Already started your own business, or thinking of doing so? Want to go “legit” and form an LLC or corporation? I received an heads up from about a promo next week Tuesday where you can get a free incorporation service worth $149:

On Tuesday, November 11, 2008 from 6am to 6pm (pacific time), MyCorporation is offering a special promotion titled FREE FOR A DAY. For one day only, MyCorporation will process a new Corporation or Limited Liability Company for FREE. That’s a savings of $149 off regular service fees (note: document shipping, state fees, publication fees, and additional product fees are additional). This is the first time this promotion has ever been offered!

MyCorporation is owned by Intuit, of TurboTax and Quicken fame. (And more recently, of free Quicken Online.) These types of pseduo-legal services are a middle ground between filling out the filing paperwork all by yourself and hiring a lawyer to do it. They perform services like checking your name to make sure it is not violating any other trademarks, making sure you filled out the forms with no common errors, and helping you start out with all the additional paperwork obligations of a separate legal entity.

Although the standard advice always seems to be “go with a lawyer”, I ended up incorporating my own home business in 2006 with one of their popular competitors, LegalZoom. I was very satisfied with their service, and even talked to a real person on the phone about some details. (They do a lot of cheap wills and trusts too.) I think I paid about $200 + filing fees. A lawyer would have cost around $1,000 + filing fees.

The decision to incorporate is not always simple, but I wanted to throw it out there so interested folks can think a bit about good reasons to incorporate, whether to go LLC or corporation, possible available names, and other details. One book that I recommend is from Nolo Press is LLC or Corporation? How to Choose the Right Form for Your Business. I chose to go the S-Corp route primarily to reduce self-employment taxes. The window for this promotion is small, but you still have to pay $50+ in state filing fees, so don’t take it too lightly. Offer is supposed to show up on the website on Monday.

Update: MyCorporation is now running a promotion where they havefree filing services for all of December with coupon code MYGIFT!

It’s not every day that you get to interview someone who:

• started out as an Emergency Medicine doctor in her native country of Russia,
• went on to be a body double for Cindy Crawford,
• is a former public relations executive,
• has been reading my blog for nearly a year 😉 ,
• … and now spends her time twisting latex balloons.

Irina Patterson is a balloon artist, usually working at upscale events like cocktail hours, galas, art dinners, or yacht events. She is a great example of how following your passions and having an open mind can lead to a fun and flexible self-employed business. Although she admits that it is not passive income, she has managed to build what she terms a “money printing press” since she has all the work she can handle.

I wanted to learn more, so below is an e-mail interview that I recently conducted with Irina:

How did you get started as the “Balloon Lady”?

Believe it or not, I have never seen balloon animals until about 4 years ago. I don’t have kids and I don’t go to the malls. I saw balloon animals for the first
time at a private party and totally fell in love with the process. I love bright colors. It just made me happy. I guess it makes happy many other people too. Otherwise, how can you explain the demand for balloon art entertainment even now, when people cut down on everything.

How long did you practice making balloons before you started to earn money doing it? Did you worry about not making enough money at it?

I practiced at home for about a week. Then I went to a strip mall. Paid them $75. That was their monthly fee for allowing me to make balloon art
for tips. I made that $75 in tips right back on the first day. At the time, I didn’t know better at the time. I only paid fees like that for about 2 months.

You can find places where you can make balloon animals without rental fees. You can find restaurants that will PAY you to entertain their customers. In Miami restaurants usually pay $50-100 per 3-4 hours on a weekend + most customers will usually give a tip. You can expect to make about $ 150 for about 4 hours as a restaurant balloon artist.

But the best part is this. While you are entertaining at a restaurant, you are also marketing your private party entertainment. Private parties will always give you better return on your time. In Miami, on average, a balloon artist can earn $100-200 per hour at a private event. And you are usually booked for more than one hour.

I didn’t have to worry about making money as a balloon artist. At the time I was full time employed as a PR executive. But I couldn’t believe how easy it was to make money as a balloon artist.

