The Easiest Way to Go Into Successful Business – Buy A Web Property

gold bars

I am seeing the birth of an entire new industry … and an entire new investment vehicle.

Those of you who know me know that I know investment vehicles. (If you don’t know me, look at my G+ profile.)

Anyway, what would you say if I told you that I know of a solid stock that pays a 50% dividend? You would say I am either crazy or don’t know what I am talking about.

However, you can’t deny it would be a great investment if it existed.

Not so fast! Consider this …

If you buy an online store that does a reliable $15,000 a year in net income, it would require you to work a maximum of 2 hours a day, and it costs $30,000 to buy. And

  • it’s a good store that hasn’t done much SEO so there is opportunity to drive more traffic,
  • has a good size mailing list so you can promote specials,
  • happy returning customers and
  • hasn’t done any advertising and doesn’t sell ads on the site so it has undeveloped revenue sources …. well, that’s pretty much the same thing as a stock that pays a 50% dividend.

If you hired an SEO service, started an affiliate program, sold ad space and pushed it on Facebook, you would probably see an improvement in revenues and profits while spending very little money.

This is not an unusual opportunity.

And most websites sell with a small amount down and a buy-out from revenues over a certain number of years. 

That’s right.

There is a growing market in web properties and, while the market is still very young, great bargains can be had.

It won’t last forever.

Some sites are made to sell. There are lots of people out there who are creating game sites, driving traffic to them through SEO and social media at very little cost, and make fairly good money off selling ad space. Now, these aren’t much more than formula money makers but you might just be going to one of those sites to play Bejeweled for free amid ads that pay the site owner well. And the site might be for sale.

Lots of people find themselves in need of selling their websites. If you started a site that became popular, and you need money to buy a house or a car, or you have an idea for a different business or you are just sick and tired of your current blog or e-commerce site, you might just be interested in selling your site. It happens.

It happens all the time.

I can suggest a reputable place to start your self-education: Latona’s 

The reason I say “reputable” is you want to deal with people who are professional enough to turn away the websites that use Black Hat techniques to make it look like they have a lot of traffic, and I happen to know Latona’s does identify and refuse to broker those sites because Latona’s is a client of mine.  (Did you notice that was a disclaimer?)

There are some great opportunities to be found now  —  before investing in web properties is discovered by the masses.

And don’t kid yourself! There are a lot of savvy investors out there investing in multiple sites and hiring people to run them. They are making a lot of money doing this. In fact, there are private equity funds doing this right now.

I will continue to post about this subject because I believe the marketplace for websites will grow and prosper.

The Jaws of Death – Entrepreneurs Beware!

The Jaws of Death - Entrepreneurs Beware!

This is an article from Kitco everyone should read!
http://www.kitco.com/ind/Taylor/2013-10-11-The-Jaws-of-Death.html

It shows a likely stock market crash on the way, and that brings on very difficult times for everyone. In this case, on top of the most sluggish and prolonged recovery from recession I have ever witnessed, it could quite easily create a situation much worse than the Great Recession.

I know you get sick of hearing me warn about over-expanding before you know what is around the corner … well … this just might be the monster around the next corner.

I know you are also tired of me warning about taking on debt at this time, but if things look like like what this chart is showing, debt will strangle you!

And, although I no longer carry my mountains of securities industry licenses, and I can’t give investment advice, I can say that you might want to read up on the subject of “Protective Puts” if you have any investments in the stock market.

A Look at the Economic Future

Image

I want to take a break from talking about re-inventing a business to focus on a trend I find worrisome.  One of my favorite economists, Joseph Barbuto has been talking about this.

This is a chart depicting the velocity of money, thanks to one of the best economists I knew on Wall Street –  Lacy Hunt at Hoisington Investment Management.

The velocity of money is important because it tells us where the money in the economy is going.

When money velocity is high, the money currently in the system is flowing freely throughout the economy.  Wages rise, banks make loans, businesses thrive.  Of course, when money velocity is too high it creates inflation.

When the velocity of money is low as depicted in the above chart, money in the system is not reaching Main Street.  This is important particularly now because the Federal Reserve has spent recent years pumping money into the system.  Where has all that money gone?  Well, banks [including the big brokerage firms that have shifted their legal identities to include that of banking institutions], and banks are lending to only the highest rungs of the credit ladder  — brokerage firms, big companies and institutional investors.

