In Breaking Free I outline a number of ways that people can generate passive income to forever leave their jobs. And as you know I always like to see new examples of that…

Well I recently stumbled across this YouTube video of a guy named Ronald Jenkees and it struck me how the internet has really made breaking free that much easier.

Ronald is just an “average” guy in small town America who happened to really enjoy playing music. A while back he started posting videos of some of the beats he was coming up with. He also came up with a blog to share some of the challenges he was facing composing music. Eventually he put together a CD of some of his work.

Apparently people liked his videos on Youtube and felt a genuine connection with him, because at last count he has over 33,000 subscribers to his videos and his work has been viewed by over 2 million people. I don’t have exact figures, but apparently his CD is selling quite well.

All this with little more than his personal time invested and probably a few hundred bucks in equipment.

By the way, music sales are a perfect example of passive income because it doesn’t require your personal time for each person to benefit from it.

The internet is the great equalizer. People with talent or something interesting to say now get free distribution to the world. You no longer have to “get discovered” by some music exec in LA or New York. A kid in a tiny town in Kentucky can reach the whole world.

Even if you aren’t a musician, you can apply the same principle. Find something you enjoy or are passionate about. Share your experience or journey to learn it. Offer some value to other people. Build a list of people who are interested in what you have to say.

This will NOT happen overnight. If Ronald had started his blog to “get rich quick” it most certainly would not have worked, and I’d be willing to bet that for the first few years (perhaps longer) he saw little or no results from it. He kept doing it because it was something he enjoyed whether other people noticed or not. This is key. As they say, it takes 7 years to become an “overnight success”, so pick something you enjoy doing.

Here is a sample of one of his videos. I happen to really like his music…make sure to check out his CD.

Have you seen any other good examples lately of people breaking free by doing what they love? Leave me a comment below…

Today I’ve been thinking a lot about different business models for internet companies. Specifically, internet companies that have some sort of service to match people up.

As you know I’ve been working on a new tutoring business model lately which is what sparked these thoughts.

Actually there are lots of companies online which match buyers and sellers just like I’m matching tutors and students.

For example, companies like AutoTrader.com match buyers and sellers of cars. Travelocity matches buyers and sellers of airline tickets. Ebay matches buyers and sellers of all sorts of products. Even Match.com matches people (not for buying and selling but for dating).

Would you believe that each of these companies uses a slightly different business model?

First of all, WHO do you charge? Does the buyer pay your fee or the seller?

Secondly, WHEN do you charge? Do you charge up front to use the service or only after a transaction actually takes place?

I made a little matrix to illustrate these different business models with an example of each. Here we’ll look at WHO gets charged and WHEN in the process:

So Match.com’s business model is to charge the buyer and they pay up front. Ebay’s business model is to charge the seller and they only pay when an actual transaction takes place. You get the idea…

Which is best? I think the answer is that none are better than the other (after all, all four example companies are highly successful). I think it totally depends on your particular business, and getting in the wrong quadrant could be disastrous if it doesn’t fit.

For example, I’d assume its always better to do the “only pay when a transaction occurs” option IF you’re able to verify when a transaction actually occurs. It’s much easier to sell this idea to customers “hey I only make money if you make money”. Most people have no problem with that because they can try your service for free and if doesn’t work they pay nothing. That’s appealing. I mean, imagine Ebay charging you up front whether you sold anything or not! That would be annoying.

But you can quickly imagine why AutoTrader and Match.com can’t use this model because they can’t verify when a transaction takes places. No one is going to go buy a car or fall in love without going to LOOK at the product in person first ;) And once the buyer and seller are in contact outside of your site, what incentive do they have to come back and report to you that a transaction actually took place? The answer is none. So AutoTrader and Match.com are forced to charge up front. A harder sale, but necessary in this case.

Secondly, who should you charge? Would it make sense on AutoTrader to give free listings to car sellers and charge buyers instead who are searching for cars? I’m guessing not…the car seller has more to gain by getting a higher price for his or her car so it makes sense to charge them. If they can sell the car for just $25 more, then they’ve made up for the cost of posting it on AutoTrader.

