NevBlog

Neville's Digital Surrogate Brain

How My First Online Business Works

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Inundated with emails about this, I decided to show how House Of Rave works. This is just one example of how I use a drop shipping service to make money on the internet. There are still some inefficiencies, but this is the way I handle things now.

I will show what happens from the time I get an order, till the customer receives their order. Everything is done in 5 steps. I can accept, process, account for and send off 2 orders in around 2 minutes with this system. 10 orders will take me about 10 minutes with this system:

1.) Check, View and Review Orders.
I login to the backend of my Shopsite software to see how many new orders I have waiting. I click to view all the orders and do a quick skim of the order information. I am looking for any subtle signs of fraud at this point. After 5 years, I’ve become pretty good.

I can view individual orders or all the orders at the same time:



2.) Charge Orders.
This is the most inefficient step, as I choose to process cards manually to become more familiar with the customer names, locations and spot fraud. I login to my merchant account digital gateway and copy/paste from Shopsite the needed customer information. This step goes quicker than imagined because I use my tablet PC pen.

Here I find out if each order is legit. If the order is declined, I make a note of it and move on. If the order was paid for using PayPal, I login there to find if payment was made. If the order looks suspicious or comes back with negative address verification, I will often call the person on the spot to verify the order.

Manually charging orders seems a waste since I can simply press a “Charge” button instead. However, over time I have noticed that I start to remember customer names, locations and ordered items. Since this step exposes me to the orders, it helps me identify order patterns and it drastically reduces my fraudulent orders (Although this isn’t as much of a problem compared to a few years ago).

3.) Enter Into Accounting System.
This step is very quick and allows me to see my estimated current profit, my expenses, what I owe etc.. I’ve used some pre-made accounting modules for Shopsite in the past, but I like my Excel sheet better. Over the years I have honed it to help predict my profit at the end of each month. I don’t know my exact profit until I get the monthly bill from my supplier, but this Excel sheet gets me damn close.

4.) Create with Word & Send.
This step is the way THIS particular business of mine works. Once an order is ready to go, I copy/paste the information into a Word document and send it via email to my supplier. From there, they print it as an invoice and send the order. This is the way my particular supplier chooses to do business, others may have different methods.


5.)Followup.
My supplier will send me a tracking number once the order is sent. These go into my tracking system where customers can check the status of their order. The tracking module also sends customers their tracking numbers via email automatically.

How I make Money:
I pay wholesale price for the products I send out from my supplier. They send me a bill for the products & shipping each month. I charge retail price on the website and bring in all the money myself. At the end of the month, I cut a check to my supplier and the difference is my income after product expenses. I then subtract my server costs, merchant account costs, PayPal costs and phone bill costs to get my total profit amount.

I’ve made about $800 – $1,000 every month for 5 years doing this. I’ve recently made additions to the site which have doubled my profit to about $1,600 a month. I plan to make this side income generate about $5,000/month in 2006.

I’ve had other online businesses which operate differently, but this process works best for HoR. There is still a lot of room for improving the efficiency of this system, and in 2006 I’ll have time to concentrate on it.

One thing I find the funniest about this business was my first order. I had no clue what to do with it. I just got the business running first, and was forced to figure the rest out very quickly.

Hopefully this helps someone further understand the inner workings of this type of small business!

Increasing Online Profits Further

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One business I own and openly talk about is House Of Rave .com.
It has consistently made between $800 – $1,000 every month for the last five years. I particularly like this business because it’s extremly simple to run and I have no inventory.

I’ve been very satisfied doing a minimal amount of work on House of Rave and making a few hundred dollars a month, but I am graduating this December and will have more time to focus on my businesses. I recently set out some Forecasted Goals for HoR and how I would go about accomplishing higher profits.

On September 2005, I set my sights to start breaking the $1,000 barrier per month by years
end. In October I beat my forecast and brought in $1,120. In November I beat my expected forecast, bringing in an HoR record of $1,630. This increase in sales seems to be directly related to the changes I’ve made to make HoR look more consistent and have faster customer support.

