Potential Means Nothing

There are two important aspects of serious buyers that make them serious buyers.

They’ve Seen (and Had) Lots of Great Ideas

If someone’s made it to the point of being a serious buyer, they’ve seen and had lots of great ideas. More importantly, they’ve seen most of those great ideas end up not being so great after all. Almost always it’s due to things that no one could have foreseen until it was exposed to real life. Anybody reading this who’s been around the block even a little is nodding his head right now.

That’s why, no matter how great your site seems to be, a smart buyer knows that nothing’s guaranteed. They want to see proof of the concept if they’re going to pay any meaningful number for it.

They Don’t Need Many Great Ideas

Virtually no one making significant money online has it spread across more than 1 or 2 concepts. The people you see running 10 or 15 different sites are still trying to find that one big thing (or they haven’t yet figured out how important it is to go deep).

The buyers paying the highest multiples are the buyers looking for 1 or 2 great ideas, and they’re willing to wait on the perfect opportunity. They didn’t get to where they are by jumping on anything with potential.

Potential Means Everything

No serious buyer is going to buy your site because of the potential, but they’re not going to buy a site without potential either. Let me explain.

When I sold my first site, I was amazed at the multiple I got. A lot of that was due to the particular timing (early 2008 before the economy tanked) and the particular topic. Factoring in just as much, though, was the fact that both traffic and revenue were on a sharp upward growth path and had been for awhile. The prospective buyers also knew that, because of their particular situations, they could make more money with the traffic than I could. How much they were willing to pay for the site was strongly impacted by the site’s potential.

Had the revenue and traffic been largely flat for several months (or longer) or, worse, actually been in decline, I wouldn’t have gotten anywhere near as good an offer. Similarly, we had several buyers drop out early in the process because they couldn’t do any better with the traffic than (or even as well as) I was doing.

Potential means everything when a buyer looks at how much he’s willing to pay for a site.

Two Sites on Opposite Ends of the Spectrum

This post was spurred by emails from two different site owners this week. One has a great site with lots of potential — but no business yet. The other has a great business, but one that time is passing by in a hurry. Both have a problem with potential: The first because it’s all he has; the second because his is running out.

Potential means nothing…and everything.

If you can already build you own site, this article isn’t for you. If you have an idea and no way to turn it into reality, though, keep reading.

. . .

There are at least a couple of different ways you can get your business built.

Find a Partner

This is the one that just about everybody thinks of. I know it seems like a good idea, but it’s not.

The reality is that anybody who’s any good already has more opportunity than they can handle. (See Dear Programmer, I have an idea.) Good developers are easily the biggest bottleneck to new ideas coming to life. Everybody I know has great projects waiting in the wings that they just have no time for. It can be really frustrating sometimes. There are so many ideas I’d like to develop.

So to convince someone who’s good to build your project for equity only, you’re going to have to give up at least 30% and probably much more. (Most will want at least a controlling equity stake.) If you have a vision that can turn into a tiny little $100,000 business, you’re probably going to have to give up $50,000 (or more) just to have it built. On a million-dollar idea, its going to cost you a cool $500,000 or more.

Yes, you’re offloading the risk of paying up-front to have it built, but at severe cost. Now is the time to suck it up and just…

Pay Someone to Build It

Based on your idea, it may cost you as much as $10,000 to have a first version built. Don’t spend any more than that, because you have no idea what the real business will end up being. (In a recent Inc. magazine survey, only 4% of business owners said their business matched the original business plan.) What you want is something good enough to put out there and get some traction so you can see which way to head.

You need:

1. A logo
2. A website design
3. Someone to code the site

For the logo, I’d definitely pony up $500 for a contest on 99designs.

For the website design, I’d try to use one of the many great pre-built WordPress designs. Even if you’re not creating the site with WordPress, many of the designs can be adapted easily to a regular website.

Two out of the three pieces done, and you’re not even close to $1,000 yet. The last piece is the most expensive, but, depending on what you need, it could be less than $1,000 too.

You have a couple of different ways you could go here.

James Altucher likes Elance. As he notes in the answer to one of these questions:

So I outlined ten ideas I thought could be good businesses. Nine of those ideas were bad ideas. Anybody can outline ten business ideas. Anybody can outline nine bad ones.

Then I spec-ed out each business, I put the specs on elance.com, I took in over 100 possible bids from developers who wanted to create the businesses, and then I hired one for each idea, including for Stockpickr.com , which worked out well for me.

I’ve never used Elance personally, but tons of people do.

The other way you could go is with a strong referral from someone you trust. Make sure they know what they’re talking about, though. The Internet is full of people who think they’re great developers.

So maybe $2,000 to get your idea built. Certainly not more than $10,000, or you’re doing it wrong. The idea is to get something out there and see what happens.

What if you don’t have the money? Scrimp, save, use credits cards, borrow money from family, sell some assets. Anything is better than giving up control (and most of the profit) to someone else. You could fail 25 different times on a $100,000 idea before you lost more money than partnering with someone would cost you.

Am I Right?

I know many of you reading this, and I know those of you who have used various routes for bringing your ideas to life.

For you, does this information match up with your experience? Is there anything you would add or change for those who are about to go through this?

Photo by compujeramey.

