If you don’t know who Gary Vaynerchuk is. He runs the very successful Wine Library TV which gets something like 85,000 readers per day.

He is one of the rare bloggers who has managed to get on/in the Wall St. Journal, GQ, Time, Conan, Ellen, etc.

His style is irreverent and he isn’t afraid to tell it like it is.

Here are two talks he has given about how important it is to build brand equity. Brand equity is how well you are recognized in people’s minds. Yes YOU can and should be a brand.

Brand equity can weather any recession, can launch any company, and can open doors for you around the world.

The beautiful part about technology (the internet, videos online, blogging, etc.) is that it has leveled the playing field. You no longer need to live in LA or New York to get discovered. You no longer need a huge marketing budget. You no longer need contact in mainstream media (tv, radio, print, etc). Now ANYONE with talent than can rise to the top regardless of where you start.

Check out these two inspiring videos from Gary, and get to work today on building YOUR brand equity:

Video 1 - Keynote from Blog World Expo

Gary Vaynerchuk Blog World Expo Keynote Speech from David Peralty on Vimeo.

Video 2 - Keynote from Web 2.0 Expo

On another note. I really need to start going to some of these conferences. It’s amazing what getting around liked minded people can do to help propel you to the next level.

Until next time, keep breaking free!
Brian Armstrong

Some of you may remember how I took a passive income idea and launched it in one month.

Since then I’ve been revising and testing out different business models as it slowly builds momentum. There are now about 300 tutors signed up and over 600 “matches” have been made (between a tutor and student).

I thought you mind find it useful to see some of the ideas I’ve tested along the way, including what worked and what didn’t.

Version 1 - Charge the Client

When I first started out I figured it would be hard to find good tutors and easy to find people who would want to hire them. So I decided to charge clients for the service of finding a good tutor.

This is the model used by sites like monster.com or “recruiting” sites. The employer pays to find the employee, not the other way around.

I bought a bunch of traffic and drove some people to the site with Google Adwords, but after testing this for a while it became clear the the conversion rate was not very high. What was the problem?

After thinking about it for a while I came to the conclusion that I was asking people to pay too soon. I think people wouldn’t mind paying for a tutor once they were convinced they had found someone who was good. But to ask them to pay for the opportunity to contact some tutors…who may or may not work out, didn’t connect with people.

I would have preferred to only charge them AFTER they found a good tutor and had met with them, but I couldn’t think of any way to enforce this in my passive model. I mean, what incentive would someone have to come back and pay after they had already met with the tutor and had all their info. It just seemed like a hassle and annoyance.

Even though I had a money back guarantee, etc, I had to admit that clients weren’t going for it. I had to face facts: the people on the site weren’t convinced of the value at the time I was asking them for their money.

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 2 - Charge the Tutor

After thinking some more about different business models, I decided it might work better to charge the tutors to keep a profile on the site.

After all, they were the ones who stood to benefit by earning lots of money. In general, very few people have a problem with someone saying “hey if I were to bring you a huge pile of cash, would you mind if I took a little off the top for myself”. In other words, I only get paid if you get paid. It’s a great sales proposition.

Furthermore, charging the tutors made much more sense as a recurring “subscription” product because tutors would need to get new jobs on an ongoing basis (there is a high turnover). Selling to clients would be a one time sale but selling to tutors would be recurring revenue.

Yet, I still had the issue of asking tutors to pay up front before they really knew if it would work. This was just some average looking site they stumbled across, and as with everything online it’s hard to know what you can trust. Clearly, I needed some sort of free trial. I decided to test out a standard “30 day free trial”, after which I would ask tutors to subscribe if they wanted to keep their profile up.

So what happened? A pitifully low conversion rate. :(

Of the 78 tutors who registered in one month, only 1 converted into becoming a subscriber. At that rate, it wouldn’t cover the cost of bring in leads (a topic for my next post).

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 3 - Trick Them Into Paying

At this point I contemplated various other schemes that might help improve the conversion rate.

One tactic often employed by companies (Netflix for example) is to require the credit card details up front on a 30 day free trial. That way if the person doesn’t cancel within 30 days they get charged instead of having to actually enter their payment info at the end of the 30 days (a big difference psychologically).

This always seemed shady to me since if your site is really worth it people should be willing to pay. You shouldn’t need to trick them, rely on their laziness, or hope they forget to cancel.