My actual income for November 2005 was higher than $1,630, and I report the actual figure on my tax statements. However, I always understate my profits so I don’t withdraw all of it from the HoR account. This is because online stores tend to surprise you down the road. For example, I may bring in a $200 order today which gets charged back for 3 months down the line. Since I understate what I can withdraw from my business account, I have extra cushioning building up for those surprise expenses.

The good thing about the business is I don’t have any inventory, I’ve had a great dropshipper in California who does all of that. The negative side is I haven’t seen 99% of the stuff I sell. To increase sales of already popular products, I’ve been ordering my own products and doing photoshoots with my ghetto photo studio.

I’m currently taking pictures, videos and writing my own descriptions for many of these products. I will keep adding 1 or 2 a week when time permits.

I did a photoshoot, video and instructional post on this Scrolling LED Message Belt Buckle. The photos were taken in my room and edited with Photoshop. The video was also taken in my apartment.

A customer emailed me while I was doing the photoshoot saying she had lost the buckle programming instructions, so I decided to make a full instruction manual for the customers. The original instructions are a little hard to use and have some confusing grammar, so this should help people out.

The video I took of the belt buckle features the now World Famous Crotch of Neville Medhora:

Another product I enjoyed playing around with were the Ultra High Intensity Glowsticks. It’s like a regular glowstick but they burn themselves out within 5 minutes. I ordered these to see how bright they were. I took some photos and two videos demonstrating the brightness.

The first video shows the cracking of an ultra bright glowstick, and the second video shows my skills at swinging glowsticks. I can’t afford real actors or anyone with talent, so I enlisted one of my roommates as camera man and shot the videos myself. This was a zero budget production, so I had to settle for that! I simply used my Casio Exilim for filming.

The last product I’ve recently updated was the Glow Paint I carry.


I added some nice before/after shots to show the effect and give HoR a free plug.

There are several reasons I am adding my own content:
  • Search Engines. A good amount of unique content on a page helps higher positioning.
  • Branding. House Of Rave needs to become more engrained in customers minds.
  • Customer Comfort. The customer must know that HoR is a real business, and unique content should help. This is especially important for online retailers.
  • More Information. The customer can get a better idea of what a product is with additional forms of media and descriptions not found anywhere else.

Hopefully enhancing the product pages with unique content will help increase profits in the long run. I see no reason why HoR cannot be a $5,000 p/month part time business by the end of 2006.

Jon Brelig, Kunal Das

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Through college I’ve met very few people who have made much money through entrepreneurial ventures. Even in many entrepreneurial clubs there still few people who have actually done much.

I like to observe people who I think “have it in them” in order to learn a way to improve my own chances of success. So far I’ve seen two people I KNOW will be successful in the future:

Jon Brelig:
Strengths: Intricate computer programming knowledge.
It’s very rare to meet someone so good at programming who also has a keen business sense and extroverted personality. Jon’s current claim to fame is SkiReport.com, one of the largest ski-condition websites in America.

Jon is still a student, yet makes serious cash because of the automated system he built for SkiReport. Of course he won’t just let his cash flow top off, so he is currently re-doing the entire site to accept reservations.

Prior to SkiReport, Jon had a web solutions company which did tons of business in the Colorado area. He was a step above all the other high school kids who designed a few websites and claimed they had a ‘web solutions’ company (like me).

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Kunal Das:
Strengths: Networking skills, leadership and persistence.
This guy knows pretty much every person in the world. His network is extremely large, and he knows how to meet new people. He is a natural born leader and manager and has started several businesses with many employees to show. His current project is Grade-A-Books.

Kunal buys back books for more cash than the Co-Op, then sells them for cheaper, right on campus. Since the Co-Op gets such a high profit margin from their used books, Kunal can afford to accept a smaller one.

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One thing I’ve picked up from Jon’s SkiReport is to automate everything. He has spent considerable time and frustration creating a phenomenal backend system, and it allows him to get things done extremely quick with little effort. Kunal demonstrates the need for being a great leader. His current and past businesses have helped him develop great leadership skills which are crucial for running a business.

