Thoughts On Entrepreneurism: No Escape

When I started this blog, I wanted to chronicle my journey to financial independence. I was naive and filled with optimism. What I’ve found out is starting a business is incredibly difficult and few will be successful. The market is saturated with everything you can think of.

Here are a few things I’ve tried:

Kate and I tried our hand at making soaps and bath salts. It seemed like a basic idea, to restore the luxury of bathing. Today we all take 5 minute showers to save water and lather up with chemicals that are made of who knows what, and I thought real soap would be awesome. I found out that everybody is pretty content with the chemicals and nobody really cared about my stupid ideas. Advertising was a waste of time, and even if people ordered soap it took literally forever to cut and wrap it and I needed way more equipment than I had room for. Are people successful? I don’t know, I found people selling similar stuff online and they appeared to be successful at it. What were they doing that I wasn’t? Well, the ones I saw making money at it were in high tourist areas like the Wine Country or in Hawaii. They established themselves with local gift shops and moved up from there to selling online. I had interest from a few natural co-ops but the time it took for two people to make any significant amount of soap was incredibly frustrating and we gave up.

I then thought that I’d try selling men’s grooming products online, so I registered for a wholesale permit so that I could buy merchandise tax free and sell it online. The problem was I found vendors who let me fill out dozens of applications but until my website was up, they didn’t want to waste time talking to me.  So this raised a problem for me, how could I start a website without any products? I was told by one supplier of imported German razors that the supply out of Germany was tight, and that he easily liquidated all of his inventory so he had no incentive open up a new account for me. He went on to explain that he has long established clients and that he wouldn’t want to risk upsetting the status quo. After finally getting access to some wholesale catalogues I found out that the prices I could get were far higher than what I could buy the exact same item for on Amazon. An example was a name brand hunting knife, the wholesale price was $68 and Amazon’s price was $55.

So where does that leave me? Well – I think there is room for retail if you’re incredibly small and incredibly niche. I’ve considered completely nuking ever website I have and every domain I own and just starting from a clean slate. Service oriented businesses may be the way to go as those cannot be outsourced and require physical bodies on the ground to get work done.

There are so many hats to wear with entrepreneurship – book keeping, taxes, customer service, and then you have to worry about the future of your business which is completely unpredictable. Take healthcare for example, the costs are sky high and what you get for the money is terrible. Right now I work for the State government and our employee union is huge. I probably get the best access to healthcare simply because the insurer would absolutely hate to lose us.

Things I’ve learned:

You can learn a lot listening to yourself talk out loud, or through writing thoughts and ideas down. There is a lot I don’t know, in fact I’m not sure I know anything. I do know what I’ve tried hasn’t worked. The only thing that has somewhat worked is writing this blog, and I’ve seen my traffic increase almost every month and I’m not entirely sure why. My last ditch effort to start a small business is 8EX and so far it’s going terribly. The idea is that film photography is coming back and there is a company that’s begun manufacturing film for polaroid cameras again. The cameras are no longer made, but they can be found all over eBay. I bought a bunch of them and shipped a few off to be refurbished.

There are companies that sell them refurbished and they have their own technicians. The main supplier is out in Asia but the minimum order is something like 10k – which is outside of my budget. I found a camera repair place out in NY that’s highly recommended but I’ve had problems with two cameras I got back. I sold 3 of them quickly but the 4th one didn’t move at all and the seller fees on eBay are expensive. I tried the forums, but I wasn’t successful there either. Strangely I found that the film moves very quickly on eBay but it doesn’t make me anything and just takes up time to get rid of.

So there are no answers in this post, just questions.

How To Fix Your Credit: Free Guide and Resources

How to fix your credit:

This post is based on something I have a lot of experience with. My day job is working at a financial institution. I pull credit on people every day and help them review their reports and provide them with tips and tricks to improve their score and odds of obtaining financing.

If your credit isn’t so great, you’re not alone. A purely unscientific guess is that on average most scores I see every day are well below 640.

If you lack credit experience, meaning you don’t have any credit at all – you’re better off than someone with a ton of issues.

If your credit is damaged, you may need an expert to help you repair your credit (ie – a bankruptcy attorney). Credit can always be fixed, but sometimes, it’s not easy.