[Read more…]

A few months ago, Dan of SuperiorTitanium.com approached me about advertising rates for his website selling titanium money clips. Although money clips are somewhat financially related, I thought it would be an even better fit to do an interview with him in exchange for some publicity. (No money changed hands at all.)

I’m always interested in the what I call micro-businesses run by one or two people, especially those selling physical products. Mainly, this is because I’ve always been turned off by selling physical goods, and have preferred to make money by either selling advertising online or by performing services. Let’s get to the interview:

Where did you get the idea to sell titanium money clips? Why titanium?

I’m an mechanical engineer and I’ve always had an interest in all things mechanical. Titanium itself is a very interesting metal, especially; since it is never found in it’s pure form and is basically a black sand prior to processing. To me it is pretty amazing that we even have titanium as a metal now and it was truly a major feat of engineering to get the process for refining titanium figured out.

I used to carry a leather wallet around, but it was pretty bulky and uncomfortable to have in my pocket all the time. I decided to make a money clip out of titanium, since it is very springy and will not fatigue and break over time like steel will. Titanium also allows the money clip to hold more and still spring back to its original form allowing me to hold my bills and credit cards along with my drivers license! The money clip worked very well for me and my friends liked it and they bought some.

I decided to try and sell them online with a very basic website and using Paypal to accept payments. I tried some advertising with Google Adwords to get traffic to the site and happily people purchased the titanium money clips and there were repeat buyers who were buying them for their friends. This inspired me to keep selling them and to not only improve on the design, but to add in different variations to suit different tastes. Of course sales were very few at first, but I stuck it out and it has paid off in the long run.

Your site looks very professional. Did you design it yourself or hire somebody?

The current website is designed by a very capable website design company and represents A LOT of work over time by myself and the designers. It was very important to find a company who was very good to work and fast to respond to questions, etc.

Is this your first online business?

This is my first online business although it is the 4th website design. I have a lot of different ideas, but I’m trying to stay focused in order to really build the business and not get spread too thin.

How long have you been running this site? Do you have others?

This site has been running for about 5 years now and although I’ve had many other product ideas I’m sticking to this one for now. My other ideas would require new websites, so there will likely be more sites in the next year or two.

Is this your full-time job? How many hours a week does it take to maintain and run?

It’s not a full time job and is run on 10 to 15 hours per week (with help), although the more time spent promoting the website the better the sales are, so I usually spend more time than that.

Do you dropship or do you hold your own inventory?

We manufacture our own money clips and hold lots of inventory, since everything is now made in batches for efficiency. This allows us to tightly control quality, delivery and all aspects of the business. I believe this is key to a strong business and quality products.

Can you give a range into the gross annual income of your website? (Ex. $1,000-$10000 or $10k-$50k or $50-$200k)

(declined to answer)

What has been the most difficult challenge in your venture?

The biggest challenge has been making people aware of the existence of titanium money clips and the benefits over traditional money clips and wallets.

What advice would you give to someone who wants to start a business selling consumer products online?

Do something you love to do because it will take passion to make your business a success and it is true that it doesn’t really feel like work (well 90% of the time it doesn’t!). You will also need to accept that it will take a long time to make money especially if you have a new product that people are not aware of. The money will come, but you will need patience and determination.

Any other tips?

Listen to your customers, since they are the ones who are putting/keeping you in business. I always try to be fair and reasonable because every satisfied customer is like a sales person out there and over time it is a powerful force working in your favor.

— end of interview —

Recap
I want to thank Dan for the interview. Here are the main take-aways for me:

1. Had an idea within personal sphere of expertise (mechanical engineering), and made a prototype.
2. Tried selling to friends first, then expanded.
3. Keeps trying to improve website.
4. Make product himself, and controls inventory directly.
5. Not a full time job.
6. Most time is now spent on marketing, not product development.

