to my own business endeavours. I link to the Amazon.com sales page for each book using my associates ID so if anyone does decide to buy the book from Amazon as a result of reading my reviews about 5% of the fee will be going to me. On to the first review…

All the Rave: The Rise and Fall of Shawn Fanning’s Napster by Joseph Menn.

As the title says this book is all about Napster.com which you will probably remember was the first Peer-to-Peer (P2P) software application to achieve wide spread use. Napster today is now a legitimate legal music subscription service but back in it’s original form it was THE place to swap MP3 music files and most of the trading going on was illegal (breaking copyright). During it’s heyday you could find virtually any song on Napster and I admit it, I was a user too.

The author of this book, Joseph Menn, must be commended for the depth of research done to complete the book. He really did his homework, including interviews with all the key players. It starts from the very beginning when Shawn first develops the concept while participating in ‘hacker’ chatrooms and finishes at the end when the assets, which after all the lawsuits left pretty much just the brand, domain name and logo, where sold off.

The book was not boring and I found myself very interested in the whole story, the only problem I had was that I couldn’t keep track of the variety of personalities that kept coming in and out of focus. With so many investors and employees entering and leaving the story over the years and such phenomenally quick growth it’s hard to maintain a grasp on who owns what and where everything was going. The scary thing is I don’t think even the people running the business always understood what was going on regarding ownership and strategic direction.

The ownership and investment future of Napster was always a contentious issue because of John Fanning, Shawn’s uncle. John came on board early on in the story and offered to provide business leadership support (and he sure had a shonky business past). Based on his portrayal in the book, John Fanning was a greedy man, with terrible business practices. He incorporated Napster and only gave his nephew 30% ownership in the business that Shawn’s invention created. Uncle John took the remaining 70%. This one decision and due to the greedy nature of John, would haunt Napster and result in many a deal falling through because John wanted more money.

I read this book after reading the eBay story. The feeling with eBay’s story was one of a nice guy building a nice community business, making profits from day one and always trying to keep the customers happy. While Napster also had a strong sense of community it was based on illegal activity and often the community creed was to shove it to the powers that be, the record companies. The business model was focused on not making profit because in a lawsuit, which the management team were expecting, if they were found to have been profiting from an illegal activity it would have hurt their case. Basically they had no profitable business model and just hoped to get big enough that they could negotiate a deal with the record labels.

Napster, which grew faster than any company in history at the time, would not have grown at such a stunning rate if it wasn’t for offering such a suspect service. Much like in eBay’s story the press, which in Napster’s case was almost always negative and focussed on court cases, helped to popularise the brand to such an extent that it became part of pop culture. If it wasn’t illegal then it wouldn’t have got the attention it did. I find that a wonderful ironic twist.

This book reinforced a few concepts that are important for any entrepreneur.

• News, media coverage and press are the best tool for mass awareness generation. No form of advertising can match sensational press. Richard Branson knows this and works it to his benefit on every new product launch. Half.com also realised this and went to great lengths to find a stunt crazy enough to get attenton when they launched, and they sure did.

• The importance and power of investment capital. Napster, with it’s profitless business model functioned day-to-day by living off investment cash. At one point they had over 100 employees. That’s a lot of salaries to pay when you are not making profit…

  …In fact after reading this book I realised that I personally have a knowledge gap about venture funding and I went out and purchased a book to help bridge that gap. I’m not certain I intend to ever go the VC way with a business but I definitely want to have more knowledge about how the whole process works.

• Although the concept of P2P was revolutionary at the time and deserved great attention (and still does today), it was being applied to encourage an illegal activity and consequently in the long run was shut down. P2P and digital content are the way of the future but even today there is no model out there that truly satisfies consumers, the record companies and the artists. That’s a fairly big opportunity for someone that can get it right.

Napster was a revolutionary concept and existed during a very exciting time for Internet business. You can learn a lot from reading about the behind the scenes deals going on between venture capitalists and business owners during the peak and decline of the Internet business bubble.

Yaro Starak
Young Entrepreneur

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A few years back I was running a little ecommerce service as part of my Magic: The Gathering trading card site MTGParadise.com. Back when I was in the thick of things playing the game I used to win a lot of cards and did a hell of a lot of trading and selling at every tournament. More often I enjoyed the trading and selling more than the tournament itself.

Once my site became huge and I realised that there really wasn’t a good online card shop for Australians I decided to try and be that card shop. I had the audience and that’s usually the hard part. I managed to locate some wholesalers and went to work creating what I called MTGParadise Mail Order. I listed a lot of my personal collection which I had built up over the years from winning, buying and selling. I also listed sealed new product which was sold in boxes and booster packs which I located from the wholesalers. Because I had no wish to expose myself to too much stock investment I would almost “drop ship” before drop shipping became common for the public to do, in the sense that I would buy sealed product as sales came through rather than maintain a new stock inventory. Unfortunately it wasn’t real drop shipping since I had to still order the products, have them shipped to me, and then ship them out to the client which slowed things down.