Other Variables

There are plenty of other options to look at when deciding a business model. For example, you could just give the product/service away for free and be advertising supported. You could also debate between charging a one time fee vs. a monthly subscription. In general subscription products are more profitable because they come with recurring revenue, but not all products justify it. Is it something that the customer will need on an ongoing basis (like finding more dates every Friday night on Match.com) or is it a one time need (like selling your car once on AutoTrader).

So what about tutoring? A thought exercise…

For my new business that matches tutors and students online, what is the best business model?

Should the tutor pay to find students or should the students pay to find a tutor? The tutor stands to make money, but the student is the one in need. Using the AutoTrader model the tutor would pay, but using the Match.com model the student would pay.

Ideally I’d charge one of them only after a match had been made and they decided to meet. But I hit the same problem of knowing WHEN a transaction actually takes place…if a tutor and student meet through the website, what incentive do they have to come back and report to me they actually met for 10 hours this month? Once they have each others email or phone (which is pretty much necessary for deciding you’d like to work with a tutor) they have no need to come back to the website to give me a cut. So I’m thinking paying up front would be the only option there.

Should it be a one time fee or subscription? Tutors would probably pay monthly to keep their profile up and get more students to work with, but a student has a need to find a new tutor maybe once or twice a year at most…so that makes more sense as a one time fee I’d think.

Or should it just be a totally free service and make money from ads?

This is all a bit jumbled and just some random thoughts floating around my head today. But hopefully it helps you see a new way to think about business models and what would work best in any particular situation.

Lets do a little survey, what do you think would be the best business model for the tutoring business just described and why? Post in the comments below!

This has been bugging me for a while now, and somebody needs to finally say it: Network Marketing is not a worthwhile endeavor, stay away from it!

The number of people who are caught up in this stuff is staggering and it seems like at least once a week I get contacted by someone trying to get me to join some program.

It’s really annoying, and there is no quicker way to ruin your reputation among your friends and contacts then trying to get them to join this stuff. Smart, respectable business people stay away from network marketing like the plague and it will INSTANTLY kill your credibility if they get even a whiff that you’re trying to get them to join one of these things.

I’ll probably piss off half the readers of this blog by posting this, but thats fine because it needs to be said. For some reason the “home based business” industry is surrounded by this stuff…get rich quick schemes, network marketing, and all sorts of shady offerings…and that bothers me.

Even the Google ads which show up automatically on this site seem to come up as network marketing type stuff half the time (haven’t figured out how to change that, if anyone knows leave me a comment)…which means they are targeting people who want to start their own business. Being a network marketer is not starting your own business!

If you want to break free from your job…you’re going to have to do it honestly, ethically, and with hard work. You’re not going to do it by selling some herbal supplement or lower electric bills or energy drink to your friends. And you’re certainly not going to do it by pissing off every contact you’ve ever made trying to get them to join you.

If you can’t explain your business in one sentence, you’re either hiding something or don’t know what you’re doing

I was in an elevator the other day and struck up a conversation with the elderly woman next to me. I asked her what she was up to and she said she was going to a meeting for XYZ (I can’t even remember the name). When I asked her what it was she gave me the most cryptic reply…”well, we do a lot of things really, but mostly…we find ways to help people.”

Right away the little alarm bell is going off in my brain…the same one I get when telemarketers call or Jehovah’s witnesses come to the door…damnit, she is a network marketer.

If you can’t explain clearly what your business is in one sentence…you’re either hiding something or you haven’t figured it out yet either.

Sure enough…her next words were “why don’t you give me your card and I can tell you more about it some time”.

“Well is it network marketing?” I asked.

“Sort of”, she said, “but not really…we really just help people. Let me get your card and we can talk more some time”.

“No offense”, I said, “but if its anything related to that I really don’t want to get involved”.

Her mouth hung open for a second, and then she stormed out of the elevator, visibly shocked.

Why You Shouldn’t Do It

Does network marketing even work? I certainly haven’t researched it extensively…the thing is every network marketer will tell you they KNOW someone who is super rich from doing it, but I’ve never met that illusive person.

On the other hand, I HAVE met dozens of millionaires who are legitimate business owners or are involved in real estate. In fact, EVERY rich person I’ve ever met either owns their own business or owns lots of real estate (or both).

