The 4-Hour Workweek: Escape 9–5, Live Anywhere, and Join the New Rich - Expanded and Updated

Outsourcing Life. OFF-LOADING THE REST AND A TASTE OF GEOARBITRAGE

If I told you this story, you wouldn’t believe me, so I’ll let AJ tell it. It will set the stage for even more incredible things to come, all of which you will do yourself.

My Outsourced Life

A true account by AJ Jacobs, editor-at-large at Esquire magazine (ellipses represent passage of time between entries)

IT BEGAN a month ago. I was midway through The World Is Flat, the bestseller by Tom Friedman. I like Friedman, despite his puzzling decision to wear a mustache. His book is all about how outsourcing to India and China is not just for tech support and carmakers but is poised to transform every industry in America, from law to banking to accounting.

I don’t have a corporation; I don’t even have an up-to-date business card. I’m a writer and editor working from home, usually in my boxer shorts or, if I’m feeling formal, my penguin-themed pajama bottoms. Then again, I think, why should Fortune 500 firms have all the fun? Why can’t I join in on the biggest business trend of the new century? Why can’t I outsource my low-end tasks? Why can’t I outsource my life?

The next day I e-mail Brickwork, one of the companies Friedman mentions in his book. Brickwork—based in Bangalore, India—offers “remote executive assistants,” mostly to financial firms and healthcare companies that want data processed. I explain that I’d like to hire someone to help with Esquire-related tasks—doing research, formatting memos, like that. The company’s CEO, Vivek Kulkarni, responds, “It would be a great pleasure to be talking to a person of your stature.” Already I’m liking this. I’ve never had stature before. In America, I barely command respect from a Bennigan’s maître d’, so it’s nice to know that in India I have stature.

A couple of days later, I get an e-mail from my new “remote executive assistant.”

Dear Jacobs,

My name is Honey K. Balani. I would be assisting you in your editorial and personal job…. I would try to adapt myself as per your requirements that would lead to desired satisfaction.

Desired satisfaction. This is great. Back when I worked at an office, I had assistants, but there was never any talk of desired satisfaction. In fact, if anyone ever used the phrase “desired satisfaction,” we’d all end up in a solemn meeting with HR.

I GO OUT to dinner with my friend Misha, who grew up in India, founded a software firm, and subsequently became nauseatingly rich. I tell him about Operation Outsource. “You should call Your Man in India,” he says. Misha explains that this is a company for Indian businessmen who have moved overseas but who still have parents back in New Delhi or Mumbai. YMII is their overseas concierge service—it buys movie tickets and cell phones and other sundries for abandoned moms.

Perfect. This could kick my outsourcing up to a new level. I can have a nice, clean division of labor: Honey will take care of my business affairs, and YMII can attend to my personal life—pay my bills, make vacation reservations, buy stuff online. Happily, YMII likes the idea, and just like that the support team at Jacobs Inc. has doubled.

HONEY HAS completed her first project for me: research on the person Esquire has chosen as the Sexiest Woman Alive. I’ve been assigned to write a profile of this woman, and I really don’t want to have to slog through all the heavy-breathing fan websites about her. When I open Honey’s file, I have this reaction: America is f*cked. There are charts. There are section headers. There is a well-organized breakdown of her pets, measurements, and favorite foods (e.g., swordfish). If all Bangalorians are like Honey, I pity Americans about to graduate college. They’re up against a hungry, polite, Excel-proficient Indian army.

IN FACT, in the next few days, I outsource a whole mess of online errands to Asha (from the personal service YMII): paying my bills, getting stuff from drugstore.com, finding my son a Tickle Me Elmo. (Actually, the store was out of Tickle Me Elmos, so Asha bought a Chicken Dance Elmo—good decision.) I had her call Cingular to ask about my cell-phone plan. I’m just guessing, but I bet her call was routed from Bangalore to New Jersey and then back to a Cingular employee in Bangalore, which makes me happy for some reason.

IT’S THE fourth morning of my new, farmed-out life, and when I flip on my computer, my e-mail inbox is already filled with updates from my overseas aides. It’s a strange feeling having people work for you while you sleep. Strange, but great. I’m not wasting time while I drool on my pillow; things are getting done.

HONEY IS my protector. Consider this: For some reason, the Colorado Tourism Board e-mails me all the time. (Most recently, they informed me about a festival in Colorado Springs featuring the world’s most famous harlequin.) I request that Honey gently ask them to stop with the press releases. Here’s what she sent:

Dear All,

Jacobs often receives mails from Colorado news, too often. They are definitely interesting topics. However, these topics are not suitable for “Esquire.”

Further, we do understand that you have taken a lot of initiatives working on these articles and sending it to us. We understand. Unfortunately, these articles and mails are too time consuming to be read.

Currently, these mails are not serving right purpose for both of us. Thus, we request to stop sending these mails.

We do not mean to demean your research work by this.

We hope you understand too.

Thanking you,

Honey K B

That is the best rejection notice in journalism history. It’s exceedingly polite, but there’s a little undercurrent of indignation. Honey seems almost outraged that Colorado would waste the valuable time of Jacobs.

I DECIDE to test the next logical relationship: my marriage. These arguments with my wife are killing me—partly because Julie is a much better debater than I am. Maybe Asha can do better:

Hello Asha,

My wife got annoyed at me because I forgot to get cash at the automatic bank machine … I wonder if you could tell her that I love her, but gently remind her that she too forgets things—she has lost her wallet twice in the last month. And she forgot to buy nail clippers for Jasper.

AJ

I can’t tell you what a thrill I got from sending that note. It’s pretty hard to get much more passive-aggressive than bickering with your wife via an e-mail from a subcontinent halfway around the world.

The next morning, Asha CC’d me on the e-mail she sent to Julie.

Julie,

Do understand your anger that I forgot to pick up the cash at the automatic machine. I have been forgetful and I am sorry about that.

But I guess that doesn’t change the fact that I love you so much….

Love

AJ

P. S. This is Asha mailing on behalf of Mr. Jacobs.

As if that weren’t enough, she also sent Julie an e-card. I click on it: two teddy bears embracing, with the words, “Anytime you need a hug, I’ve got one for you…. I’m sorry.”

Damn! My outsourcers are too friggin’ nice! They kept the apology part but took out my little jabs. They are trying to save me from myself. They are superegoing my id. I feel castrated.

Julie, on the other hand, seems quite pleased: “That’s nice, sweetie. I forgive you.”