The service did reasonably well. It was a horribly manual process because I would have to update card lists and inventory counts all by hand and I spent a lot of time running to the post office. I didn’t plan the service to be a proper business so I wasn’t considering systematising my inventory and having an online shopping cart like overseas card stores (which I would for sure do now, manual updates are a pain!). Another problem was that card selling has tiny margins and if it wasn’t for the fact that I managed to win cards I don’t think I would have made much profit. I did enjoy it for the most part though so I kept it going for a good year or so while studying at university.

One day I got a query from a person in Thailand wanting to buy boxes of cards. The profit wouldn’t be much because of the aforementioned tiny margins, but it would be significant enough that I was very keen to get his business.

He wanted to pay with credit card.

I asked my father about taking credit cards since he did for his business. My dad offered use of his “click-clack” manual credit card processor for the order. The customer emailed his credit card number and details and we checked the number against the ‘reported stolen’ list and it was fine. I processed the order, shipped the cards and was pleased with my first big sale.

Over the next few months I continued to have increasingly significant orders from this client which I carefully processed through my father’s credit card processor. Since I was doing such a regular amount I decided to get my own merchant account and after some looking around a bank was willing to provide me with the account. I then started to process orders through my own account.

One day many months after the first Thailand order I got a call from my father’s wife about a chargeback that had been initiated on the first credit card order I had processed from this customer in Thailand. I was worried, but not too worried because I thought that since we had verified the card for every purchase and it checked out that it just must be a mistake. I emailed the client and he told me it was just a mistake at his end so I relaxed a bit.

Unfortunately it wasn’t, the customer was a credit card fraudster and I had been very stupid. Over the next few weeks I came to grips with the fact that many thousands of dollars of sales would be ‘bouncing’. Initially I was angry with the banks that they didn’t offer more protection but as I slowly investigated the whole merchant account system I realised that the merchant is usually always the one taking the risk and that when no signature from the customer is present, which for web based orders is not really feasible, then the customer has all the power. I also read over the communications from the months of dealing with this client and realised that there were plenty of warning signs that I just refused to take notice of. I was caught up in the ‘business’ of it all and being very naive.

It was a lesson learnt. I learnt about credit card fraud, merchant accounts and the risk involved with selling over the Internet. I learnt to be more cautious and not jump with eagerness at every significant order that comes through. Call me paranoid, but it’s from experience. Note that I am complaining from the point of view of a merchant but there are instances where the customer has problems too.

When I then went on to setup credit card payment options for my clients at BetterEdit.com I was very careful. By this time I had discovered paypal and later I would also learn about Paymate, an Australian version of Paypal. These services were reasonably good solutions to provide online payment options and to this day BetterEdit processes many transactions online through them.

I have not had one problem with credit card fraud for any Betteredit essay editing service order (touch wood) but on many occasions I have been contacted by the staff at Paymate regarding suspect orders. After my experiences I really appreciate the extra layer of protection provided by Paymate. They protect you before an order is processed and offer personalised protection. As an Australian running an Australian based business I can recommend Paymate as one of the safest ways to accept credit cards and I don’t mind paying the fees for that extra level of security. Sure there are features I’d like to see and things I’d like changed at Paymate, but for the moment they offer the best option available.

I would also like to say I feel secure with Paypal but to be honest I do not. I’ve heard a lot of horror stories from other Paypal users. I’ve read through the chargeback policies at Paypal and while they do have a ‘department’ to deal with fraud, they make every effort to argue the case on behalf of their sellers and have an ‘industry leading’ low fraud rate I don’t feel 100% confident. They seem very reactive rather than proactive when dealing with credit card fraud. Their system doesn’t talk much about how they protect you from first taking fraudulent credit card orders, rather they help you to argue your case after a chargeback occurs. I know from experience that for online orders the merchant has little hope because the credit card company almost always is in favour of the cardholder.

The Paypal website seems designed to make it difficult to contact a person. I’ve tried to contact them over the phone and spent an annoyingly long time waiting and trying to navigate a phone system clearly designed so they don’t have to employ too many phone staff. Their web support is much the same. Their whole system tries to avoid providing any personal support. They point you to look for an answer online via their FAQs which is great for the easy questions but often leads to a wild goose chase if you want to find answer to your very particular question. Even just timely and helpful customer service email support would be good but I always seem to find myself waiting a few days for a response that only half answers my question. Paymate on the other hand has a simple ‘Contact’ link which pops up an email that goes direct to a real live person that responds within 24 hours with a good answer. What more could you ask for.

All the problems at Paypal seem symptomatic of a business that got too big too quickly and I hope over time their customer support will improve as it ‘catches up’. All in all though I should note that Paypal has been good for my business and since it is the market leader in online payment processing it will most likely remain as a payment option at BetterEdit.com.

Yaro Starak
BetterEdit Manager

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