But I tested it anyway just to see what happened, and it didn’t work very well. Even with all the right “marketing tactics” in place, hardly anyone who went to the sign-up page actually signed up once they saw a credit card was required. Plus I didn’t really feel good about requiring it in the first place.

I was thinking about it all wrong. Instead of focusing on how to convince people to sign-up, I should have been thinking about how to make the site better!

At this point, I was getting somewhat discouraged. What kept me going was one important fact: PEOPLE WERE ACTUALLY FINDING THE SITE USEFUL. I knew this because every day tutors were finding jobs on the site and people were finding tutors. I would occasionally get emails from people telling me how much they liked the site. This thing had potential, I could feel it. I was probably even a little bit irrationally committed.

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 4 - A Better Free Trial

I could have always just made the site free and put up some advertisements, but I knew there was a solution to this problem.

After discussing this dilemma with other entrepreneurs, I finally went back and looked at the data from the free trial (version 2). A startling fact emerged: only 25% of the people who had gone through the 30 day trial had been contacted by ANYONE.

That meant that 75% of the people who I was emailing saying “hey your free trial is up, pay me money!” had never even been contacted for 1 tutoring job. No wonder they weren’t signing up!

Still, I figured that if 25% of people had gotten a job, and doing only 1 hour of tutoring covered the cost of subscription, at least more of those 25% would have subscribed, right?

I decided to survey that 25% and sent them a very brief, personalized email from me. Not some mass mail that would get deleted. It looked like this…

Hi Test,

I’m surveying a few of the tutors, and was hoping you could send me some feedback on your experience so far with UniversityTutor.com? Basically, has it been useful and if so how? If there is any way we can improve the site or make it better please don’t hesitate to let me know.

Thanks for your feedback I appreciate it!
Brian Armstrong
UniversityTutor.com

The responses I got back painted a clear picture: most of that 25% who had gotten contacted had only been contacted by 1 person. Often, that one contact hadn’t even turned into a job for them. Essentially, I was over-estimating the value of being on the site. I wasn’t giving them any real value (they hadn’t gotten a tutoring job) so they had no reason to subscribe.

It finally made sense. You need to get in touch with several potential clients (not just one) before you get a real tutoring job out of it (I knew this from experience but didn’t connect it). Plus, many people who came to the site would contact 4 or 5 tutors all at once and wait to see who got back to them promptly. Basically, they were interviewing several tutors for one job, so getting 1 contact through the site did not guarantee a job.

This was further confirmed when I went back and looked at the one person who had subscribed. They had been contacted more than anyone else that month: 5 times.

I thought for a few days about how to make the site better so people could clearly see the benefit before I asked them to pay. I thought about extending the free trial to 60 days or just focusing on SEO to bring in more traffic.

Then something hit me: why not make the free trial based on the number of contacts instead of the length of time. Sure, a 30 day free trial was common, but maybe it didn’t make the most sense in this case.

SOLUTION: I changed the free trial so that the first 5 students who contacted you were free, no matter how long that took. No credit card was required up front. I also cut the subscription price in half from $19.95 to $9.95.

The number of subscribers improved almost overnight. It was a great feeling. I felt like I had cracked the code. I literally did a dance around the computer.

Now, when someone received an automated email from me asking them to subscribe, I KNEW they had at least been contacted by 5 people and could see the value in the site. Maybe that would take 2 months to happen. Maybe it would take 2 weeks as the site got more popular. This felt right, and the tutors seemed to agree.

Conclusion

I think there are several important take aways from this:

• 9 out of 10 of my ideas don’t work, and that’s ok
• Survey your customers, they will tell you what’s wrong
• Don’t ask your prospects to pay until AFTER they’ve seen the value
• REMEMBER: So you want to give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Until next time, keep breaking free!
Brian Armstrong

Hey Brian,

I know you’ve thought a lot about investment / passive income, etc. so I wanted to get your thoughts…

I can see how real estate is a great investment if you can get someone else (a renter) to pay the entire mortgage for N years, and then you sell for a profit and you make money. Maybe you can even rent it for more than that and make money every month.

But what about when you can’t rent it for that much? In a few years I will probably move out of my condo, so I need to think about whether to keep it as a rental. Total cost per month that we’d still owe with a renter (mortgage, property tax, and condo fee) is about $2200/month. And I honestly don’t think we’d be able to rent it for more than $1900/month. Maybe rents would go up in 10 years. But the condo fee would also go up over time.

To make money, the value would have to increase faster than inflation. Anyway I’m just curious what you think!
K

Hi K,

Good thoughts all around. Negative cash flow properties can still make sense.