DESPITE THREE weeks with my support team, I’m still stressed. Perhaps it’s the fault of Chicken Dance Elmo, whom my son loves to the point of dry humping, but who is driving me slowly insane. Whatever the reason, I figure it’s time to conquer another frontier: outsourcing my inner life.

First, I try to delegate my therapy. My plan is to give Asha a list of my neuroses and a childhood anecdote or two, have her talk to my shrink for 50 minutes, then relay the advice. Smart, right? My shrink refused. Ethics or something. Fine. Instead, I have Asha send me a meticulously researched memo on stress relief. It had a nice Indian flavor to it, with a couple of yogic postures and some visualization.

This was okay, but it didn’t seem quite enough. I decided I needed to outsource my worry. For the last few weeks I’ve been tearing my hair out because a business deal is taking far too long to close. I asked Honey if she would be interested in tearing her hair out in my stead. Just for a few minutes a day. She thought it was a wonderful idea. “I will worry about this every day,” she wrote. “Do not worry.”

The outsourcing of my neuroses was one of the most successful experiments of the month. Every time I started to ruminate, I’d remind myself that Honey was already on the case, and I’d relax. No joke—this alone was worth it.

At a Glance: Where You Will Be

The future is here. It’s just not widely distributed yet.

—WILLIAM GIBSON, author of Neuromancer; coined term “cyberspace” in 1984

Here is a sneak preview of full automation.

I woke up this morning, and given that it’s Monday, I checked my e-mail for one hour after an exquisite Buenos Aires breakfast.

Sowmya from India had found a long-lost high school classmate of mine, and Anakool from YMII had put together Excel research reports for retiree happiness and the average annual hours worked in different fields. Interviews for this week had been set by a third Indian virtual assistant, who had also found contact information for the best Kendo schools in Japan and the top salsa teachers in Cuba. In the next e-mail folder, I was pleased to see that my fulfillment account manager in Tennessee, Beth, had resolved nearly two dozen problems in the last week—keeping our largest clients in China and South Africa smiling—and had also coordinated California sales tax filing with my accountants in Michigan. The taxes had been paid via my credit card on file, and a quick glance at my bank accounts confirmed that Shane and the rest of the team at my credit card processor were depositing more cash than last month. All was right in the world of automation.

It was a beautiful sunny day, and I closed my laptop with a smile. For an all-you-can-eat buffet breakfast with coffee and orange juice, I paid $4 U.S. The Indian outsourcers cost between $4–10 U.S. per hour. My domestic outsourcers are paid on performance or when product ships. This creates a curious business phenomenon: Negative cash flow is impossible.

Fun things happen when you earn dollars, live on pesos, and compensate in rupees, but that’s just the beginning.

But I’m an Employee! How Does This Help Me?

Nobody can give you freedom. Nobody can give you equality or justice or anything. If you’re a man, you take it.

—MALCOLM X, Malcolm X Speaks

Getting a remote personal assistant is a huge departure point and marks the moment that you learn how to give orders and be commander instead of the commanded. It is small-scale training wheels for the most critical of NR skills: remote management and communication.

It is time to learn how to be the boss. It isn’t time-consuming. It’s low-cost and it’s low-risk. Whether or not you “need” someone at this point is immaterial. It is an exercise.

It is also a litmus test for entrepreneurship: Can you manage (direct and chastise) other people? Given the proper instruction and practice, I believe so. Most entrepreneurs fail because they jump into the deep end of the pool without learning to swim first. Using a virtual assistant (VA) as a simple exercise with no downside, the basics of management are covered in a 2–4-week test costing between $100–400. This is an investment, not an expense, and the ROI is astounding. It will be repaid in a maximum of 10–14 days, after which it is pure timesaving profit.

Becoming a member of the NR is not just about working smarter. It’s about building a system to replace yourself.

This is the first exercise.

Even if you have no intention of becoming an entrepreneur, this is the ultimate continuation of our 80/20 and elimination process: Preparing someone to replace you (even if it never happens) will produce an ultrarefined set of rules that will cut remaining fat and redundancy from your schedule. Lingering unimportant tasks will disappear as soon as someone else is being paid to do them.

But what about the cost?

This is a hurdle that is hard for most. If I can do it better than an assistant, why should I pay them at all? Because the goal is to free your time to focus on bigger and better things.

This chapter is a low-cost exercise to get you past this lifestyle limiter. It is absolutely necessary that you realize that you can always do something more cheaply yourself. This doesn’t mean you want to spend your time doing it. If you spend your time, worth $20–25 per hour, doing something that someone else will do for $10 per hour, it’s simply a poor use of resources. It is important to take baby steps toward paying others to do work for you. Few do it, which is another reason so few people have their ideal lifestyles.

Even if the cost is occasionally more per hour than you currently earn, the trade is often worth it. Let’s assume you make $50,000 and thus $25 per hour (working from 9–5, Monday through Friday, for 50 weeks per year). If you pay a top-notch assistant $30 per hour and he or she saves you one full 8-hour shift per week, your cost (subtracting what you’re being paid) is $40 to free an extra day. Would you pay $40 per week to work Monday to Thursday? I would, and I do. Keep in mind that this is a worst-case cost scenario.

But what if your boss freaks out?

It’s largely a non-issue, and prevention is better than cure. There is no ethical or legal reason for the boss to know if you choose non-sensitive tasks. The first option is to assign personal items. Time is time, and if you’re spending time on chores and errands that could be spent better elsewhere, a VA will improve life and the management learning curve is similar. Second, you can delegate business tasks that don’t include financial information or identify your company.

Ready to build an army of assistants? Let’s first look at the dark side of delegation. A review is in order to prevent abuses of power and wasteful behavior.

Delegation Dangers: Before Getting Started

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

—BILL GATES

Have you ever been given illogical assignments, handed unimportant work, or commanded to do something in the most inefficient fashion possible? Not fun and not productive.

Now it’s your turn to show that you know better. Delegation is to be used as a further step in reduction, not as an excuse to create more movement and add the unimportant. Remember—unless something is well-defined and important, no one should do it.

Eliminate before you delegate.

Never automate something that can be eliminated, and never delegate something that can be automated or streamlined. Otherwise, you waste someone else’s time instead of your own, which now wastes your hard-earned cash. How’s that for incentive to be effective and efficient? Now you’re playing with your own dough. It’s something I want you to get comfortable with, and this baby step is small stakes.

Did I mention to eliminate before you delegate?