That’s just my personal experience and not conclusive proof, but look at your own personal experience and see if it matches up.

That brings me to an important point. Even if network marketing DID make lots of money (which I don’t think it does for 99.9% of people), I STILL think you shouldn’t do it.

Why? Because in the process of making that money you would have pissed off all your friends and family hustling them to sell your vitamins!

What good is it to have all that money if your family hates you and the only friends you have left are other network marketers?

Does It Feel Like You’re Helping People?

The only way to make a ton of money is help a bunch of people. Period. If you give a bunch of people a tremendous amount of value they will gladly give you some money for that.

I know, I know…your network marketing program is different from the others which all give it a bad name, etc…and the intense motivational weekend you went to made it sound like you were helping people who love the product.

Just be honest with yourself for a minute and forget all the delusional bullcrap, and ask yourself how you feel about what you’re doing. Maybe it REALLY IS a good product that helps people…if so why the tactics to get people to buy it. If it feels dirty get out.

Its the same as people who bring fraudulent slip-and-fall lawsuits or don’t disclose the patch repair done on their transmission when they go to sell a car.

Of course its possible to make money in slightly unethical ways in the short term…there is no doubt about that. But I think ultimately the biggest person you end up hurting is yourself…both in terms of your pocket book and self-esteem.

Stay away from network marketing, and if you’re in it already…forgive yourself (we all make mistakes) and get the hell out!

What has been your experience with network marketing and dealing with network marketers? Please post a comment below…

This list might be a little different than the typical great business ideas you see talked about in major publications (like Facebook, the iPhone, etc).

Those are great ideas, but I prefer to look at business ideas which are a little closer to home. Ideas that anyone with some hard work could get off the ground even if they didn’t have much money.

I like business ideas which…

• Have low startup costs
• Don’t require manufacturing a physical product (like the iPod, which incurs huge overheads)
• Actually charge something (unlike YouTube or more generally the “hope we get bought out by Google” business model)
• Scale well and don’t require your personal time for each person you help
• Fit the lifestyle of “breaking free” by not trading time for money

All of these ideas are somewhat obvious in hindsight, but I bet you can steal the “how” behind every idea and adapt it into a new business. How they made something easier, cheaper, faster, etc and helped a whole bunch of people.

Here they are in no particular order…(and by the way, I either use or have used every single one of these at some point besides PlentyOfFish):

1. Mozy
   Mozy is an online backup service. It automatically backs up the files on your computer over the internet, and offers unlimited storage space for a few dollars a month. I like this business model because its a subscription product, solves a real problem (when your hard drive crashes, it HURTS to lose everything), and scales well. You can build the system and it requires pretty much the same amount of investment whether 10 people use it or a million people do.
2. CollegeStudentTutors.com
   Ok granted I might be a little biased since this MY site :) But still, I like the idea because of the reasons mentioned above. It’s a better solution to a common problem than what is currently out there (the common problem being, where can I find a high quality tutor for my child at a good price who lives near me?). Super low startup costs and scalability are a plus here.
3. PlentyOfFish
   PlentyOfFish is a free online dating site that is advertising supported. The founder and sole operator, 29-year-old Markus Frind, runs the site from his West Vancouver apartment. The site pulls in more than $5 million a year from Google advertising with only its one employee/founder. Simply staggering. More generally, I like this approach of taking an idea you already know works online (match.com, eharmony.com, etc), and make a free alternative to it that is advertising supported. I’m sure their are dozens of opportunities that fit that model which are ripe for the picking.
4. Basecamp
   Basecamp is an online collaboration tool. It was started by just a few guys working part time and is now a multi million dollar subscription product. It worked because they went out of their way to understand good user interface design (something that, shockingly, Microsoft still sucks at). They built a loyal following of people who were happy to find software that “just worked” (a rarity) and really saved them time.
5. WordTracker
   A tool for online marketers that lets you find out what your customers are typing into search engines to find you. The product isn’t even that good, but considering how bad the alternatives are, the bar is pretty low (Yahoo deserves a particular dishonorable mention for the colossal wasted opportunity they had with http://inventory.overture.com, a similar site that is now offline). Anyway, again it is a subscription product that scales well and solved a real need that people had.
6. E-Junkie
   The process of accepting credit card payments on your website is traditionally nothing short of a nightmare. It involves horrible programming intricacies, laws and rules regarding encryption and storage, and having to deal with the shady credit card processing industry. It used to be hard to get a nice looking shopping cart set up quickly but E-Junkie changed that. It was surprisingly easy to get it set up on my website, and I’ve used many of the alternatives (OSCommerce, Zen Cart, buy now buttons, etc). I’m going to start sounding like a broken record, but….same reasons: subscription product, scales well, solves a real pain.
7. LuLu.com
   This one was probably more expensive to set up than others on this list, but its a great service for authors to get their books printed. Just upload a word document or PDF and they will do drop shipping, manage inventory for you, and get your book on Amazon.com. This company is making the idea of a publisher more obsolete (although that won’t happen completely for a while). Its a godsend to first time authors.
8. Quest
   This is a small local business in Houston, but I like the idea. It saves realtors and real estate investors all sorts of time by make a simple interface to look up and analyze investment property. Again, we see an improvement in user interface design which saves people time and makes their lives easier. This little innovation is a neat little subscription product that costs about $75/month (almost pure profit and again scaleable). At that rate you only need a little over a thousand customers and its a million dollar business.