If you just have a few small collections, it may be best to just pay them. If they are beyond your means to repay, you should talk to an attorney and figure out the best way to resolve them. Determining if the collection items are valid is ultimately a legal question, so determining whether or not something should be paid or should have fallen off your report depends on what you agreed to with your creditor in the original contract – which is why an attorney who can offer qualified legal advice is recommended.

The steps for fixing your credit are as follows:

  1. Determine where your credit currently sits
  2. Determine which factors are affecting your score
  3. Develop a plan to correct those factors  which may include establishing more credit, paying off old charged off accounts, getting in touch with government agencies that have attached things to your credit report, contacting a bankruptcy attorney etc.

Some things to keep in mind about credit reports and scores:

  1. Everything that can be known about credit reports and scores (I.E. not a trade secret) is available on the websites for the three major credit reporting agencies: Transunion, Equifax, and Experian.
  2. Each credit reporting agency uses a variation of the FICO formula
  3. Each agency has about a dozen different scores, which can differ significantly – even among the same agency. For example, Transunion has a score called the Classic 08 and another one called the Classic 08 – Auto; each of these scores is used for a different purpose. This benefits lenders who can choose the best model for whatever loan they’re offering. There are 40+ slightly different versions of your score.
  4. As stated above, all of those versions are based on the FICO formula, so they’re all based on the same factors.
  5. The following are factors of your score: Payment history, Amounts Owed, Length of Credit History, New Credit, Types of Credit Used.
  6. Cellphone and utility bills, paying rent, etc. do not help build your credit, even though you often have to go through a credit check to obtain these services. However, they can hurt your credit if you fail to pay your bills on time and the company sends you to collections.
  7. Items that can hurt your score are collection items, judgements, medical bills, bouncing checks, bankruptcy, foreclosures, using too much of your available credit, paying late (30 days or more), government liens, past due medical bills, too many credit inquiries, not enough length of credit history.
  8. If you are aware of the behaviors that build good credit, then you can practice them and make sure your score stays high.
  9. On every credit report the agency lists 4 factors that are contributing to your score.

Why Good Credit Is Important to Any Entrepreneur:

Credit is the lifeblood of business. If you don’t have $10,000 to float inventory, then using credit to do this is an option for people with good credit. Managing cash flow shortages with credit can help you keep your business afloat when there are delays in collecting cash or selling inventory. It also beats asking your friends and family for start up money.

Tools You Can Use To Track and Improve Credit:

Where to start:

I personally recommend reviewing the basic ins and outs of how credit works, which is available online through each of the companies on their website or at myfico.com. I usually send people to Transunions education center. There are a few short articles on each topic that cover building and improving credit.  I’ve done all the googlign for you and linked the learning centers for each bureau here: Transunion, Experian, and Equifax.You can also check out myfico which is the consumer side of Fair Isaac and Company.

Annualcreditreport.com

The credit reporting agencies are required by law to allow access to your reports (not your score) at least 1x per year. This is easily done by visiting the official website: annualcreditreport.com. With annualcreditreport.com you can check your report from each company and see which accounts are open, if you have any collections or deliquent accounts. They also provide you with a nifty report so you can see what is good and what is bad about your credit history, as well as provide you with easy ways to dispute items on your report.

How to dispute items on your Credit Report: Understanding the Process of Disputes

Find something you didn’t do on your credit report? Mistakes can happen, and that’s why the credit reporting agencies allow you to dispute things. If you go to each website for the agencies (Transunion, Experian, and Equifax) they have sections on their website that allow you to fill out a form explaining your dispute. The agency will contact the company that placed the record and verify its legitimacy.

Keep in mind, the purpose of any consumer report is to accurately provide information to users of the report. Therefore the bureaus have processes in place to prevent erroneous information from going onto or being removed from your report. Of course, accidents happen, and things fall through the cracks. Some people start by sending letters and disputing everything on the report that’s hurting their score. If the information is valid, it is likely staying on your report. For more information see this article on lifehacker.

The article linked above contains contact information for each bureau and how the process works.

How to get your credit score for free: Credit Karma

So now that you know what’s on your report, how do you find out your score? Sure you could pay for it – and I could try to link you to the transunion website so I could collect affiliate money – but the truth is there is a fast and free way that doesn’t require a monthly bill.