“Surround yourself with those smarter than you”

Marketing – UT Aquatics Center

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I love seeing new ways of effective marketing, especially on a large scale. An example I’ve seen lately is the brand new outdoor/indoor aquatics complex here at the University of Texas.

Two buildings were demolished to make room for this structure in the epicenter of the UT campus. It serves absolutely no educational purpose and will probably distract students from school….yet it will make the UT campus education level go up.

UT Austin has become one of the most desirable colleges in Texas, causing record numbers of applications. They have cut the number of admitted students each semester, yet are getting more and more applications. Demand is way up and supply is down.

Because of this, UT is getting phenomenally difficult to get in. The increased competition is allowing only very well qualified students into the college. To further increase this demand and therefore caliber of students, UT Austin has created this additional ‘fun’ feature to the campus.

The complex was just finished and officially opened. It has a 12 lane lap pool, a giant hot tub, a “beach” pool and a volleyball pool. There is also a cafe and tons of lounge chairs. When potential freshman come for tours, this should definitely impress them.

Removing books from libraries, putting coffee shops everywhere, adding new resturaunts, free transportation to 6th Street and now a giant aquatic center in the middle of campus….it’s a brilliant way to increase competition for UT admission.

I could learn a thing or two from this method of indirect advertising as I am rolling out some new businesses in 2006. I’ve already come up with some indirect ways to advertise. This is sort of like the free videos and pictures on House Of Rave.com. Most people will view them and leave, but some will actually stay and buy something.

Just something to keep in mind!

Graduating – Outsourcing – Goals

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I’m graduating in December and I couldn’t be more excited.

Instead of finding a good job, I’m taking a road I find more interesting and exciting: making my own way.

Of course a lot of people would like to do this, but many cannot. I feel I’ve worked enough towards this goal to allow me to do this successfully:

  • Supposing EVERYTHING goes wrong, I’ve built up a modest amount of money to live on.
  • I’ve expanded my network of people to a very healthy level which means more opportunity, and if I DO need a fixed income job, I could get one.
  • I’m young, unattached and able to rough out tough times if needed.
  • I’ve built up my arsenal of experience to make small amounts of money here and there in case everything goes completely wrong.
  • My income currently exceeds my expenses + monthly savings + then some.
  • I’ve already split up my accounts to help see exactly how much money is allocated to each type of expense.

Not only have I setup the foundation for being a full time entrepreneur, but it also suits my personality: I love uncertainty, I get bored very quickly and I like dabbling in many things at once.

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Lately I’ve been exposed to a lot of oversees computer work. These are basically freelance computer programmers and web designers who work from India, Russia or other countries. I must say I’ve been very impressed with the quality and speed of their work.

People complain about outsourcing, but I’ve found it very difficult to find skilled people in the United States with the same amount of computer knowledge and quick service.

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I’ve missed a few goal deadlines including a new business I am pretty excited about. I’ve been redesigning a whole new backend and ordering system for it. There are some unique features I need, so custom programming must be done.

I’ve also missed my $7,500 p/month by 11-17-2005 goal, however I am not too far off. On this site, I only list personal income sources. If I make money from someone else or with someone else, I do not document it on this website. I have a strong feeling that 2006 will be a great year for me!

-Nev

New scooter, Paid Writing, Increasing HoR Sales

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I bought yet another scooter, same year, same brand. I saw it on Craigslist going for a great price, so I withdrew cash from the bank and bought it.

It hardly had any miles on it, and it runs like brand new. The guy selling it was a successful lawyer who stopped riding after he and his wife had a son. He just wanted it out of his garage, hence the great price I got.

I now own two 2003 Aprilia Scarabeo 50’s. My original one is awaiting a part from Italy that will arrive sometime this month. Once the work is complete, I will sell one of the scooters. I might also wait a few months for it to get warmer and then sell it (You get better prices).
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Recently I have been getting a lot of offers to write for stock market websites. One offer I got was from ADVFN.com that pays $500 a quarter or $2,000 a year. According to their agreement I must write a one paragraph post on their website about the stock market every day.

SO I would get $8 a day for writing one paragraph a day, 5 days a week….this sounds too much like a job.