Any time you see someone who is FRUSTRATED there is a business waiting to be born. Just go ask people around the office or your friends “What is the most annoying part of your job?” or just watch them for an afternoon and you’ll see something they are doing inefficiently. Any time you can save someone some time, money, or frustration you have a viable business idea. Now if it scales well you’re really on to something.

There’s no better time than now to take the initiative and put one of these ideas together. Hiring programers to make some software is cheaper than ever. What are you waiting for?

Brian Armstrong

Here is a little video update on the tutoring business launch. I’ve been doing all sorts of things to promote it. We’ve got enough tutors signed up in four cities now and I’ve been doing SEO, pay per click, contacting academic advisors, etc. Making progress slowly but surely…

Most people who want to start their own business don’t have a ton of money laying around and it’s probably one the most common questions I get emailed about: How can I get started without a lot of cash?

Well I’ve put together a list below of the best ideas I’ve heard and personally used. I hope you find it useful!

The three basic strategies to starting a business without much money are:

• Delay the normal “business starting” activities like incorporating, hiring, renting office or retail space, etc until AFTER your business has started earning money. This is known as bootstrapping.
• Doing everything yourself and spending your personal time instead of hiring an expert. (Takes longer but costs less.)
• Using some neat tricks and little known deals below.

Start With The Easy Stuff: Eliminate Expenses

1. Don’t rent an office! - work from home. Or better yet work from the best free office with locations everywhere: Starbucks. If you need to meet with a client and are worried about seeming small time without an office, don’t be. Just meet them at a restaurant for a lunch meeting. This is what people with the nicest offices do anyway.

2. Don’t hire any employees! - do it all yourself until you have some $ coming in the door.

3. Don’t hire lawyers, technical people, graphic designers, or assistants (see below)

Legal Stuff and Incorporating

4. Get a free lawyer and legal advice from the mentors at Score.org

5. Find a website with a similar legal document and modify it to your needs

6. An LLC is probably the best business structure, but don’t worry about incorporating until you’re earning money, just do a sole proprietorship, you can always incorporate later (you can get it setup with the IRS in just a few minutes by calling them at 800-829-4933)

7. Learn how to do your own financial statements for your business in Excel instead of hiring a CPA or bookkeeper (again you can do this after you’re making money)

8. Take a Quickbooks class at your local community college

Make a website for your business

9. Don’t pay a premium for a top end domain name, there are plenty of good ones left

10. Test out your ideas by writing to a blog, you’ll get feedback on what people like and don’t like

11. Get a free business website at www.wordpress.com. It won’t be your own domain (it will be something like yourbusiness.wordpress.com) but…

12. When you’re ready to have your own domain, get a hosting plan (new domain included) at 1and1 for $4.99/month, and install wordpress on your own server (instructions)

13. Get a professional website design for free with a wordpress theme that you can install with a few clicks (no programming knowledge needed)
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People tell me their business ideas all the time. They usually want to start a restaurant, or sell something they made, or give their advice as a consultant or coach.