I recommend Credit Karma. I use it myself and have been able to increase my score by about 100 points in the last year. Credit Karma is a marketer for credit card companies, and they earn money every time you apply for a credit card through them. They’re sort of like the match.com of consumer finance. They use the information in your credit report to match you up with different credit products designed for people with a similar credit profile.If you don’t want them to get paid, don’t apply for any cards.

The best part is their iphone and android apps, which make monitoring your credit on the go a breeze.

The Credit Report Card

What Credit Karma offer you to get you in, is a free credit report card. The credit report card analyzes your credit report and breaks it down into easily understood chunks of data. It tells you which factors are good, and which factors need work.

As an example, years ago – I had a number of late payments. I wasn’t able to do anything about them other than to wait for them to go away. My score recovered from the low sixes over a period of time but I noticed a jump up to the low 700s when the lates finally fell off. Credit Karma notified me of the improvement and then told me I had limited credit – which was true – just one card and my mortgage. I applied for a card at a bank, earned about $300 by getting the cash back bonus and taking advantage of the 5% spending category, and then earned about $200 in rewards over the year from using that card to pay for my new business idea and putting almost every dollar of bills I pay on it. My score jumped up into the mid 700s after 3 months – so I applied for a 10,000 line of credit with a local credit union and was approved. They then offered me another 9,000 credit card, which I accepted. I applied at another credit union for 5,000 more and then applied for a card with a bank – they gave me 2,000. Then my existing two cards upped my limit by another 2500.00. This gave me a flood of access to cash to use to finance my business – but not needing them right now, I simply put them in my desk drawer.

Of course this impacted my score because I have had a number of inquiries on my reports and because opening up 5 lines of new credit lowers the average age of my accounts. It improved my score because my credit utilization went down. Not sure what this means? Read the articles on Transunions website.

Another cool thing about Credit Karma? Any time I get a new inquiry on my report, Credit Karma notifies me on my next update which gives me the opportunity to make sure nobody else is using my good credit to finance their own business.

Ways to establish credit:

Now that you know what is on your report, what your score is, what you need to do to improve it, now we’ll discuss how to establish credit.

If you don’t have any credit:

Get started with a local credit union and see if they offer any credit building programs or secured credit cards. If you don’t have a local credit union, visit a community bank. If none of these options work, your last bet should be an evil big bank. Just beware of their fees and payment policies and do your best to abide by the rules to avoid late payments.

You can also visit a department store and see about getting a card with them. A note of caution is that too many store cards can hurt your credit report. They also often times have incredibly high interest rates. Get one with a store that you can use often and pay easily online or at the register. I have a Macy’s card and I also would consider a company like Target. The strategy for these cards is to use them once or twice a year and pay them in full before the month ends.

If you already have credit:

Use the recommendations from Credit Karma or use a tool like NerdWallet to help you pick the best card based on your credit profile. There are cards for people of every stage of rebuilding.

Another option is to consider a secured loan, which often times requires a lower credit score. For instance, asking your credit union for a cash out loan against a car that’s free and clear, or against a certificate of deposit or savings account can also help improve your score.

Credit In a Nutshell:

Good credit is essential to maintain. No matter what you’ve done to it, there are ways to fix it. Everything you need to know about credit is easily attainable online, and isn’t complicated to understand. Using tools from Annual Credit Report, Myfico, Transunion, Experian, Equifax, and Credit Karma you can determine which steps you need to take to fix your credit.

The Importance of Testing A Business Idea and How To Do It On The Cheap

What Happens When You Don’t Test Business Ideas:

  • Failure

In 2010 I started a company with my wife called Duchess and Duke Co. I was attracted to the idea of manufacturing and was exploring the idea of producing small batches of high quality goods. I did absolutely no testing what so ever. Of course, I did get great reviews from actual users of my products; which encouraged me to spend about $2000 on equipment and another $500 on bulk oils.

The problems I quickly ran into were that my site and merchant account were costing me about $100 per month and I wasn’t selling any product. Advertising was also costing me $40 – $50 per month, and after calculating how much soap I’d need to sell to break even, and how much more I’d need to spend in advertising, and how many hours of soap making I’d have to do – including cutting, wrapping, and boxing up orders – I realized quickly that it was a fools errand.