Getting health insurance for a small company is nearly impossible.

Having been on my own for over six years now, I’ve definitely had to deal with that. It’s not something that I’ve ever seen anyone blog about, though, so I thought I’d weigh in with what’s been working for me.

Finding an Individual Plan

I switched to an individual health insurance plan near the end of my COBRA eligibility period. Like any good Internet marketer, I Googled something like individual health insurance and just started with the first link

I never went any further, though, because eHealthInsurance was amazingly good. (They’re not paying me; I genuinely mean that.) I’m instantly skeptical of companies starting with “e” that make money generating insurance leads, but these guys are a real business.

Through eHealthInsurance, I ended up selecting Golden Rule, the UnitedHealthcare subsidiary that focuses on individual plans. I don’t have any problem recommending them. There are a few things that being responsible for my own insurance has taught me, though.

They raise your rates every year

The rate for our first year with Golden Rule were really good. They increased the rates for our second year, but I still couldn’t complain. After a few years, though, those rate increases have really added up. I’ve talked to others with the same situation. It might be time to look for another provider.

The value is more than just insurance

I always viewed insurance as “I pay some, and they pay some” — i.e. we just share the cost. The difference in various insurance plans was just how much of the cost they shared.

What I never realized, though, was that I pay much less right off the bat than I would without insurance because these insurance companies have negotiated special rates with the providers. I’ve seen some cases where I paid 90% less just because the insurance company enforced lower prices on the provider. With three kids, there have been some months where those savings alone were greater than my monthly insurance payment.

Augmenting Your Insurance

Chances are, the plan you pick will have a really high deductible and/or won’t cover as much if you don’t want the monthly cost to be really onerous.

That’s the case with me, so I’ve started supplementing my insurance with AmeriCard. Starting at $12/month, it gives me access to the same negotiated rates as having insurance, but with a MUCH lower monthly cost. That means I now get things like Vision and Dental coverage that I didn’t have before.

A Group May be as Few as 1

What I haven’t investigated yet though, and what I believe Scott is referring to specifically, is Group Insurance plans. Before you disregard this, you need to know that some states allow group plans for single-employee companies under the “Business of One” provision. The number one advantage of group plans is that they usually can’t exclude you because of pre-existing conditions.

Do any of you have experience with getting group insurance for small businesses like we run? Have your experiences with insurance been the same or different than mine?

Toby Clements has taken over Rick Latona’s Daily Domains Newsletter, and he’s doing a terrific job with it. It’s definitely worth signing up for. Every day you get a list of domains for sale — from just a few bucks to six figures or more.

Pair a good domain from Toby with my getting started guide, and you’ll be well on your way!

So instead of driving traffic to other companies’ offers, drive traffic to your own site. White Label Dating makes it easy, and they’re just now moving into the U.S.

Way more potential here than $100/day.

I’m also fine with retargeting, the strategy of serving me ads based on a site I’ve been to but chose to leave without making a purchase. Offline stores would love to be able to do that.

However, let’s imagine a scenario where an offline store had a sales rep follow you out of the store and start showing up everywhere you went. Starbucks, the grocery store, the driving range, church — you name it, there he was. Always.

It wouldn’t take long for you to get pretty freaked out.

Well that’s what happens when you turn your retargeting up to 11 like Liquid Web has. For any site running AdSense ads, they magically turn into Liquid Web ads when I view them — even on my own sites. Over the past month or two, it has gone from interesting to creepy to very annoying. In just one week, here are the various sizes of Liquid Web ads I’ve seen:

Now I’ve probably been Liquid Web’s biggest fan over the past few years, but this is really annoying.

Be very careful if you ever choose to use retargeting. Not only could you fail to make the sale, but you could also drive the customer away forever.

I’m not kidding when I say that it’s almost impossibly difficult.

If you’re trying to make money online, these are the two most important things I’ve learned since I started.

It’s Almost Impossibly Difficult

Last week I caught myself thinking how easy this is. I’m not sure what spurred it, but it took a day or two for me to remember just what it was like in the beginning. Like so many other things in life, we tend to block out the bad and only remember the good.

My first foray into making money online was in 1999, and the next 2.5 years was almost a constant drain. Every night was spent making myself work on the site after having worked all day at my job. I would rather have been doing anything else, but into my study I would trudge.

What stopped it being a drain? My partner and I pulling the plug on the business. We did over $1 million in sales in 2001, but still only netted $48,000: which paid for my partner’s 16 hour days keeping everything running.

It wasn’t until the spring of 2007 that my online ventures were generating enough cash to support me full time. 8 years. And had I not been led into a particular business model while working at CareerBuilder, I probably would still be working now. I didn’t have the stamina to grind it out for that long.

If anyone tells you it’s easy, they’re trying to sell you something.

It’s Totally Worth It

I think most people start trying to make money online for the financial freedom it can afford. That was definitely the reason I did it. I’ve written before, though, that I had no clue just how awesome that freedom is. I marvel at it every day.

So while I didn’t have the stamina to grind it out for 8 years, I absolutely do now. If I somehow lost everything, I would do whatever it took to get back here.

Yeah, you may have to give up TV or Angry Birds for a few years, but it’s totally worth it. I cannot even begin to describe how awesome it is.