The velocity of money creates pools in specific asset classes  —  In the above chart, the velocity of money declined after 2000 and it pooled in the housing market.  After the housing bubble burst in 2005 the velocity of money increased until it became clear that a lot of this money was disappearing in loan defaults.  That’s when the Fed dropped interest rates and began pumping money into the system to try to get the economy back on track.

Note that this didn’t increase the velocity of money.

Money is pooling in institutional investment accounts where it created a bubble in the stock market, emerging economies, gold and may even be creating another bubble in institutional investment in housing.  Much of the improvement in the US housing market has been due to hedge funds and foreign investors buying blocks of houses/apartments to use as rental properties.  However, money has been conspicuously absent from job creation, wages, and consumer credit.

What a lot of top economists are wondering right now is when the investment asset bubble will burst.  This is something you should wonder, as well.

Another economic crisis will compound your struggles over the past years, so start conserving money and lowering your expenses now.

When money velocity is rising, it means the economy is expanding. Production capacity is increasing. Deposits from rising wages are being lent and invested effectively. Essentially, more money is moving around the economy, in the places it should. Late 1978 into 1997 was such a period.

When money velocity starts to fall (as we saw after 1918 or 1997), it means investment is increasingly speculative. Less money is spent on productivity enhancements or capacity improvements. Workers’ wages stagnate or fall, so they spend less. Basically, the money flow shifts.

Think of it like our circulation. When money velocity is rising, blood is flowing through all our veins and arteries smoothly, feeding our muscles and organs the necessary nutrients and oxygen we need to function optimally. When money velocity is falling, blockages form and the blood pools dangerously. Blood clots and strokes become a constant threat.

When money velocity drops below average levels, as the black line in the chart above shows, then those bubbles and the debt behind them are starting to deleverage, and that causes deflation and negative money velocity.

– See more at: http://survive-prosper.com/2013/08/28/why-quantitative-easing-has-not-created-inflation-and-why-it-wont/#sthash.kdoDLpyH.8FWgXJhU.dpuf

When money velocity is rising, it means the economy is expanding. Production capacity is increasing. Deposits from rising wages are being lent and invested effectively. Essentially, more money is moving around the economy, in the places it should. Late 1978 into 1997 was such a period.

When money velocity starts to fall (as we saw after 1918 or 1997), it means investment is increasingly speculative. Less money is spent on productivity enhancements or capacity improvements. Workers’ wages stagnate or fall, so they spend less. Basically, the money flow shifts.

Think of it like our circulation. When money velocity is rising, blood is flowing through all our veins and arteries smoothly, feeding our muscles and organs the necessary nutrients and oxygen we need to function optimally. When money velocity is falling, blockages form and the blood pools dangerously. Blood clots and strokes become a constant threat.

When money velocity drops below average levels, as the black line in the chart above shows, then those bubbles and the debt behind them are starting to deleverage, and that causes deflation and negative money velocity.

– See more at: http://survive-prosper.com/2013/08/28/why-quantitative-easing-has-not-created-inflation-and-why-it-wont/#sthash.kdoDLpyH.8FWgXJhU.dpuf

When money velocity is rising, it means the economy is expanding. Production capacity is increasing. Deposits from rising wages are being lent and invested effectively. Essentially, more money is moving around the economy, in the places it should. Late 1978 into 1997 was such a period.

When money velocity starts to fall (as we saw after 1918 or 1997), it means investment is increasingly speculative. Less money is spent on productivity enhancements or capacity improvements. Workers’ wages stagnate or fall, so they spend less. Basically, the money flow shifts.

Think of it like our circulation. When money velocity is rising, blood is flowing through all our veins and arteries smoothly, feeding our muscles and organs the necessary nutrients and oxygen we need to function optimally. When money velocity is falling, blockages form and the blood pools dangerously. Blood clots and strokes become a constant threat.

When money velocity drops below average levels, as the black line in the chart above shows, then those bubbles and the debt behind them are starting to deleverage, and that causes deflation and negative money velocity.

– See more at: http://survive-prosper.com/2013/08/28/why-quantitative-easing-has-not-created-inflation-and-why-it-wont/#sthash.kdoDLpyH.8FWgXJhU.dpuf

The reality show method of entrepreneurial training …

Reality television can be a terrific introduction to entrepreneurial skills. I like the shows on the Discovery Channel, such as Gold Rush, Amish Mafia, Deadliest Catch and any of the other shows featuring small businesses.

