Learning the business ropes
During this time MTGParadise.com was growing and I had a real audience. My business instincts had long ago kicked in and I had been making a little money from advertising. Advertising revenue would turn out to be a reliable and consistent source of cash for me and while income would fluctuate I always managed to make a few hundred dollars a month, even peeking at $1000 per month at one stage. Of course as a result of campaigning for advertisers I learnt more valuable skills, including how to attract and provide value for advertisers and the technical skills necessary to manage advertising campaigns on a website.
Over the years of playing Magic I had accumulated quite a few cards. I loved trading just as much as I loved a playing and at every tournament between rounds you would find me with my trading folder out. I also sold a lot of cards at tournaments and replenished my stock by placing well in tournaments. I always walked away from a tournament with a couple of hundred dollars in sales and/or winnings. For most of my late highschool and early university years I didn’t bother with a part time job, I just sold cards.
In the late nineties the Internet became a serious platform for all things Magic. Hugely popular sites sprung up featuring strategy, deck design and of course card trading. MTGParadise.com was well positioned as the main Australian site so it was logical for me to start up a mail order service, and this is where I gained my first real business experience. MTGParadise mail order was started slowly first by selling singles (invidual cards) from my own collection and then I started offering sealed “new” product (booster packs which contain 15 random cards, 11 common, 3 uncommon, and 1 rare card per pack) sourcing the stock from wholesalers. The margins were terrible for sealed product but I enjoyed the fun of operating a proper virtual store.
I never intended the store to be too serious, mainly because I knew that you can’t get rich selling Magic cards, the margins are just so small that you need tremendous volume to make much. In my case though because I won product and was paid in product for journalistic undertakings I managed to make a reasonable “spare change” income while I was studying. I worked damn hard for it though. Every day featured trips down to the post office to send off cards and cash payments. I organised and controlled my inventory and maintained static online sales list which were simple text files. This meant that for every sale I had to manually update stock amounts online, I didn’t have an automated shopping cart. It was an extremely labourious job for not much reward, but I enjoyed it and sales were brisk enough that it was worthwhile financially.
An Important Lesson – Credit Card Fraud Strikes
One day I received an email from a gentleman from Thailand requesting to purchase a case load of sealed booster boxes ( 36 booster packs to a box, 6 boxes to a case – about $700 worth of product, maybe about $100 in profit) and he wanted to pay by credit card. I went to my father who was running a training institute business at the time and asked about the possibility of using his manual “click-clack” credit card processor (called so because of the noise it makes when you process a card through it). He said it wasn’t a problem and that we need to first check the card using a phone number to see if it had been reported as stolen. The Thai customer emailed the credit card number, it cleared the telephone check and I processed the payment and shipped the product. It was a quick $100 in my mind, a pure business transaction of buying at wholesale, selling at retail and making a profit. I was pretty happy!
Over the next few months I continued to receive more and more orders from Thailand, nothing too extravagent but the quantities were getting slightly larger each time. Each time I would check the card, process the order and ship the boxes. I was making a few hundred each time and felt that my business was becoming quite “real” and not as much a hobby. Around the time I had processed about $8000 dollars through my father’s credit card facility I thought I should get my own since the orders didn’t look like stopping any time soon. I had also begun offering credit card processing as a standard service and a few Australian clients were starting to use it to pay for single card purchases and the occasional box.
I went to the local bank and checked about the procedure to get a credit card processor. It turned out that it wasn’t going to be easy because I needed to have a certain amount of money in an account before they would let me open a credit card facility. Luckily my mother had $10,000 in savings which she had kept in one of my bank accounts and I also had a nice older bank branch account manager that seemed to take kindly too me, perhaps keen to support a young person starting a business. He signed off on my account a week later I had my own click-clacker which I immediately begun processing credit card orders with.
During all my email communications with my Thai customer I never once stopped to worry about credit card fraud. I assumed that because the card cleared the phone call and it had been so long since we had done the first sale to him that it must be legitimate. I read over my new credit card merchant agreement, glancing over the policies for chargebacks, noting that without a signature as a merchant I was assuming all the risk, but continued without much concern. Once my Thai customer sent me a new credit card number after his original number stopped working, which again passed the phone check so I continued taking orders. After I had done about $14,000 in sales to this customer a new, second Thai customer popped up also requesting to purchase a case of product. I thought word of mouth must be starting to spread and that Magic must be cheaper in Australia than in Thailand hence they were buying from me. How wrong I was.