For example, it is popular among executives to have assistants read e-mail. In some cases this is valuable. In my case, I use spam filters, autoresponders with FAQs, and automatic forwarding to outsourcers to limit my e-mail obligation to 10–20 e-mail responses per week. It takes me 30 minutes per week because I used systems—elimination and automation—to make it so.

Nor do I use an assistant to set meetings and conference calls because I have eliminated meetings. If I need to set the odd 20-minute call for a given month, I’ll send one two-sentence e-mail and be done with it.

Principle number one is to refine rules and processes before adding people. Using people to leverage a refined process multiplies production; using people as a solution to a poor process multiplies problems.

The Menu: A World of Possibilities

I am not interested in picking up crumbs of compassion thrown from the table of someone who considers himself my master. I want the full menu of rights.

—BISHOP DESMOND TUTU, South African cleric and activist

The next question then becomes, “What should you delegate?” It’s a good question, but I don’t want to answer it. I want to watch Family Guy.

The truth be told, it is a hell of a lot of work writing about not working. Ritika of Brickwork and Venky of YMII are more than capable of writing this section, so I’ll just mention two guidelines and leave the mental hernia of detail work to them.

Golden Rule #1: Each delegated task must be both time-consuming and well-defined. If you’re running around like a chicken with its head cut off and assign your VA to do that for you, it doesn’t improve the order of the universe.

Golden Rule #2: On a lighter note, have some fun with it. Have someone in Bangalore or Shanghai send e-mails to friends as your personal concierge to set lunch dates or similar basics. Harass your boss with odd phone calls in strong accents from unknown numbers. Being effective doesn’t mean being serious all the time. It’s fun being in control for a change. Get a bit of repression off your chest so it doesn’t turn into a complex later.

Getting Personal and Going Howard Hughes

Howard Hughes, the ultrarich filmmaker and eccentric from The Aviator, was notorious for assigning odd tasks to his assistants. Here are a few from Donald Bartlett’s Howard Hughes: His Life and Madness you might want to consider.

1. After his first plane crash, Hughes confided in a friend that he believed his recovery was due to his consumption of orange juice and its healing properties. He believed that exposure to the air diluted the juice’s potency, so he demanded that fresh oranges be sliced and juiced in front of him.

2. When Hughes was partaking of the nightlife in Las Vegas, his aides were charged with approaching any girls he took a liking to. If a girl was invited to join the Hughes table and agreed, an aide would pull out a waiver and agreement for her to sign.

3. Hughes had a barber on call 24/7 but had his hair and nails trimmed about once a year.

4. In his hotel-bound years, Hughes was rumored to have instructed assistants to place a single cheeseburger in a specific tree outside his penthouse room at a 4:00 P.M. each day, whether he was there or not.

Such a world of possibilities! Just as the Model-T brought transportation to the masses, virtual assistants bring eccentric billionaire behavior within reach of each man, woman, and child. Now, that’s progress.

Without further ado, let me pass the mic. Note that YMII performs both personal and business tasks, whereas Brickwork focuses solely on business projects. Let’s start with the important but dull stuff and move quickly from the sublime to the ridiculous. To give a true taste of what to expect, I have not corrected non-native-sounding English.

Venky: Don’t limit yourself. Just ask us if something is possible. We’ve arranged parties, organized caterers, researched summer courses, cleaned up accounting books, created 3D drafts based on blueprints. Just ask us. We could find the closest kid-friendly restaurant to your house for your son’s birthday, finding out costs and organizing the birthday party. This frees up your time to work or hang out with your son.

What can we not do? We can’t do anything that would require our physical presence. But you would be surprised as to how small a set of tasks that is in this day and age.

Here are the most common tasks we handle:

scheduling interviews and meetings web-research following up on appointments, errands, and tasks online purchases creation of legal documents website maintenance (web design, publishing, uploading files) that doesn’t require a professional designer monitoring, editing, and publishing comments for online discussions posting job vacancies on the web document creation proofreading and editing documents for spelling and formatting online research for updating blogs updating the database for Customer Relationship Management Software managing recruitment processes updating invoices and receiving payments voicemail transcription

Ritika at Brickwork added the following:

market research financial research business plans industry analysis market assessment reports preparing presentations reports and newsletters legal research analytics website development search engine optimization maintaining and updating databases credit scoring managing procurement processes

Venky: We have a forgetful client who has us call him all the time with various reminders. One of our clients on a custom plan has us wake him up every morning. We’ve done the legwork and found people who fell out of contact after Katrina. Found jobs for clients! My favorite so far: One of our clients has a pair of trousers that he really likes that aren’t in production anymore. He’s sending them to Bangalore (from London) to have created exact replicas at a tiny fraction of the price.

Here are a few other YMII custom requests:

Reminding an overzealous client to pay his current parking fines, as well as not speed and collect parking fines.

Apologizing and sending flowers and cards to spouses of clients.

Charting a diet plan, reminding client on it regularly, ordering groceries based on the specific diet plan.

Getting a job for a person who lost his job due to outsourcing a year back. We did the job search, did the cover letters, did the resume tuning, and got the client a job in 30 days.

Fixing a broken windowpane of a house in Geneva, Switzerland.

Collecting homework information from teacher’s voicemail and e-mailing it to the client (parents of the kid).

Research on how to tie a shoelace meant for a kid (client’s son).

Find a parking slot for your car in some other city even before you make the trip.

Ordered garbage bins for home.

Get an authenticated weather forecast and weather report for a particular time in a particular place on a particular day, five years ago. This was to be used as supportive evidence for a lawsuit.

Talking to parents in our client’s stead.

Here’s another real example of personal outsourcing from reader David Cross, who got a personal chef at home for less than $5 per meal. Just thinking of the possibilities is enough to make you start drooling. He explains:

I wanted to find someone to prepare food I love. I trained as a chef but I am often so busy and as I am the only one in the house who really cooks, I often don’t have time to prepare the food that makes me feel the healthiest so I wrote the attached ad and dropped it on Craigslist.

This was a very tight focus—ultraspecific—I had just two applicants in two months—one who was a 2/10 match but the guy we just OK’d was a Hare Krishna follower for many years, lived in India, and his sample menu proved he knew what he’s doing so we just started him.

The food is absolutely awesome. The hourly rate is *extremely reasonable,* he’s a five-minute detour when either of us are in town to collect food and I now have delicious Indian food for less than $5 a meal and it’s as good as anything I’ve ever eaten anywhere.

I’m going to progress to other cuisines now… Thai, Italian, Chinese, etc., and it means when I do have time to cook I’ll enjoy doing it that much more as I am not the only one cooking!