Now that I write this, I have some additional follow-up questions like what shopping cart backend software he uses. If you have some questions as well, please leave them in the comments and I’ll try to get them answered if they aren’t trade secrets. I haven’t had a chance to try out the product myself yet, but be on the look out for an upcoming titanium money clip giveaway. 🙂

If you liked this entrepreneur interview, also check out this interview with Dennis of OneGreekStore, a custom apparel store for the college Greek community. Finally, if you’re an entrepreneur with a unique story and would like to be interviewed here as well, please feel free to contact me.

There’s always the weekly garage sales to dig through, but if you are after some higher quality furniture, antiques, or collectibles, this Money magazine article about estate sales suggests another option. Estate sales are similar to garage sales, except the process is more formal and many times everything in the entire house is marked with a price tag. You walk in, snoop around, and pick up what you want. Everything often must be sold within the 1-3 day sale. It’s usually after a death, but there might be a number of other causes.

The article has a bunch of good tips, including:

• Call head to find out what specific items are available beforehand, so you can do your homework.
• Arrive either really early to get the best selection, or really late for the best haggling.
• Bring tools like a big tote bag, bubble wrap, a flashlight.
• Use the internet or phone-a-friend to prices things instantly while browsing.

To find a sale, there are newspaper classified ads, Craigslist, and local liquidator firms. There’s also EstateSales.net, which if you are in the San Francisco Bay Area there is a sale of the contents of four model homes Friday-Sunday in Discover Bay. (Wonder if this indicates good or bad news?) I like the idea of good furniture at steep discounts! I hope it’s better organized than this picture from another listing in the area:

Also, I found that it’s actually better to use the “Find Companies” section of EstateSales.net and look for local liquidator firms; they usually provide a link to their websites. I have found several estates sales which are only listed on the individual firm websites. Anyhow, although I don’t think I’d be a good antique flipper on eBay, I still think it would be interesting to go to one of these. Anyone have any good stories?

Thanks for all the diverse and interesting insights on teaching kids about money, I learned quite a few things myself. As I was trying to think back and remember what I personally learned – or wish I learned – about money in 6th grade, a couple of amusing stories came to mind. They may not be all that helpful to young folks (quite possibly the opposite), but I’ll share them anyway since I am curious to see if others had similar experiences.

Flips and Underage Gambling
The allure of gambling knows no age limit. For those that haven’t heard of it – I have no idea how widespread it was – “Flips” is a simple game where first one person flips a coin, and then the second participant flips another coin of the same type. If the coins match, either both heads or both tails, then the 2nd person wins both coins. If the 2nd coin does not match, the 1st person wins both coins. Quarters seemed to be the coin of choice. For a while I was regularly losing or winning a few dollars each day playing Flips, which was a lot of money to me at the time.

The main idea was for the 2nd person to be able to control Heads or Tails, with each us having a secret flipping “method” much like craps players have when throwing dice. As the game got more and more popular, people would start to create their own cheats. One kid brought a double-sided quarter with heads on both sides to school. He was promptly beat up and the quarter was stolen, never to be found again. After that, we started to check coins. 🙂 In addition, the more adventurous kids would even play with dollar bills, and people quickly found that folding the bills a certain way would help the bill land on a certain side. Lots of new ground rules were made up on the fly.

Lessons learned? During a particularly bad losing streak, I was unable to eat lunch for a couple days. I stopped playing cold turkey. What did I learn? Gambling is a rush, but that’s not always a good thing. Someone else is always trying to gain an edge, fair or unfair. Don’t bet what you can’t afford to lose.

Pre-teen Candy Mogul
My second memory was of a 12-year old entrepreneur. Chip was a kind of a big kid, he looked like he had been held back a grade once and could have easily been the school bully. Instead, he sold us candy. I remember in particular he sold Charms Blow-Pops for 25¢ each and Crybaby Extra-Sour Gum and Atomic Fireballs at 10¢ each. I was a regular customer, as was most of our school. His backpack was 80% candy and 20% books.

I remember thinking he was pretty smart back then, but as an adult I am even more impressed.