Take Gold Rush for instance: The show features three different companies. Each company has a manager with dramatically different techniques for dealing with employees and making decisions. As you watch each show, you may see examples of things you do or examples of things you probably should be doing. It isn’t too geeky to keep a notepad with you while watching the shows because there will probably be instances that you want to remember.

There is very little training for being an effective entrepreneur. It tends to be something you learn as you go along. Of course, some people are born with natural entrepreneurial talent but most of us can improve on what we do in running our companies. That is why watching other companies in operation helps improve our own skills.

Decisions: these reality shows show the entrepreneurs making decisions and you get to see the outcome of those decisions sometimes the outcome is good sometimes it’s bad. Always try to identify why a decision was a success or failure, and how the entrepreneur could have made a better decision. Be brutal in your critique.

Employee management: evaluate the management styles of each of the entrepreneurs. Are they constantly aware of what is happening on the job? If not, who steps in to solve problems? What method does that person use discover the real source of the problem? How does that person solve the problem? If another employee made a mistake, how is that handled? And finally, how are employees incentivized to avoid further mistakes? Good management styles are easy to spot, so make a note of them and try to incorporate them in your daily management style.

Operations: it’s easy to get so wrapped up in growing your company that you forget important things or don’t create closure on projects. Forgetting to pay a bill, renew a license, or check a maintenance schedule can put your company out of business. Such mistakes are common and learning to avoid them is a matter of experience. However, watching other people make these mistakes is a good way to learn from their mistakes so you can avoid making them yourself.

The Long Island Expressway entrepreneurial parable

I was describing what it is like driving on the Long Island Expressway in a snow storm and it hit me that there are a lot of similarities to startup and young company management behavior.

I used to live in Huntington Bay, Long Island. I often drove the Long Island Expressway and sometimes had to drive through blizzards, particularly at night. The funny thing was that during a blizzard, the average speed of the traffic increased and the space between cars decreased. I don’t have scientific figures to support these claims, but I have my vivid memories.

In fact, you can even see this during rain storms on most highways. When people might be expected to slow down because of the hazards presented by the rain such as hydroplaning and inefficient braking, a good many of the people get nervous and apply more pressure to the gas pedal. Perhaps they don’t even realize they are adding an extra 5 or 10 mph to their normal dry-weather speeds. Stress does that to a person.

So, during a blizzard, speeds on the LIE tend to rise to 70 or 80 mph and cars spin out into the accumulated snow on the roadside. This makes drivers even more nervous so they drive faster and closer to the cars in front of them, and when they spin out, they take other cars with them. The sides of the roadway and the center divide are littered with cars facing all sorts of improbable directions.

I have seen entrepreneurs behaving the same way, and I think this is what accounts for so many failures among startups.

The real truth about driving in a snowstorm is that it will take you longer to get home, if you drive slower you are less likely to spin out or get into an accident and it is always best to steer the opposite direction from your spin and resist the temptation to step on your brake pedal.

That is pretty much good advice for anyone starting a company.

Starting a company, or growing one, will take a long time. It will take much more work than you expect. Your potential investors and customers aren’t concerned with your timetable – they have their own to worry about. Be patient and take care to conserve your resources.

If you try to speed things up because you are afraid your company will not get off the ground, you are likely to spin out. Don’t try to launch with a big expensive splash. Don’t spend money on hand-out trinkets or client entertainment, hoping that will bring in business. Don’t cut corners on quality. Do apply careful consideration to how you are spending your money and your time. Manage smart – not fast.

If you start to spin out, steer in the opposite direction of the skid and keep your foot on the gas pedal – gently. If you are not getting the investment or revenues you need, cut expenses and figure out a low-cost side product or service you can offer to bring in a little money until your big idea finds customers and starts bringing in revenue. Also, take a critical look at what you are doing that isn’t working and make some changes.

Don’t slam on the brakes. Downsize into your extra bedroom to cut office costs. Let your employees work from home. Bring in contractors for projects. In other words, sell off the office furnishings and artwork, but don’t sell-out the enterprise goal. Even small steps toward the goal will eventually get you there.