Indian/Asian Vegetarian Cook Needed

Date: 2007–06–07, 12:25PM PDT

Hello.

We are a local, international family who love Indian and Asian vegetarian food. We are looking for a cook experienced in this wonderful cuisine to prepare delicious, fresh, healthy, authentic Indian/Asian vegetarian meals for us.

If you’ve cooked a curry once or twice or need to follow recipes, this position is probably not for you, but if you know Indian vegetarian cooking in depth and can prepare delicious, healthy, fresh, authentic Indian vegetarian food then we’d like to hear from you. This could be an ideal opportunity if you are Indian, Pakistani, Punjabi, etc., and are looking for a great way to apply your experience and love of Indian vegetarian food, cooking and culture. Knowledge of Ayurved and how this relates to food and diet is a plus though not essential.

Please reply with details of your experience and some dishes you could prepare. If we like what you have to offer, we’ll arrange for you to cook a sample meal or two which we will pay you for and then we’ll see what works out for us all.

This is a part-time position. You will be self-employed and responsible for your own taxes, etc. We’ll pay you an hourly rate we will agree with you plus grocery bills for the food you prepare. You can prepare food in your own place and we can arrange to collect it from you, possibly for us to freeze for later eating. We will work with you to come up with menus and schedules that work out for you and us.

Thank you for your interest.

Basic Choices: New Delhi or New York?

There are tens of thousands of VAs—how on earth do you find the right one? The resources at the end of this chapter will show you where to look, but it is overwhelming and confusing unless you have a few criteria determined in advance.

It often helps to begin with the question “Where on Earth?”

Remote or Local?

“Made in the USA” doesn’t have the ring it used to. The pros of jumping time zones and visiting third-world currency are twofold: People work while you sleep, and the per-hour expense is less. Time savings and cost savings. Ritika explains the former with an example.

One can give the remote personal assistant in India their assignment when they are leaving work at the end of the day in New York City, and they will have the presentation ready the next morning. Because of the time difference with India, assistants can work on it while they are asleep and have it back in their morning. When they wake up, they will find the completed summary in their inbox. These assistants can also help them keep pace with what they want to read, for example.

Indian and Chinese VAs, as well as most from other developing countries, will run $4–15 per hour, the lower end being limited to simple tasks and the higher end including the equivalent of Harvard or Stanford M.B.A.s and Ph.D.s. Need a business plan to raise funding? Brickwork can provide it for between $2,500–5,000 instead of $15,000–20,000. Foreign assistance isn’t just for the small time. I know from firsthand discussions that executives from big five accounting and management consulting firms routinely charge clients six figures for research reports that are then farmed to India for low four figures.

In the U.S. or Canada, the per-hour range is often $25–100. Seems like an obvious choice, right? Bangalore 100%? It’s not. The important metric is cost per completed task, not cost per hour.

The biggest challenge with overseas help will be the language barrier, which often quadruples back-and-forth discussion and the ultimate cost. The first time I hired an Indian VA, I made the fundamental mistake of not setting an hour cap for three simple tasks. I checked in later that week and found he had spent 23 hours chasing his tail. He had scheduled one tentative interview for the following week, set at the wrong time! Mind boggling. 23 hours? It ended up costing me, at $10 per hour, $230. The same tasks, assigned later that week to a native English speaker in Canada, were completed in two hours at $25 per hour. $50 for more than four times the results. That said, I later requested another Indian VA from the same firm who was able to duplicate the native speaker results.

How do you know which to choose? That’s the beautiful part: You don’t. It’s a matter of testing a few assistants to both sharpen your communication skills and determine who is worth hiring and who is worth firing. Being a results-based boss isn’t as simple as it looks.

There are a number of lessons to be learned here.

First, per-hour cost is not the ultimate determinant of cost. Look at per-task cost. If you need to spend time restating the task and otherwise managing the VA, determine the time required of you and add this (using your per-hour rate from earlier chapters) to the end sticker price of the task. It can be surprising. As cool as it is to say that you have people working for you in three countries, it’s uncool to spend time babysitting people who are supposed to make your life easier.

Second, the proof is in the pudding. It is impossible to predict how well you will work with a given VA without a trial. Luckily, there are things you can do to improve your odds, and one of them is using a VA firm instead of a solo operator.

Solo vs. Support Team

Let’s suppose you find the perfect VA. He or she is performing all of your noncritical tasks and you’ve decided to take a much-deserved vacation to Thailand. It’s nice to know someone besides you will be manning the wheel and putting out fires for a change. Finally, some relief! Two hours before your flight from Bangkok to Phuket, you receive an e-mail: Your VA is out of commission and will be in the hospital for the next week. Not good. Vacation FUBAR.

I don’t like being dependent on one person, and I don’t recommend it in the least. In the world of high technology, this type of dependency would be referred to as a “single point of failure”—one fragile item upon which all else depends. In the world of IT,¹⁵ the term “redundancy” is used as a selling point for systems that continue to function if there is a malfunction or mechanical failure in any given part. In the context of VAs, redundancy entails having fallback support.

I recommend that you hire a VA firm or VAs with backup teams instead of sole operators. Examples abound, of course, of people who have had a single assistant for decades without incident, but I suggest that this is the exception rather than the rule. Better safe than sorry. Besides simple disaster avoidance, a group structure provides a pool of talent that allows you to assign multiple tasks without bothering to find a new person with the qualifications. Brickwork and YMII both exemplify this type of structure and provide a single point of contact, a personal account manager, who then farms out your tasks to the most-capable people in the group and across different shifts. Need graphic design? Covered. Need database management? Covered. I don’t like calling and coordinating multiple people. I want one-stop shopping and am willing to pay 10% more to have it. I encourage you to be similarly pound-wise and penny-foolish.

Team preference doesn’t mean that bigger is better, just that multiple people are better than one person. The best VA I have used to date is an Indian with five backup assistants under him. Three can be more than sufficient, but two is toeing the line.

The #1 Fear: “Sweetheart, Did You Buy

a Porsche in China?”

I’m sure you might have your fears. AJ certainly did:

My outsourcers now know an alarming amount about me—not just my schedule but my cholesterol, my infertility problems, my Social Security number, my passwords (including the one that is a particularly adolescent curse word). Sometimes I worry that I can’t piss off my outsourcers or I’ll end up with a $12,000 charge on my MasterCard bill from the Louis Vuitton in Anantapur.