…and honestly, I don’t want stock advice from someone doing it for the pay. I’d rather get advice from Kirk. He’s one of the few stock market writers that makes his money by actually trading stock. I’ve done ADVFN a favor and disqualified myself by discussing the terms:

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Ever since I made up my mind to increase profits for House Of Rave, it has worked.
Here was my hopeful profit chart:

I set my October profit goal at $975, and I slightly surpassed that goal with a total profit of $1,120 for October. Over the next three weeks I will be making more changes that should hopefully boost my profits even more. I enjoy the ease of running HoR, and I know I can increase profits enough to completely cover all my monthly expenses after graduation.

Meeting Michael Dell and Lance Armstrong

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7:00pm my phone rings and “Bob” calls me from his regular hotspot, a swanky hotel, saying he happened to notice a large number of high powered individuals heading to the ballroom downstairs. Party crashing time. I took a quick shower, threw on a suit, got my roommate to tie my tie (because I still don’t know how) and drove to the hotel.

I met “Bob” in the lobby as dinner was being served. The place was packed and every seat was taken except at one table. We went up to the table, “Bob” did a little talking, and in an instant we were having a conversation with people we didn’t know, at an event we knew nothing about, and having a delicious meal.

After scoping out the room, it became very apparent that this was a big event with big people. In fact, while opening the bathroom door, I literally bumped into Lance Armstrong!

The event was in honor of Michael and Susan Dell for their philanthropic contributions. There were three billionaires in the room, the biggest being Michael. There was a movie about the Dell charity, several speakers and then they both gave a speech after being honored.

Michael Dell’s wife, Susan, is a tri-athlete and frequently goes bike riding with Lance Armstrong. Here is a picture of Lance, Susan and Michael together….well, their backs at least:

Later in the evening I got to meet Michael Dell, the famed founder of Dell Computers who started his company from a dorm room at the University of Texas. I talked with him briefly and found him to be a very approachable and extremely nice guy.

After the event was over, “Bob” and I headed back upstairs to the hotel lounge to finish up the night with an evening cocktail. That suit cost me $200 and the drinks cost me $25, but now I had the opportunity to meet Lance Armstrong and Michael Dell.

Thanks “Bob” for another great event!

Henry Juszkiewicz – CEO of Gibson Guitar

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The Texas Union frequently brings CEO’s and other speakers to UT, and this Thursday night was a speech given by Henry Juszkiewicz, the CEO of Gibson Guitar who took the company from small and unprofitable to the most recognizable brand of guitar in the world.

He claims his passion for music coupled with his love for electronics since he was a kid helped him excel at running Gibson. He strongly emphasized that true success is best accomplished with passionate leadership.

In his third year at Harvard Business School he became curious about buying/selling companies. His professors told him, “Just find a good lawyer.” Not satisfied with this answer, he went into investment banking for a few years to learn about buying and selling companies. He later tried buying several at-risk companies and restoring them. Like most successful people, he failed at some and succeeded at some.

A while later he was informed that Gibson Guitar Corp was for sale, but no one would buy it because it was a financial disaster. He moved to the Kansas to live near the company headquarters and observed the operation for a full 6 months while drawing up a concrete business plan. Once he purchased it, the company became profitable within 30 days because of his hard work and research. Since 1987 he has grown the business 20% every year.

Some of the main pieces of advice he gave were:

  • Have the tenacity and boldness to do things others won’t.
  • What’s possible is only what you think is possible. He said he wanted to grow the company to impossible levels. He has now far exceeded everyone’s expectations.
  • Only allow people in your company who believe in your vision. If they don’t believe in the company, they must go.
  • Constantly grow and innovate.
  • Give back to the community that helped build you.

Of course I had to get a picture with him. I actually brought my own guitar I’ve had for over 10 years to the speech to take a picture with:

The pictures came out….interesting. He covered the head of my guitar in both pictures because it wasn’t a Gibson!