• He had a monopoly. Who else could sell candy directly to kids at school? Competition is also rare when you weigh 20lbs more than everyone else. Besides, it was against the rules, and I was too scared to try and pull something like that off.
• Smart pricing. He chose simple pricing, and at about the same price as 7-11 convenience stores. He even gave discounts for bulk purchases – instead of 10¢ each, you could get 3 for 25¢. Instead of 25¢ each, you could get 5 for $1. Even us slower folks could figure out that was a better deal.
• Smart buying. I even recall running into him at Sam’s Club buying candy. I would guess that’s as close to wholesale as you can get as a 6th grader. This also meant that his parents were in on the scheme, or even encouraged it?! Ethicists would go nuts.

Running rough numbers in my head, I would say he maintained a 100% profit margin markup on all his candy. That gum couldn’t have cost more than 5 cents apiece. He probably made around $10-$20 a day in net profit, tax free! Sure, this was probably illegal in various ways – no business license, on school grounds, too young, non-existent tax reporting – but I like to imagine Chip as the CEO of some huge multi-national corporation now.

Is it bad that both of these stories involve illicit activities?

The StartupNation Home-Based 100 is a list of the 100 “best” home-based business. More specifically, it’s composed of ten Top-10 lists in these categories: Best Financial Performers, Most Innovative, Highest Vote Getters, Boomers Back In Business, Greenest, Yummiest, Wackiest, Grungiest, Worldiest, and Most Slacker-Friendly.

Many of the businesses seem to be based on an practical idea extended from their existing jobs. Others are hobbies or passions that grew into a profitable venture. Here are some of that I found most interesting to me:

The Welcome Committee. This company will personally greet new homeowners, introducing them to the community and also local advertisers who sponsor them (and I guess the gift baskets).

“Newcomers spend more in the first 6 months than established residents spend in 5 years. In total, newcomers spend approximately $100 billion on move-related goods and services annually. Newcomers have no shopping loyalties in their new community and are eager to receive information for products and services they need.”

Lesson: Target a specific situation where people spend unusually large amounts of money. An existing example is weddings.

No Throw. Kids like to throw their bottles. “We have designed a velcro strap that will fit tightly around and hold onto children’s bottles and sippy cups. The NoThrow’s leash styled handle can be slipped over any seat belt that is attached your child’s car seat, stroller, bike seat, high chair, baby-backpack, you name it!.” Yes, it’s sounds so simple it’s funny. But they just got picked up by Walgreens, so they’re probably laughing all the way to the bank…

Lesson: Cute, useful things for children are a huge market. We aren’t even parents and we just bought 3 different kids toys/gifts within the last week. Baby showers, 1st birthdays, 2nd birthdays…

Whiner and Diner. These guys make raised wooden pet bowls and pet beds. “The products are hand-crafted in the U.S. from recycled wooden wine crates of prestigious European and Californian vineyards.”

Lesson: Okay, I know this may sound useless to a lot of people, even some animal lovers. I think they look very nice. (Of course, I put my dog’s bowl over a big roll of duct tape to raise it up…) But I really do think high-end pet products are a great idea for a home business. You need a unique product that can’t be mass-produced and with a large profit margin to make it worthwhile.

She grew up in a working-class household near Detroit, with divorced parents who argued about unpaid bills. At 14 years old, she had to ask her mom to buy an $8 domain name for her. Today, at 17, she owns her own 2-story house and is head of a company that earned over $1 million in revenue in 2006, with even more projected for 2007.

Who is she? Ashley Qualls, owner of WhateverLife.com, a MySpace-related website that get over 7 million unique visitors each month. That’s more than Oprah.com and CBS.com. She’s had a multi-page profile done in Fast Company magazine and has been written up in other local publications. I actually saw her story highlighted briefly while watching CNN.

This piqued my interest – I mean, she seems like a good web designer with decent graphic design skills. But good designers are everywhere now, she had to do something special in making her millions. What was it?

She piggy-backed onto the next big thing
Without MySpace, this whole thing might not have happened. I mean, I still do not understand the appeal of MySpace. It’s cluttered. Music plays automatically when you visit someone’s page. The blogging platform is confusing. Who wants to read 100 people saying “Thanks for the add!” or linking to the same 10 blinking images over and over?