There are problems with every idea, and the ones that will sink you are the ones you didn’t know about.

How I tested my idea:

  • Registered a domain or two
  • Asked friends and family for their opinion
  • Used tools to generate traffic (stumble upon)
  • Determined the practicality of the idea by talking to wholesalers / developers

The next project I decided on was a company called Dapper Supply. The idea was to start a subscription service for men’s grooming products. I bought two domains, I think this cost me about $13 because Godaddy occasionally has 99 cent domain sales. I bought Shavepacks.com and DapperSupply.com to test out the names and asked friends and family members which name they liked the best. I built two landing pages using Mailchimp and bootstrap. I tweeted about it, and then I sent traffic to it for a few dollars using stumble upon (which is probably the cheapest way to get traffic – although they’re obviously stumblers.) After spending about $25 on traffic I had 25 sign ups. I had sent just a few hundred people there.

Unfortunately this was difficult, because I’d need some code written to control re-ordering and subscriptions. I had no money to pay thousands of dollars for a coder to solve this problem and the available subscription tools and plugins for wordpress out there, don’t easily integrate with shopping carts and didn’t give me the flexibility that I wanted or needed.

The subscription service has been done to death and looking at it, it doesn’t look like the other major player in this arena is doign so hot. I also came up with another model, which was a wholesale club – guys pay $50 – $100 per year for membership and can get all of the same stuff at wholesale prices rather than subscription based.

I got a resellers permit from the State of California (free) and began contacting wholesalers. I was met with resistance. Firstly they didn’t like my wholesale pricing idea – they wanted me to respect the MSRP. Secondly, they didn’t like online only businesses operated from a spare bedroom.

The next problem came up when I gained access to wholesalers prices and found out that they were insanely more expensive than the every day prices on Amazon. An example was a KaBar knife – MSRP 129.00, Wholesale price: 79.00 Amazon price: 52.00. Most websites I found were selling the same knife for about $99.00 – but why would anyone pay more than $52 when they could get the exact same thing directly from Amazon, which has better brand recognition?

I scrapped this idea. It cost me less than $100 to figure out that it was beyond my abilities and more trouble than it was worth. If I could get a few thousand signups before hand, then it would have been easier to negotiate prices, but I didn’t want to go promise thousands of people something I couldn’t guarantee delivery on and then I’d still need to convince thousands of people to sign up.

Realizing that retail is dead, I had to come up with a better idea. I figured to be successful and compete, I’d have to have a one of a kind product that is difficult or impossible to find elsewhere.

8ex.co (Currently Testing)

When I’m not blogging about business ideas, I spend a lot of my time taking pictures on old 35mm cameras (digital cameras too). I have some buddies who started a blog called Snap it See it which is all about instant film and cameras. They finally convinced me to get into it, and I fell in love immediately.

I decided that these cameras would be my next test. So, I went on ebay and bought 5 of them for about $70 -$100 each. I then located a company that could refurbish them and shipped off 4 of them (I had to keep one for myself, because they’re so rad). I got them back and listed them on eBay for a princely sum. In the first three days I sold two cameras for a total profit of about $300 (gross) except that I sold them both to one guy. My other two haven’t sold. eBay seems like a great place to find customers, and it’s probably a better way than advertising on google. The real deal is, I need to get in with the film shooters, more precisely the instant film shooters.

In the mean time, I used bigcartel’s $10 a month plan to build a website. Using their tutorial, I built a blog on tumblr and used some code to add it to my bigcartel shop. I purchased the domain 8ex.co and 8-ex.com and used 301 redirects and forwards to seamlessly transfer people to my bigcartel shop. I had to edit the template a little so the very little that I understand of HTML and CSS was actually super handy to have.

I listed my camera for sale on forums and on my Instagram account, and they still haven’t sold 15 days in, but I have gotten some interest about it.

I’ve determined that there is demand for these cameras. However, eBay seems to be more geared towards people who are simply buying and testing them to see if they work (with an empty pack of film) and then flipping them. My cameras are the only ones listed that I’ve found that have been refurbished, all the rest are in various conditions. Most of the ones I’ve purchased were broken upon receipt.