One day while sitting at a computer in a university lab in my last semester I received a call from my father’s wife that a letter had arrived claiming a chargeback on the very first order I had processed for my Thai customer. I was worried but I thought it just must be a mistake and emailed him. He responded quickly and said it was just an error in his billing department and not to worry he would sort it out. He also asked if I would quickly ship his latest order because he needed it immediately. I said I would as soon as he sorted out the card problem. Of course he never did and that was the start of a nightmare for me as over the next few weeks and months I would slowly receive more and more chargeback notices in the mail.
Luckily the first notice arrived in the mail just as I was about to ship off two more cases of product and I was able to return them to the wholesaler for a refund minus shipping. I investigated many things trying find a way out of the situation, including a letter to the banking industry ombudsman believing the the amount of protection provided by the banks was far from adequate and that I should have some sort of recourse available against them. I even had some friends visiting from Malaysia that offered to investigate the matter when they returned home to see if any product had flooded the marketplace and to locate the card fraudster. Unfortunately everything was to no avail and it slowly sunk in that I was just about to graduate my business degree with enough debt that it would take nearly all of my first year’s after tax salary to cover it. I was pretty depressed.
My father agreed to cover some of the cost and was in fact scolded by the bank for originally allowing me to use his card processor as that was against the rules. All of my profits from the past months of card sales were sucked up into chargeback payments. For some reason, perhaps because the actual card holder never initiated a chargeback request or didn’t notice the charges until too late (card holders have up to 90 days to dispute a charge) not all of the orders bounced. I left university without a cent to my name having learnt a very painful lesson about business and my own naiviety.
At around this time Wizards decided that businesses would no longer be allowed to purchase Magic product from wholesalers if they did not have a physical store, which of course meant that my Internet site would not qualify. With my stock running short, no access to wholesale stock and being completely gutted from the credit card fraud experience I decided that was enough and soon after closed down MTGParadise mail order. I went back to focussing on advertising revenue and expanding the community.
BetterEdit is Born
It was during my 3rd year at university that the idea for BetterEdit.com was hatched. I found myself awake after midnight painfully working to integrate the individual pieces of writing from my group members into one whole paper for a large group project. One international student’s writing was particularly difficult to work with and I found myself almost re-writing whole sections. The quality of his English was terrible and I started to wonder how on earth this student was getting through a university degree when clearly his English was below university standards.
It was the middle of the dot.com boom and I had just read in a Yahoo! print magazine about an entrepreneur at Harvard that was running a successful essay editing service from his dorm room. There was no service in Australia like this and certainly I had just experienced working with the exact target market for this service, international students from non-English speaking backgrounds studying at English universities away from home.
My mother’s partner, Phil, was out of work at the time but was a qualified teacher. I sat down with my mother and Phil and talked about my idea. I was keen to build the website and give it a go and they were willing to be the editors. I quickly completed the site and we went to work advertising. We ended up putting in a lacklustre marketing effort, spending only a brief time promoting the site using posters at universities. This included some postering in Toronto Canada as we were visiting family later that year (which incidentally netted a client which has continued to use BetterEdit to this day and prompted me to later extensively expand into Canada). I also did my best to submit the site to search engines and use the skills I had gained promoting MTGParadise.com online to promote BetterEdit.com.
After building the site I left it in the hands of Phil and he continued to service the occasional client, however no one undertook much marketing so the business started to stagnate. Phil grew frustrated dealing with clients and editing incomprehensible English so eventually decided to hire an editor to cover the few clients we had. I always had intentions down the line if the business was successful to hire more editors as demand grew but certainly not at this early stage. The business was far from my mind at the time anyway and was in Phil’s control entirely. Phil contacted some local universities and our first editor was hired, Chelsea Allen. Chelsea became one of BetterEdit’s most trusted and respected editors and to this day continues to work and maintain a loyal client following. BetterEdit however did not continue to grow and only the occasional job came through which was sent to Chelsea if Phil did not want to do it. Eventually things died down so much that no jobs would come through for months at a time.
It was 2001 when I finally graduated from university. BetterEdit was far from my mind at the time. While I always thought of it as an extremely viable business model I never had the intentions or desire to put the effort in, I was not committed and really still trying to deal with myself and my own lack of direction in life. I lacked the self confidence and self belief to make it work.
Continue to Part Three of Yaro’s Business Timeline…