The good news is that misuse of financial and confidential information is rare. In all of the interviews I conducted for this section, I could find only one case of information abuse, and I had to search long and hard. It involved an overworked U.S.-based VA who hired freelance help at the last moment.

Commit to memory the following—never use the new hire. Prohibit small-operation VAs from subcontracting work to untested freelancers without your written permission. The more established and higher-end firms, Brickwork in the below example, have security measures that border on excessive and make it simple to pinpoint abusers in the case of a breach:

Employees undergo background checks and sign NDAs (nondisclosure agreements) in accordance with the company policy of maintaining confidentiality of client information

Electronic access card for entry and exit

Credit card information keyed only by select supervisors

Removal of paper from the offices is prohibited

VLAN-based access restrictions between different teams; this ensures that there is no unauthorized access of information between people of different teams in the organization

Regular reporting on printer logs

Floppy drives and USB ports disabled

BS779 certification for accomplished international security standards

128-bit encryption technology for all data exchange

Secure VPN connection

I bet there is a fair chance that sensitive data is 100 times safer with Brickwork than on your own computer.

Still, information theft is best thought of as inevitable in a digital world, and precautions should be taken with damage control in mind. There are two rules that I use to minimize damage and allow for fast repair.

1. Never use debit cards for online transactions or with remote assistants. Reversing unauthorized credit card charges, particularly with American Express, is painless and near instantaneous. Recovering funds withdrawn from your checking account via unauthorized debit card use takes dozens of hours in paperwork alone and can take months to receive, if approved at all.

2. If your VA will be accessing websites on your behalf, create a new unique login and password to be used on those sites. Most of us reuse both logins and passwords on multiple sites, and taking this precaution limits possible damage. Instruct them to use these unique logins to create accounts on new sites if needed. Note that this is particularly important when using assistants who have access to live commercial websites (developers, programmers, etc.).

If information or identity theft hasn’t hit you, it will. Use these guidelines and you’ll realize when it happens that, just like most nightmares, it’s not that big a deal and is reversible.

The Complicated Art of Simplicity:

Common Complaints

My assistant is an idiot! It took him 23 hours to book an interview! This was the first complaint I had, for sure. 23 hours! I was heated up for a shouting match. My original e-mail to this first assistant seemed clear enough.

Dear Abdul,

Here are the first tasks, due at the end of next Tuesday. Please call or e-mail with any questions:

1. Go to this article http://www.msnbc.msn.com/id/12666060/site/newsweek/, get the phone/e-mail/website contacts for Carol Milligan and Marc and Julie Szekely. Also find the same info for Rob Long here http://www.msnbc.msn.com/id/12652789/site/newsweek/.

2. Schedule 30-minute interviews for Carol, Marc/Julie, and Rob. Use www.myevents.com (username: notreal, password: donttryit) to book them in my calendar for next week any time between 9–9 ET.

3. Find the name, e-mail, and phone (phone is least important) of workers in the U.S. who have negotiated remote work agreements (telecommuting) despite resistant bosses. Those who have traveled outside the U.S. are ideal. Other keywords could include “teleworking” and “telecommuting.” The important factor is that they negotiated with difficult bosses. Please send me links to their profiles or write a paragraph describing why they fit the profile above.

Look forward to seeing what you can do. Please e-mail if you don’t understand or have questions.

Best,

Tim

The truth is—I was at fault. This is not a good debut demand, and I made fatal mistakes even before composing it. If you are an effective person but unaccustomed to issuing commands, assume that most problems at the outset are your fault. It is tempting to immediately point the finger at someone else and huff and puff, but most beginner bosses repeat the same mistakes I made.

1. I accepted the first person the firm provided and made no special requests at the outset.

Request someone who has “excellent” English and indicate that phone calls will be required (even if not). Be fast to request a replacement if there are repeated communication issues.

2. I gave imprecise directions.

I asked him to schedule interviews but didn’t indicate that it was for an article. He assumed, based on work with previous clients, that I wanted to hire someone and he misspent time compiling spreadsheets and combing online job sites for additional information I didn’t need.

Sentences should have one possible interpretation and be suitable for a 2nd-grade reading level. This goes for native speakers as well and will make requests clearer. Ten-dollar words disguise imprecision.

Note that I asked him to respond if he didn’t understand or had questions. This is the wrong approach. Ask foreign VAs to rephrase tasks to confirm understanding before getting started.

3. I gave him a license to waste time.

This brings us again to damage control. Request a status update after a few hours of work on a task to ensure that the task is both understood and achievable. Some tasks are, after initial attempts, impossible.

4. I set the deadline a week in advance.

Use Parkinson’s Law and assign tasks that are to be completed within no more than 72 hours. I have had the best luck with 48 and 24 hours. This is another compelling reason to use a small group (three or more) rather than a single individual who can become overtaxed with last-minute requests from multiple clients. Using short deadlines does not mean avoiding larger tasks (e.g., business plan), but rather breaking them into smaller milestones that can be completed in shorter time frames (outline, competitive research summaries, chapters, etc.).

5. I gave him too many tasks and didn’t set an order of importance.

I advise sending one task at a time whenever possible and no more than two. If you want to cause your computer to hang or crash, open 20 windows and applications at the same time. If you want to do the same to your assistant, assign him or her a dozen tasks without prioritizing them. Recall our mantra: Eliminate before you delegate.

WHAT DOES A good VA task e-mail look like? The following example was recently sent to an Indian VA whose results have been nothing short of spectacular:

Dear Sowmya,

Thank you. I would like to start with the following task.

TASK: I need to find the names and e-mails of editors of men’s magazines in the US (for example: maxim, stuff, GQ, esquire, blender, etc.) who also have written books. An example of such a person would be AJ Jacobs who is Editor-at-Large of Esquire (www.ajjacobs.com). I already have his information and need more like him.

Can you do this? If not, please advise. Please reply and confirm what you will plan to do to complete this task.

DEADLINE: Since I’m in a rush, get started after your next e-mail and stop at 3 hours and tell me what results you have. Please begin this task now if possible. The deadline for these 3 hours and reported results is end-of-day ET Monday.

Thank you for your fastest reply,

Tim

Short, sweet, and to the point. Clear writing, and therefore clear commands, come from clear thinking. Think simple.

IN THE NEXT several chapters, the communication skills you develop with our virtual assistant experiment will be applied to a much larger and obscenely profitable playing field: automation. The extent to which you will outsource next makes delegation look like finger painting.