But those businesses don’t scale. The only way people get rich is by developing a product or service that can help a LOT of people, not just a few.

If each person that you help requires your personal time then there’s only so many you can help, and you probably won’t get rich doing it. (Even if you don’t care about getting rich and just want to help people, helping individuals is still an inefficient use of your time, more on this later.)

Sure you can make quite a bit of money in the right job working hourly. Doctors and lawyers get a high hourly wage. But they still have to help each person individually which is why they can never be as rich as someone like Bill Gates who has a scaleable business. His software gets written once, and then distributed to millions of people with very little additional effort for each person who is helped. Bill Gates makes money from his software while he sleeps, whereas doctors and lawyers still have to keep putting in the hours to get paid.

Scaleable businesses require much more work up front, but once they are off and running they require little or no additional time per person. That’s power because once your business system is in place, your time is still “preserved” for you to work on your next business idea and help even more people.

Compare each of the following. Which one scales better?

• Giving a speech to a group of people vs. making a recording of that speech to distribute
• Flipping houses vs. building a real estate portfolio over time
• Cooking for a bake sale vs. licensing your recipe
• Your band playing at a local festival vs. selling songs on iTunes
• Talking to customers over the phone vs. taking taking orders through your website
• Accepting checks vs. accepting credit cards
• One-on-one coaching sessions vs. selling a book
• Keeping in touch with friends by email vs. writing to your blog
• Being a freelance programmer for one client vs. selling subscriptions to your software to many clients

Even if you don’t care about making money and just want to help people, I’d still argue that you need a system that scales. You can do the same kind of comparison for non-profit work…

• Volunteering your time at a homeless shelter vs. developing a city wide program to help thousands of homeless
• Feeding a hungry family vs. improving education/changing legislation/etc

It might give you a warm fuzzy feeling to help an individual, but in general I think you’re setting the bar too low when you do that and selling yourself short. Spend your time on something that will really have an impact.

Making a scaleable business is not easy (otherwise everyone would do it).

While working hourly, you can see a paycheck in as little as a few days or weeks. It’s dependable. But while building a scaleable business, you can see zero return for months or years (or maybe never). All the work is up front.

It’s the old linear vs. exponential growth. That’s why most people don’t get rich. They don’t want to put the time in up front to see the big payoff down the road.

The next time you have a business idea, try to think about how it will scale and if it could ever really help a TON of people. If not, is it really worth pursuing?

Hey Folks,

Well the website has launched and you can go check it out here CollegeStudentTutors.com

I’m going to show you a few more cool features that went into it, the results of some user testing, and what the next steps are to get my first sale.

Making a UI to Input “Availability”
One of the things I knew from running an existing tutoring business is how hard it was to match people’s availability. If I was going to automate the matching process I had to spend some serious time thinking about it.

There is both availability in terms of time and location. Plus the added challenge of being compensated for driving time, which some tutors want.

The simplest solution is just to make a generic text field where people can write in anything they want for their availability. This is not the best answer, because you will get an inconsistent look to the site and your customers are then forced to understand and compare all sorts of different things that sort of mean the same thing. Its also unclear from this how detailed people should get.

Here is an example of generic inputs you can get from a text field which all mean pretty much the same thing:

“I am available Monday Wednesday and Friday after 3PM and Tuesday and Thursday After 5PM”
“WEEKDAYS AFTER 4″
“Mon/Wed/Fri afternoons Tues/Thurs after 5″
“MWF after three o’clock I am availabe and T/TH in the evening”

This just deals with time, not driving or compensation, plus you get the problem of spelling errors, etc. It makes the site less usable.

Another option is to put in a full blown calendar system sort of like Outlook or Google Calendar which allows people to mark blocks of time. This is a lot of code and testing, and more importantly its probably overkill for such simple scheduling needs.

In the end I found something that worked for me, and it wasn’t overly complicated.

Time
For scheduling I made two drop down menus. The first drop down shows days, and the second shows time. The choices force the results to be consistent and gives them some flexibility in how detailed they want to get. It also doesn’t let them get TOO detailed. This is good and intentional.