She took the initiative with her hobby, and let it grow
The whole thing just started out when she made a few custom MySpace layouts for her friends, and exploded from there. But she could have easily have said “Nah, I’m bored. Let’s go to the mall.” after making one or two. But instead she made layouts for everyone in her high school, and then she took it online.

She knows exactly what her target audience wants. It’s like the movie Big with Tom Hanks, when the 12-year old kid becomes vice-president of a toy company.

She took a risk and went full-time
She actually dropped out of high school during her sophomore year, instead going the GED route and attending community college now.

She’s still thinking big
She’s not just stuck making MySpace layouts forever, either. For one, her templates are compatible with many other social-networking sites besides MySpace. Recently, she hired developers to create an application that lets her users build their own stylized websites. She has an online magazine up and running. Next up, she plans on selling cell-phone wallpapers at $1.99 a pop, so people can extend their custom themes to their phones. She’s the Teen Martha Stewart.

Overall, I would say the best lesson to take from Ashley’s story is that she caught the MySpace wave early and ran with it. I would have totally missed it. Anyone want to tell me what the next big thing will be?

I hear the term ‘passive income’ thrown around a lot. But what does it really mean? Is anything that you earn outside your day job considered passive income? Let’s look at some popular things that are associated with the term.

Dividend Income From Stocks
First, one must come up with money to buy a share of a dividend-yielding stock. That probably took some work. But what’s so special about a dividend? There are two components of return from stocks – share appreciation and dividends. All other things held equal, when a stock gives off a dividend, the share price drops commensurately. For example, if the share price was $100 and it gave off a $1 dividend, the share price would then be $99. So it’s not like the $1 came out of thin air.

If you had 100 shares of a $1 stock, you could simply sell $1 and get $1 of cash and $99 of stock as well. In fact, sometime dividends are simply paid in the form of more shares of stock. The way I see it, if you think dividends are passive income, then you should treat any increase in share price as passive income as well. Coupon payments from bonds and interest from savings accounts would be in the same group.

I personally prefer to simply call all these things investment income and keep it separate, as learning about investments is more of a requirement nowadays, as opposed to an optional entrepreneurial venture like the other activities below.

Creative Works – Songs, Books, Patents
Let’s say you compose a song, or write a book. Every time someone plays your song, or buys your book, you will get a small fee. But what if you spent 1,000 hours writing that book, and you only earn a $100 each year from royalties? Is that really passive? Sounds like a lot of research and hard work to me. On the other hand, the Beatles will be making millions for their great-great-great grandchildren. When does it cross over to becoming passive?

Take blogging for example. You spend hours writing, reading, commenting, dealing with spam. Divide your advertising revenue by the hours spent, and if you’re really lucky, you’ll be above minimum wage. And then there still ain’t anything passive about it!

Real Estate Rental Property, Vending Machines, Car Washes
Another group with similar characteristics… You put up a relatively large sum of money upfront to pay for the rental property, vending machines, or car wash property and equipment, and after that you make money from rent, selling soda/snacks, and water/soap, respectively. But there is still work to be done. If you don’t manage your properties, restock your supplies, or maintain your equipment, things start falling apart fast. Even if you do all these things, there will always be the occasional breakdown or emergency to give you headaches.

My Alternative Definition For Passive Income
Now, I don’t doubt that many people make a ton of money with things like rental properties and writing books, with a relatively small amount of ongoing work. I’m still definitely interested in pursuing such activities! It should be obvious that I love making extra money on the side as much as anybody. But I don’t call anything I do passive income. I can’t really think of anything truly passive, besides maybe winning the lottery. So I suppose “passive” really just means “less work than other stuff”.

Accordingly, here’s my two requirements for me to consider labeling an activity as “passive income”:

If you only satisfy the top one, then it’s just a really well-paying job. If only satisfy the bottom one, you wouldn’t be using your time efficiently, which wouldn’t make it very passive at all. Would you agree?