In the world of automation, not all business models are created equal. How do you assemble a business and coordinate all its parts without lifting a finger? How do you automate cash deposits in your bank account while avoiding the most common problems? It begins with understanding the options, the art of dodging information flow, and what we will call “muses.”

The next chapter is a blueprint for the first step: a product.

Go with the Flow

Here is a flowchart of 4HWW from reader Jed Wood, who has used it for faster decision making, more output with less input, and more time with his wife and children.

Q&A: QUESTIONS AND ACTIONS

1. Get an assistant—even if you don’t need one.

Develop the comfort of commanding and not being commanded. Begin with a one-time test project or small repetitive task (daily preferred). I advise using domestic help for language-intensive tasks and using foreign assistants in the early stages to improve the general clarity of your communication. Pick one from each group and get started.

The following sites, split up geographically, are useful resources.

U.S. and Canada ($20/hour+)

http://www.iavoa.com (International Association of Virtual Office Assistants). Global directory that includes the U.S.

http://www.cvac.ca (Canadian Virtual Assistant Connection)

http://www.canadianva.net/files/va-locator.html (Canada)

www.onlinebusinessmanager.com

North America and International ($4/hour+)

www.elance.com (Search “virtual assistants,” “personal assistants,” and “executive assistants.”) The client feedback reviews on Elance enabled me to find my best VA to date, who costs $4/hour. Similar marketplaces with positive reviews include www.guru.com and www.rentacoder.com.

India

www.tryasksunday.com ($20–60 per month for 24/7 concierge, free one-week trial). AskSunday is one of the sophisticated new kids on the personal outsourcing block. Their site was nominated the #2 website of the year in 2007 by Time magazine. Just dial a 212 (NYC) area code and get routed to well-spoken assistants in India and the Philippines. I use this service 80% of the time, as most tasks take less than 10 minues to complete. For longer projects, there are teams available for $12/hour.

www.b2kcorp.com ($15/hour+) From Fortune 10 oil companies and Fortune 500 clients to Big 5 accounting firms and U.S. congressmen, Brickwork can handle it all. This is reflected in the costs of this pure suit-and-tie operation—business only. No flowers for auntie.

www.taskseveryday.com ($6.98/hour for a dedicated virtual assistant) Based in Mumbai, available via phone and e-mail from the U.S., UK, and Australia. Must choose between 20 or 40 hours per week and pre-purchase hours.

www.yourmaninindia.com ($6.25/hour+) YMII handles both business and personal tasks and can work with you in real time (there are people on duty 24/7) and complete work while you sleep. English capability and effectiveness vary tremendously across VAs, so interview yours before getting started or assigning important tasks. Important: Following the publication of the first edition of this book, there have been some complaints of lower quality and up to four-week wait lists to become a client.

2. Start small but think big.

Tina Forsyth, an online business manager (higher-level VA) who helps six-figure-income clients achieve seven figures with business model redesigns, makes the following recommendations.

Look at your to-do list—what has been sitting on it the longest?

Each time you are interrupted or change tasks, ask, “Could a VA do this?”

Examine pain points—what causes you the most frustration and boredom?

Here are a few common time-consumers in small businesses with online presences.

Submitting articles to drive traffic to site and build mailing lists

Participating in or moderating discussion forums and message boards

Managing affiliate programs

Creating content for and publishing newsletters and blog postings

Background research components of new marketing initiatives or analysis of current marketing results

Don’t expect miracles from a single VA, but don’t expect too little, either. Let go of the controls a bit. Don’t assign crap tasks that end up consuming rather than saving time. It makes little sense to spend 10–15 minutes sending an e-mail to India to get a price quote on a plane ticket when you could do the same online in 10 minutes and avoid all the subsequent back-and-forth.

Push outside your comfort zone—that is the entire point of the exercise.

It is always possible to reclaim a task for yourself if the VA proves incapable, so test the limits of their capabilities. Remember Brickwork’s suggestion: Don’t limit yourself.

3. Identify your top five time-consuming non-work tasks and five personal tasks you could assign for sheer fun.

4. Keep in sync: scheduling and calendars.

If you decide to have an assistant schedule appointments and add things to your calendar, it will be important to ensure what you both see is updated. There are several options:

BusySync (www.busysync.com) I have two Gmail accounts: one private account for me and one for my assistant, where general e-mail is sent. I use BusySync to synchronize her Google Calendar with iCal (Mac calendar) on my laptop. I have also used SpanningSync (www.spanningsync.com) successfully for the same purpose.

WebEx Office (www.weboffice.com) Share your calendar online while masking personal appointments. Can be synchronized with Outlook, and also offers document sharing and other assistant- or team-friendly features. I suggest you compare this to synchronizing your Outlook with an assistant’s Google Calendar.

COMFORT CHALLENGE

Use the Criticism Sandwich (2 Days and Weekly)

Chances are good that someone—be it a co-worker, boss, customer, or significant other—does something irritating or at a subpar level. Rather than avoid the topic out of fear of confrontation, let’s chocolate-coat it and ask them to fix it. Once per day for two days, and then each Thursday (M-W is too tense and Friday is too relaxed) for the next three weeks, resolve to use what I call the Criticism Sandwich with someone. It’s called the Criticism Sandwich because you first praise the person for something, then deliver the criticism, and then close with topic-shifting praise to exit the sensitive topic. Here’s an example with a superior or boss, with keywords and phrases in italics.

You: Hi, Mara. Do you have a second?

Mara: Sure. What’s up?

You: First, I wanted to thank you for helping me with the Meelie Worm account [or whatever]. I really appreciate you showing me how to handle that. You’re really good at fixing the technical issues.

Mara: No problem.

You: Here’s the thing.¹⁶ There is a lot of work coming down on everyone, and I’m feeling¹⁷ a bit overwhelmed. Normally, priorities are really clear to me¹⁸ but I’ve been having trouble recently figuring out which tasks are highest on the list. Could you help me by pointing out the most important items when a handful need to be done? I’m sure it’s just me,¹⁹ but I’d really appreciate it, and I think it would help.

Mara: Uhh … I’ll see what I can do.

You: That means a lot to me. Thanks. Before I forget,²⁰ last week’s presentation was excellent.