On the plus side…

• Don’t forget a small part of your mortgage payment is going to pay off the principal (maybe $100 on yours per month?) and that is really your money, it’s no different than putting $100 in a savings account each month except it’s equity in the house which you will eventually get back in a refinance or sale, so while I wouldn’t count it as cash flow, it’s also not money spent in your -$300, it’s money saved.
• Real estate gives you tax benefits…all the interest payments, improvements to the house, and property taxes are deductible, some other stuff too like people calculate travel mileage. It adds up quick, I ended up taking a huge deduction in taxes from real estate last year. People who own lots of real estate get away with murder regarding the tax system in this country. Some of them are millionaires and qualify for wellfare because they show such low income, and it’s perfectly legal. So that’s one other side benefit.
• I wouldn’t worry about the inflation part of it, real estate automatically adjusts for it (both rents and values). When people talk about appreciating values or rent going up they mean above and beyond inflation, so yeah I don’t think real estate ever loses value to inflation the way cash would since rents and home values are liquid markets just like any other good. Most leases I’ve seen have an automatic price bump built in each year for inflation, as an example.

On the negative side…

• Don’t forget to include cost of insurance in your cash flow (although that may be part of the condo fee?)
• You’re right condos aren’t ideal because they can assess greater fees whenever they want
• It’s a pain just in answering phone calls from tenants and repairs once in a while, and when someone moves out you have to use their deposit to get it ready again, etc. Your time is certainly worth something. What works out best I think is pricing the rent slightly below market so you get lots of rental applicants, then you can run credit checks (and criminal) on every applicant (costs about $15 each) to make sure you really find a good tenant who will stay in there forever and treat it well. I also have a home warranty policy which covers most repairs so they can just call that number instead of me, costs about $350 per year in Houston, but of course there are always little unexpected surprises so owning real estate is never stress free.

Anyway, it’s not an easy decision, but if it were me I would probably keep it unless you have an immediate need for the cash. In the long term real estate is always a good investment. Many people inadvertently wind up millionaires just because every time they move they don’t sell their old house, they rent it. And for sure that thing will be worth millions some day, hard to say when, but your mortgage isn’t getting any bigger so you know that. Rich people all own loads of real estate, so I say the more of it you can get your hands on the better.

Good luck, and until next time, keep breaking free!
Brian Armstrong

P.S. Also, one more thing…to get your cash out of it, you don’t necessarily have to sell it. You can refinance it out and still have the asset plus rent coming in. Some people say never sell a piece of real estate since you can refinance the money out and it will keep paying you both in rent and equity build up.

Since Friday things have been a little crazy in Houston as we recover from the Hurricane.

Yet, even when I was without power and water, my business in other cities managed to hum along almost without incident. That’s pretty cool, and illustrates the power in passive businesses. You can continue to have money deposited into your bank account even when the entire city shuts down.

Side Note: I did however get an email from Google Adsense saying they shut my account down for “click fraud” on this site. That’s why all the ads have disappeared. I have no idea why they think there was click fraud, but I’ve filed an appeal. We’ll see what happens. I’m pretty surprised, since most of my experiences with Google have been great up until this.

But back to the hurricane, I like to try and see the positive in every situation, and in reality the Hurricane was not that bad. I tried to think of it as a vacation (or actually somewhat like camping given the lack of AC and canned food). I got lots of reading done, bonded with people, and basically partied every night for 4 days. Don’t tell anyone, but I actually ran outside through the hurricane with a group of people in our underwear at about 4am, and then went to the hot tub (relax, there wasn’t any debris flying at that time or anything like that). It was one of those peak life experiences that you don’t want to miss.

People always freak out in situations like this which always seemed like the wrong attitude to me. As I’ve written about before, people are really bad at estimating risk. The hurricane really wasn’t very dangerous at all. You have to put things into perspective, and it only killed 6 people in all of Texas. More people than that die every hour in traffic accidents in the U.S. Same with heart disease. Not to mention the thousands of people who die every day of starvation around the world. Sure, the hurricane might have set some people back financially, but it was also a good reminder of what’s really important in life. People need to stop worrying so much and start enjoying life.

Anyway, here are some pictures I took during the last four days. Enjoy!

Broken Windows In Downtown Houston

Minus one chimney

Good time to start a roofing business (or tree trimming, construction, linemen, etc)

We played a LOT of board games with candles. It was also about 85 degrees with 90% humidity the whole night. I don’t know how people lived in Houston before air conditioning.