Mike A. Myers – University of Texas

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I had the opportunity to listen to Mike A. Myers, an extremely successful business man and community developer. He has developed many high-end neighborhoods and golf courses all around the nation, especially in Texas, including several by my home in Houston. He owns several banks and has been involved in tons of other investments. He gave a large donation to UT to help construct the Mike A. Myers Track and Soccer Stadium:

He is also on the board of many companies and is very involved with the university.

A Quick Background on him:
-He attended UT and later went to law school here also.

-One summer he moved to Michigan to sell books door-to-door. He said still to this day he has never experienced so much rejection as his door-to-door days. He also said learning how to handle rejection helped him immensely in the business world.

-In his junior year of college he started a mobile catering service which ended up being pretty successful.

-He then opened two restaurants, including one very speculative property inside a military base. Both were wildly successful and he had over 40 employees.

-At a very young age he got several high-up internships in Washington D.C.

-After making loads of money from various investments, he decided to build a 750-acre luxury community in Dallas. He put up much of his own money, totaling about 25% of the total capital. He raised the other 75% and got started with the project. One of the largest oil price spikes in history struck and vastly increased the cost of the project, nearly wiping him out completely. In the end he came out successful.

-He later started a bank which has since expanded to several banks.

Towards the end of his speech he said the following five things were his own rules for success:

  • Find a mentor.
  • Keep your options open.
  • Have as few responsibilities to other people as you can.
  • Stay focused.
  • Get Lucky.

He was a great speaker and I definitely learned a lot from his talk (especially some very interesting facts about real estate development). At the end of the speech I spoke with him for a while, discussing his developments around my area and joking about Herb Kelleher. I also got a nice picture with him to add to the collection:

Party Crashing Fashion Show

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I was informed about another charity event where many wealthy Austinites would be Saturday night for drinks, a fashion show, dinner and dancing. I always jump at chances like this to meet powerful people, so naturally I decided to crash it.

Crashing this party was a little different because it was black-tie attire only and held at a secure venue. Three days before I had a tuxedo tailored at K&G Men’s store. The entire ensemble including the tux suit & pants, cufflinks, bowtie and cumberbund cost me around $200 after tailoring. Not too bad, especially since there will be lots of black-tie events during the holiday season.

Now that I have a suit AND tuxedo, I’m properly outfitted to attend upcoming events. Looking the part really helps when attending a fancy-shmancy party. When I was checked at the front of the base, they checked my ID, saw I was wearing a tux, asked me if I knew where my table was (I said yes) and they handed me a gift bag filled with Grey Goose, assorted bottled waters, pens and all sorts of other goodies. “Bob” had given me a table name to use, I was wearing a tux, sounded like I knew where I was supposed to be and acted as if I belonged there…and it worked.

I pulled up to the event, and my car was valeted because there was no self-parking. A photographer at the front entrance took my picture by one of three huge tanks, and I asked him to also snap a picture with my own camera:

I ordered a martini, Grey Goose of course because they were partly sponsoring the party and began to mingle. I found the crowd very easy to talk to, and striking up conversations was simple, especially since UT had just won a football game an hour earlier.

After cocktails, the crowd entered a large aircraft hangar (I think) which was converted beautifully into a large fashion show runway. There was loud music playing and the whole place had a very New-Yorky feel to it.

After the fashion show, which was actually pretty cool, everyone was ushered to several enormous and connected tents for dinner, dessert and dancing. There was a silent auction, a live auction, and raffle. The main prize for the raffle was one of three Mercedes cars. I found out the event was being coordinated by the Four Seasons, so it was very nice, and MUCH more elegant than the pictures show:

I knew a few people before I came to the event, but their table was already full. Also, my whole goal of attending this was to meet NEW people, so after some mingling with the crowed I was invited to another table for dinner.

After desert, coffee and some dancing people started to leave. The valet area was around several M1 Abrams tanks….I couldn’t resist climbing on top of one and getting a picture!

I left the party with several contact numbers, new friends, some interesting business ideas, a full stomach and having had a great time.

I must remember to thank “Bob” who told me about the party in the first place. He’s one of the people “In the know” about all these events, and is always gracious enough to inform me about them and help me get in. He also introduces me to his well-established network of friends and mentors, he’s a really great guy…always smiling!