Mara: Did you think so? Blah, blah, blah …

LIFESTYLE DESIGN IN ACTION

THE BEST TIMES TO SEND E-MAIL

You’ve suggested people check e-mail only a few times a day. Here’s a twist: I reply to e-mails when it’s convenient, but I time it to arrive when it’s also convenient for me. In Outlook you can delay e-mail delivery to any time of day. For example, when I return e-mails at 3 p.m., I don’t want my staff instantly zinging me responses or clarifying questions. (This also prevents e-mail chats.) So I hit send, but it’s delayed to arrive later in the evening or at 8 A.M. when my employees arrive the next day. This is how e-mail was meant to be! It’s mail, not a chat service.

—JIM LARRANAGA

14. To leverage global pricing and currency differences for profit or lifestyle purposes.

15. Information technology.

16. Don’t call it a problem if you can avoid it.

17. No one can argue with your feelings, so use this to avoid a debate about external circumstances.

18. Notice how I take “you” out of the sentence to avoid finger-pointing, even though it’s implicit. “Normally, you make priorities clear” sounds like a backhanded insult. If this is a significant other, you can skip this formality, but never use “you always do X,” which is just a fight starter.

19. Take a little bit of the heat off with this. The point has already been made.

20. “Before I forget” is a great segue to the closing compliment, which is also a topic shifter and gets you off the sensitive topic without awkwardness.

9. Income Autopilot I. FINDING THE MUSE

The Renaissance Minimalist

Douglas Price was waking up to another beautiful summer morning in his Brooklyn brownstone. First things first: coffee. The jet lag was minor, considering he had just returned from a two-week jaunt through the islands of Croatia. It was just one of six countries he had visited in the last 12 months. Japan was next on the agenda.

Buzzing with a smile and his coffee mug in hand, he ambled over to his Mac to check on personal e-mail first. There were 32 messages and all brought good news.

One of his friends and business partners, also a cofounder of Limewire, had an update: Last Bamboo, their start-up poised to reinvent peer-to-peer technology, was rounding the final corners of development. It could be their billion-dollar baby, but Doug was letting the engineers run wild first.

Samson Projects, one of the hottest contemporary art galleries in Boston, had compliments for Doug’s latest work and requests for expanded involvement with new exhibits as their sound curator.

The last e-mail in his inbox was a fan letter addressed to “Demon Doc” and praise for his latest instrumental hip-hop album, onliness VI.O.I. Doug had released his album as what he termed “open source music”—anyone could download the album for free and use sounds from any track in his or her own compositions.

He smiled again, polished off his dark roast, and opened a window to deal with business e-mail next. It would take much less time. In fact, less than 30 minutes for the day and 2 hours for the week.

How much things change.

Two years earlier, in June of 2004, I was in Doug’s apartment checking e-mail for what I hoped would be the last time for a long time. I was headed to JFK Airport in New York in a matter of hours and was preparing for an indefinite quest around the world. Doug looked on with amusement. He had similar plans for himself and was finally extricating himself from a venture-funded Internet startup that had once been a cover story and his passion but was now just a job. The euphoria of the dot-com era was long dead, along with most chances for a sale or an IPO.

He bid me farewell and made a decision as the taxi pulled from the curb—enough of the complicated stuff. It was time to return to basics.

Prosoundeffects.com, launched in January of 2005 after one week of sales testing on eBay, was designed to do one thing: give Doug lots of cash with minimal time investment.

This brings us back to his business inbox in 2006.

There are 10 orders for sound libraries, CDs that film producers, musicians, video game designers, and other audio professionals use to add hard-to-find sounds—whether the purr of a lemur or an exotic instrument—to their own creations. These are Doug’s products, but he doesn’t own them, as that would require physical inventory and upfront cash. His business model is more elegant than that. Here is just one revenue stream:

1. A prospective customer sees his Pay-Per-Click (PPC) advertising on Google or other search engines and clicks through to his site, www.prosoundeffects.com.

2. The prospect orders a product for $325 (the average purchase price, though prices range from $29–7,500) on a Yahoo shopping cart, and a PDF with all their billing and shipping information is automatically e-mailed to Doug.

3. Three times a week, Doug presses a single button in the Yahoo management page to charge all his customers’ credit cards and put cash in his bank account. Then he saves the PDFs as Excel purchase orders and e-mails the purchase orders to the manufacturers of the CD libraries. Those companies mail the products to Doug’s customers—this is called drop-shipping—and Doug pays the manufacturers as little as 45% of the retail price of the products up to 90 days later (net-90 terms).

Let’s look at the mathematical beauty of his system for full effect.

For each $325 order at his cost of 55% off retail, Doug is entitled to $178.75. If we subtract 1% of the full retail price (1% of $325 = $3.25) for the Yahoo Store transaction fee and 2.5% for the credit card processing fee (2.5% of $325 = $8.13), Doug is left with a pretax profit of $167.38 for this one sale.

Multiply this by 10 and we have $1673.80 in profit for 30 minutes of work. Doug is making $3,347.60 per hour and purchases no product in advance. His initial start-up costs were $1,200 for the webpage design, which he recouped in the first week. His PPC advertising costs approximately $700 per month and he pays Yahoo $99 per month for their hosting and shopping cart.

He works less than two hours a week, often pulls more than $10,000 per month, and there is no financial risk whatsoever.

Now Doug spends his time making music, traveling, and exploring new businesses for excitement. Prosoundeffects.com is not his end-all-be-all, but it has removed all financial concerns and freed his mind to focus on other things.

What would you do if you didn’t have to think about money? If you follow the advice in this chapter, you will soon have to answer this question.

It’s time to find your muse.

THERE ARE A million and one ways to make a million dollars. From franchising to freelance consulting, the list is endless. Fortunately, most of them are unsuited to our purpose. This chapter is not for people who want to run businesses but for those who want to own businesses and spend no time on them.

The response I get when I introduce this concept is more or less universal: Huh?

People can’t believe that most of the ultrasuccessful companies in the world do not manufacture their own products, answer their own phones, ship their own products, or service their own customers. There are hundreds of companies that exist to pretend to work for someone else and handle these functions, providing rentable infrastructure to anyone who knows where to find them.

Think Microsoft manufactures the Xbox 360 or that Kodak designs and distributes their digital cameras? Guess again. Flextronics, a Singapore-based engineering and manufacturing firm with locations in 30 countries and $15.3 billion in annual revenue, does both. Most popular brands of mountain bikes in the U.S. are all manufactured in the same three or four plants in China. Dozens of call centers press one button to answer calls for the JC Penneys of the world, another to answer calls for the Dell Computers of the world, and yet another to answer calls for the New Rich like me.

It’s all beautifully transparent and cheap.