What do you do when there is no TV? Make your own with shadow puppets!

All the essential survival tools…

I though ya’ll might enjoy this article I wrote for LifeHack.org about how to connect with people.

Life is full of little situations that you encounter regularly. Some people don’t see these for the opportunities that they are: a chance to stand out, be different, and be memorable.

They’re a way to quickly built rapport with someone so they can think back later and say “Brian…hmm, yeah he was the guy who does [BLANK]” or “Barbara, oh yeah she is the gal who said [BLANK]“. You stood out enough to be remembered.

By breaking out of your comfort zone and doing something a little different than everyone else you can connect with new people on a regular basis.

The article covers three common social situations that come up and how you can use them to your advantage:

1. What to do when people ask: “How’s it going?”
2. Handshakes
3. The two most common small talk questions: “What do you do?” and “Where are you from?”

Check it out by clicking here. Maybe it can help you meet that next entrepreneur or mentor.

Until next time, keep breaking free!
Brian Armtrong

Be sure to check out 37 Signals live web cast tomorrow. Their last few have been pretty good, but this one is right up our alley: How to go from business idea to business launch, something I’ve written about quite a bit in the past.

================
Please join us this Thursday, September 11 at 11am central for the next edition of 37signals Live.

This show’s topic will be “The Starting Line: From Idea to Execution”. How do you start your business? How do you take that idea you had and actually do something with it? How do you get from thought to action? How do you deal with business plans and projections and all that stuff you’re supposed to do when you get started. Do you hire people? Do you design business cards? All that good stuff.

We look forward to seeing you for 37signals Live this Thursday!
================

Also worth reading: Check out this story of a 26 year old entrepreneur who sold her first business for $1 Million, and is now deciding what to do next. Sometimes, we spend so long trying to accomplish a goal that when we finally do we sort of miss the struggle (also known as the Paradox of Success).

Hi Brian,

I would like to get a marketing opinion of you. I have offered downloadable e-books in the past for other educational products I developed but I had a problem with people stealing the work - buying one e-book, then copying it for others. I even had problems with my printed works in that regard. I had several of my online articles mishandled as well and have since removed every one. It was a bit unsettling since my sellable works were mostly purchase locally and I often knew who was doing it - makes one wonder about people and ethics. What kind of copyright security would I get or should I even worry about it? People seem to steal no matter how many protections one tries to implement. Do you have that problem with your works?

Thanks,
Karen

Hi Karen,

Yes I had the same issue. Within a few months there were free copies of my book circulating online. But honestly…it didn’t bother me one bit. I was just glad people were reading it/using it etc.

The way I look at it, distribution and getting your ideas out there is more important than making money from it. In fact, if you get good distribution the money thing will take care of itself. For every person who reads it free, at least they are exposed to my ideas…then maybe they will benefit from it, and tell other people about it or subscribe to my blog, and end up making me money some other way down the road.

You could get it to 100 people perfectly locked down, get $100 from each, and make $10,000. Or you could get it to a million people, have 90% of them steal it, only get $10 from the remaining people, and still make more that way (a million).

Hope that helps, and until next time, keep breaking free!
Brian Armstrong

Yesterday I went rock climbing with my friend James.

About half way up the last run I hit what looked like a dead end. The next handhold above me was WAY out of reach. The piece of rock I was holding onto with my hands was right around my waist…but I couldn’t reach anything above it, just a smooth rock face.

How was I going to go up?

It seemed like I’d have to put my left foot where my hands were (near my waist) and stand up on my left foot. But with nothing for my hands to hold at that point, I’d surely fall backwards, right?

I was pretty sure it wasn’t going to work, but with encouragement from below I decided to give it a go. I’d start to step up…and then stop. Then I’d start again just a few inches, and quickly retreat back to my handhold.

It just felt terribly unnatural…i mean, imagine how it would feel if you tried climbing to the top of a high ladder with no hands. Then take the last step with just one foot, where the rung of the ladder was about an inch wide with no hands. Yeah…it felt sort of like that. It just wasn’t going to work, I could FEEL myself starting to fall.

I belayed back down to the ground convinced that this one was beyond my abilities. Then a strange thing happened: James went up the same route, got to the point where I was stuck, stepped up on his left foot with no hands while hugging the wall, and somehow didn’t fall backwards. Damn! That broke my theory.