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I’ve been working like mad man lately on this new business website, and its coming along really nicely.

Something I’ve been thinking about a lot is “how can you build trust on a website?”

People have an inherent distrust of any service they see online, due to the number of the scams out there, and just shoddy companies.

Online is very different than the real world. In the real world when we meet someone we can get a “gut feeling” about them (ever heard that 93% of communication is non-verbal?) based on their body language, tone, rate of speaking etc. We make instant snap judgments whether we know it or not about whether we like and trust someone or something.

But in the online world, we are blind. We have nothing to go on except some words on a page, and human beings weren’t built to trust based on such limited information.

So here are some ideas I came up with to help built trust with prospective customers on yours website:

1. Show that other people trust you

It’s human nature to look and see how other people are acting (and copy it) any time we aren’t sure how to act. This is hard wired into us by nature. You see everyone else in your gang of primitive humans running away from something scary in the woods, well you better start running too. Those who didn’t, never lived long enough to become our ancestors.

So what does this mean online? If you can prove that other people trust you, it will give you instant credibility. Typically people do this with testimonials, but another great way is to let customers write reviews (Amazon is the king of this by the way). In my case, I’m letting customers write reviews of the tutors they used.

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Hey Folks,

I’ve been hard at work on a new business idea which I’ll be unveiling here over the next few weeks to you on this blog as I track the launch, new features, marketing efforts, and of course the results.

I am following my own philosophy that I teach: when you come across a new business idea, find the cheapest and fastest way to test it and just get SOMETHING out there which people can see and give you feedback on. This is far better than what most people do which is either (1) have a great idea and think about it so long you never take any action on it or (2) spend way too much time and money on something that eventually turns out to not work. If this doesn’t work, I’m going to find out quickly and have lost very little other than my time.

Total investment to launch this business:
$102.00 - 12 months of web hosting
$8.88 - one domain name
About 80 hours of my time.

The Idea
As many of you know I’ve owned a tutoring business for 4 years now. The way it works currently is that people fill out the form on my website requesting a tutor, then someone like myself or someone who works for me calls them back and sets them up with a tutor. Typically, 3-4 phone calls and emails are involved with each new person who signs up from the time they first sign up to the time they are matched with a tutor and earning money.

One of the harder parts about growing the business is finding good people to match students with tutors. People who will approach it with as much enthusiasm as I do (hard to find, since to them it is a job and to me its my own business). And I can’t just do it all on my own, because that is being “self-employed”, not a true “business owner” who can disappear and the company continues to grow.

So anyway, a friend of mine came up with the idea. Yes you read that right, I didn’t even come up with this idea myself, remember that one of the keys to coming up with great business ideas is just to be around other people who have good ideas. (In case you’re wondering, we structured an agreement so that he’ll be compensated if it works.)

The idea is to let people browse tutor profiles on the website and pick their own tutors. All the tutors are college students at prestigious universities. Clients can view lots of information to help them make a decision (the tutor’s major, GPA, feedback and reviews from other clients, picture, resume, location, etc).

Instead of taking a percentage of each hour of tutoring, which is what I do now, this would be more hands off approach and we’d only charge a flat fee to contact tutors since they’d be doing much of it on their own.

The beauty of this idea is that is scales well (something I talk about in Breaking Free extensively). In other words, the amount of time required on my part to match 10 tutors vs. 10,000 tutors with this model is practically the same because the whole thing is automated through the website. So even though I’d make less per hour of tutoring, it could reach a much wider audience.

Sketching Out Ideas

So I couldn’t sleep one night and decided to sketch out how this website might look. You should ALWAYS design on paper. Designing a website in Photoshop or by coding it as you go is a sure fire way to get a terrible looking site. Here are some early sketches. You can see how things progressed and changed a little bit along the way.

Also, my theory on make good webpages (especially when in the product launch phase here when you just want to get something done quickly and “good enough”) is to find a design you like on another page, and tailor it to your own needs. Don’t copy it outright, but pretty close is fine. No need to reinvent the wheel early on. Can you tell which site I borrowed liberally from? :)

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