[This is the fifth in a series of posts about entrepreneurship as a way to protect your income in a bad economy.]
Broke 30-Year-Old Solo Entrepreneur Takes His Company from Zero to $10 Million a Year in Five Years
Markus Frind, a 30-year-old internet marketer, works an average of an hour a day and brings in $10 million a year of revenue. He keeps more than half of that in pretax profit.
Frind founded an online dating company called Plenty of Fish, which in five years has grown from nothing to the point that it eclipsed Match.com, the former leader in that market.
Free Service with Revenue from Advertising
With only three employees, Plenty of Fish has become the largest on-line dating site in the United States and the United Kingdom – maybe in the world. It receives 1.6 billion page clicks per day.
Only 10 sites in the United States get more traffic – including Google, Yahoo, and Amazon.com.
The site provides its service at no charge to its members and makes its money by selling advertising through a Google service called AdSense.
Not Exactly the Kind of Entrepreneur You Might Expect
Frind, who appears on the cover of Inc. magazine, says he started Plenty of Fish with no plan, no money, and very little knowledge of how to run a business on the web.
He has a two-year degree in programming from a technical school.
A Simple Strategy that Worked
Frind’s strategy was to find a big market where the established players charge a fee to users. Then he built a web site that’s “dead simple” (meaning it pretty much runs itself with no labor). And he generates revenue through advertising.
Although Frind has achieved extraordinary success, he is far from alone in generating multiple millions of dollars from small enterprises based primarily on the economics of the internet.
How Else Might You Build a Business on the Internet?
Businesses that do direct marketing have to look for products or services that are unusual enough that they can’t be found at lower prices in megastores.
Rather than launching frontal attacks on well-funded competitors that are deeply entrenched in mass markets, internet entrepreneurs tend to look for underserved niche markets.
In particular, they look for markets that meet these criteria:
- They’re big enough to generate an acceptable level of revenue over time.
- They’re relatively cost effective to reach so you can market to them profitably.
- They’re passionate or have specific, unmet needs and interests they’re willing to spend money on.
- They have money to spend.
In addition, it helps to choose a market you’re passionate about yourself. Otherwise you’ll be putting a lot of time and energy into something that doesn’t maintain your interest and energize you in the long run.
What to Sell
Internet entrepreneurs have built substantial business by selling virtually any kind of product or service you can imagine. Here are some popular offerings:
- Physical products such as dietary supplements, vitamins, consumer electronics, specialty sporting goods, specialty apparel, supplies for unusual hobbies, etc.
- Physical or digital information products such as courseware, how-to guides, directories, listings, books and eBooks, newsletters, audio recordings, DVDs, teleconferences or webinars, membership sites, electronic magazines (known as eZines)
- Services such as consulting, coaching, training, public speaking, etc.
- Software products or online services automated by software.
Digital products offer the huge advantage of having little or no cost for manufacturing, inventory, or shipping. They can be wildly profitable.
How to Make Money
Entrepreneurs may use any of several different ways generate money from such offerings, including these:
- Sales of your own products or services for which you keep the gross margin.
- Commissions you earn by selling someone else’s products or services.
- Recurring revenue or commissions earned on products or services you sell by subscription.
- Payment per lead generated by your your marketing efforts.
- Payment per view of ads placed on your web site or blog (as with Google AdSense).
What Do You Need to Know?
Marcus Frind, the dating-service multi-millionaire, said that in the early years of starting the company he spent his time “every day at work when I wasn’t at my day job reading, studying and learning.”
This is a trait common to many successful internet entrepreneurs. Almost all of the big guns have voracious appetites for knowledge, and many spend hours and hours in bookstores looking for new ideas.
Virtually everything you know and learn will contribute toward your success.
Specifically, you should become a student of direct marketing. You’ll need this because you’re going to be calling the plays on your business strategy.
If you’re not already a good time manager, you need to become one. In a general sense, you need to know how to get things done.
Because it should be your goal to outsource as much as you can, you’ll need to know how to find people who can help you do the things you don’t know how to do yourself. And you have to learn how to judge the quality of work they do for you.
What You Don’t Need to Know
You certainly don’t need to be an expert in everything that needs to be done to run a successful internet business.
For example, you don’t need to know how to write computer code or how to build a web site. In fact, you probably don’t want to be doing any technical work yourself because it will distract you from making money.
You don’t need to be a good writer (thought it sure helps if you are).
You don’t need to know much about photography, video or sound production.
You don’t need any formal business education.
How Much Time Should You Plan to Invest?
That depends. You’ll face a significant learning curve if you know very little about direct marketing, if you’ve never run your own business, and you’re not very comfortable on the internet.
It will probably take you seven to 10 hours a week for six to 12 months to learn about direct marketing in general and of internet marketing in particular.
With the help of some self-study courses or coaching you can buy, you can start generating revenue even before you’ve learn much about direct marketing.
With the proper guidance, you can research business markets, buy domain names, set up a web site, create marketing campaigns to drive traffic to your site, and earn money within a few weeks. Expect to spend 30 to 120 hours getting all that done, depending on how much you outsource and how much you do yourself.
How Much Will It Cost?
Your basic education could cost a few hundred to a few thousand dollars for books, newsletters, membership subscriptions and instructional courses and conferences.
You’ll spend about $200 to $600 to incorporate a company. (You can do this yourself, but you probably want to get legal advice on which structure to use.)
It’ll cost about $8 a year for each domain name you buy; $8 to $20 a month to open a web hosting account; $20 to $50 a month for an autoresponder service that records customer names and sends out e-mail messages automatically; and $80 to $500 to set up a simple website.
To avoid risk, plan on spending a few hundred to $2,000 to conduct market research. And it may cost you a few hundred dollars a month to start a small Google AdWords campaign.
How Soon Can You Expect to Earn ‘Real Money?’
Some internet-marketing gurus say that plenty of people (their students, in particular) have begun generating tens of thousands of dollars a month in revenue very quickly and have achieved six-figure revenue goals within their first year.
Maybe so. But be careful of such claims. They usually precede a hard-sell pitch for a course that promises to change your life. I’ve wasted plenty of money on such courses.
You could easily spend most of your time and tens of thousands of dollars chasing “income opportunities” when you’d be far better off in the long run building a solid, enduring business that will grow at a slower and steadier pace.
If this sounds interesting to you, don’t quit your day job. You’ve got to invest some money, you’ve probably got a lot to learn, and even if everything goes perfectly for you, it will take months to generate enough revenue to replace your current income.
Next time we’ll talk more about the 13 steps involved in launching a business.
Stay fresh.
–Scott Silverback