Being the competitive person I am, I was none too happy about this. I decided to try it again. This time, the same feelings in my head were all saying “this is not working, you’re falling, you’re falling, NO YOU’RE REALLY FALLING NOW!” but I forced myself to ignore them, and kept inching up on that left leg. Lo and behold, I DIDN’T fall and managed to reach the next handhold.

I was as surprised as anyone. I’ve never done a complete 180 from “I am absolutely sure this is impossible” to “I am absolutely sure this IS possible” so quickly.

It occurred to me that most things worth doing in life play out like this the first time you try it…including starting a business.

• It’s going to feel very unnatural the first time you try it
• What at first seems impossible, later is not only possible but can become easy
• Having more experienced people around you can be an amazing motivator

I bet the first time you make a million dollars it’s the hardest. It probably doesn’t even seem possible at first. But then you see someone else do it right in front of your eyes and it changes everything.

Some people have been asking me how much money this blog makes.

If you’ve been reading it for a while then you know I like making monthly financial statements, so as you might have guessed I track the numbers.

Here they are for August 2008.

Income:

• $215.00 - Book Sales
• $87.70 - Google Adsense
• $53.00 - Private Ad Sales
• $50.14 - Text Link Ads
• $10.22 - Kontera
• $3.50 - Commission Junction
• $1.36 - Chitika

TOTAL INCOME: $420.92

Expenses:

• $10.00 - Hosting with 1and1 (this includes a number of sites, not just BreakingFree)
• $45.00 - Book printing and shipping costs (paperback only)
• $5.00 - E-Junkie for processing book payments

TOTAL EXPENSES: $60.00

NET INCOME: $360.92

As you can see I’ve been trying a variety of ad programs. Some of them are under performing, like Kontera, CJ, and Chitika. I’m always ready and willing to replace these with something that might work a lot better. In particular the 125×125 square ads on the right side of this blog make very little money at all. I was trying a company called PerformancingAds.com last month which brokers 125×125 square ads like that, but they didn’t make a single dollar :(. That space can probably be put to better use.

If anyone has other suggestion for what has made them money on their blog, please post below in the comments.

I don’t think blogging is a good way to get rich quick, but if you enjoy writing about a subject then by all means it doesn’t hurt to make some money on the side.

The real benefit of blogging (at least in my mind) is:

1. Writing your thoughts and interacting with others on a particular topic forces you to learn it better and faster.
2. From a purely egotistical point of view, it just feels good to help other people, get emails from them, and have people listen to what you say.
3. It’s like a personal journal to help you record and organize your thoughts.
4. It’s a good way to keep in touch with people who you wouldn’t ordinarily have time to communicate with on a regular basis. They can still know what’s going on in your life.
5. It builds distribution for your ideas (also known as a permission asset) so that the next time you launch a project there are people who know you and are willing to check it out.

If the non-monetary reasons make enough sense for you to blog, then I think you can wake up a few years later and have a nice fairly passive income. It certainly doesn’t happen quick though, and I’ve still got a ways to go. I’ll keep you posted as things progress and I find other ways to make money from blogging as a side income.

I stumbled across this excellent resource today. It’s called UserVoice and it’s a free tool to collect feedback from your users and let them make suggestions.

The reason why this is so brilliant is that it’s something you know you should do with every project, but it’s low enough priority that you never get around to doing it. Usually I end up doing it informally like by emailing some people, or waiting for a complaint to come in. But there is phenomenal gains in making it as easy as possible for people.

Google used this technique successfully throughout the beta launch of Gmail, which won all sorts of awards for doing exactly what people wanted. Dell used this technique successfully with their site DellIdeaStorm to figure out that their users wanted to buy PC’s with linux on them. They never would have known if they didn’t ask, and now Dell makes a bunch more money offering that product.

No business is perfect when you first launch it. But luckily you don’t need to guess what people want. If you’re good at ASKING your customers what they want they’ll tell you. It’s no secret.

Now you have the same quality tools as Google and Dell to listen to your customers. It’s a fully featured site that has built in voting, anyone can submit a new idea, and duplicates are caught. And it’s free.

There are even two little widgets you can install on your site to help you collect data. One of them you can see on the right side of this blog which I’m using to allow people to suggest new blog topics.

To try it out, click the above image and suggest or vote on a post idea. The second type of widget I’ve installed on my tutoring site to get feedback and suggestions from clients and tutors.

This is really an outstanding site that just made things a lot easier for the small business owner. Nice work UserVoice!