Before we create this virtual architecture, however, we need a product to sell. If you own a service business, this section will help you convert expertise into a downloadable or shippable good to escape the limits of a per-hour-based model. If starting from scratch, ignore service businesses for now, as constant customer contact makes absence difficult.²¹

To narrow the field further, our target product can’t take more than $500 to test, it has to lend itself to automation within four weeks, and—when up and running—it can’t require more than one day per week of management.

Can a business be used to change the world, like The Body Shop or Patagonia? Yes, but that isn’t our goal here.

Can a business be used to cash out through an IPO or sale? Yes, but that isn’t our goal either.

Our goal is simple: to create an automated vehicle for generating cash without consuming time. That’s it.²² I will call this vehicle a “muse” whenever possible to separate it from the ambiguous term “business,” which can refer to a lemonade stand or a Fortune 10 oil conglomerate—our objective is more limited and thus requires a more precise label.

So first things first: cash flow and time. With these two currencies, all other things are possible. Without them, nothing is possible.

Why to Begin with the End in Mind: A Cautionary Tale

Sarah is excited.

It has been two weeks since her line of humorous T-shirts for golfers went online, and she is averaging 5 T-shirt sales per day at $15 each. Her cost per unit is $5, so she is grossing $50 in profit (minus 3% in credit card fees) per 24 hours, as she passes shipping and handling on to customers. She should soon recoup the cost of her initial order of 300 shirts (including plate charges, setup, etc.)—but wants to earn more.

It’s a nice reversal of fortune, considering the fate of her first product. She had spent $12,000 to develop, patent, and manufacture a high-tech stroller for new moms (she has never been a new mom), only to find that no one was interested.

The T-shirts, in contrast, were actually selling, but sales were beginning to slow.

It appears she has reached her online sales ceiling, as well-funded and uneducated competitors are now spending too much for advertising and driving up costs. Then it strikes her—retail!

Sarah approaches the manager of her local golf shop, Bill, who immediately expresses interest in carrying the shirts. She’s thrilled.

Bill asks for the customary 40% minimum discount for wholesale pricing. This means her sell price is now $9 instead of $15 and her profit has dropped from $10 to $4. Sarah decides to give it a shot and does the same with three other stores in surrounding towns. The shirts begin to move off the shelves, but she soon realizes that her small profit is being eaten by extra hours she spends handling invoices and additional administration.

She decides to approach a distributor²³ to alleviate this labor, a company that acts as a shipping warehouse and sells products from various manufacturers to golf stores nationwide. The distributor is interested and asks for its usual pricing—70% off of retail or $4.50—which would leave Sarah 50 cents in the hole on each unit. She declines.

To make matters worse, the four local stores have already started discounting her shirts to compete among one another and are killing their own profit margins. Two weeks later, reorders disappear. Sarah abandons retail and returns to her website demoralized. Sales online have dropped to almost nothing with new competition. She has not recouped her initial investment, and she still has 50 shirts in her garage.

Not good.

It all could have been prevented with proper testing and planning.

ED “MR. CREATINE” BYRD is no Sarah. He does not invest and hope for the best.

His San Francisco–based company, MRI, had the top-selling sports supplement in the U.S. from 2002–2005, NO₂. It is still a top-seller despite dozens of imitators. He did it through smart testing, smart positioning, and brilliant distribution.

Prior to manufacturing, MRI first offered a low-priced book related to the product through ¼-page advertisements in men’s health magazines. Once the need had been confirmed with a mountain of book orders, NO₂ was priced at an outrageous $79.95, positioned as the premium product on the market, and sold exclusively through GNC stores nationwide. No one else was permitted to sell it.

How can it make sense to turn away business? There are a few good reasons.

First, the more competing resellers there are, the faster your product goes extinct. This was one of Sarah’s mistakes.

It works like this: Reseller A sells the product for your recommended advertised price of $50, then reseller B sells it for $45 to compete with A, and then C sells it for $40 to compete with A and B. In no time at all, no one is making profit from selling your product and reorders disappear. Customers are now accustomed to the lower pricing and the process is irreversible. The product is dead and you need to create a new product. This is precisely the reason why so many companies need to create new product after new product month after month. It’s a headache.

I had one single supplement, BrainQUICKEN® (also sold as BodyQUICK®) for six years and maintained a consistent profit margin by limiting wholesale distribution, particularly online, to the top one or two largest resellers who could move serious quantities of product and who agreed to maintain a minimum advertised pricing.²⁴ Otherwise, rogue discounters on eBay and mom-and-pop independents will drive you broke.

Second, if you offer someone exclusivity, which most manufacturers try to avoid, it can work in your favor. Since you are offering one company 100% of the distribution, it is possible to negotiate better profit margins (offering less of a discount off of retail price), better marketing support in-store, faster payment, and other preferential treatment.

It is critical that you decide how you will sell and distribute your product before you commit to a product in the first place. The more middlemen are involved, the higher your margins must be to maintain profitability for all the links in the chain.

Ed Byrd realized this and exemplifies how doing the opposite of what most do can reduce risk and increase profit. Choosing distribution before product is just one example.

Ed drives a Lamborghini down the California coast when not traveling or in the office with his small focused staff and his two Australian shepherds. This outcome is not accidental. His product-creation methods—and those of the New Rich in general—can be emulated.

Here’s how you do it in the fewest number of steps.

Step One: Pick an Affordably Reachable Niche Market

When I was younger … I [didn’t] want to be pigeonholed … Basically, now you want to be pigeonholed. It’s your niche.

—JOAN CHEN, actress; appeared in The Last Emperor and Twin Peaks

Creating demand is hard. Filling demand is much easier. Don’t create a product, then seek someone to sell it to. Find a market—define your customers—then find or develop a product for them.

I have been a student and an athlete, so I developed products for those markets, focusing on the male demographic whenever possible. The audiobook I created for college guidance counselors failed because I have never been a guidance counselor. I developed the subsequent speed-reading seminar after realizing that I had free access to students, and the business succeeded because—being a student myself—I understood their needs and spending habits. Be a member of your target market and don’t speculate what others need or will be willing to buy.

Start Small, Think Big

Some people are just into lavish dwarf entertainment.

–DANNY BLACK (42″), part-owner of Shortdwarf.com²⁵

Danny Black rents dwarfs as entertainment for $149 per hour. How is that for a niche market?

It is said that if everyone is your customer, then no one is your customer. If you start off aiming to sell a product to dog- or car-lovers, stop. It’s expensive to advertise to such a broad market, and you are competing with too many products and too much free information. If you focus on how to train German shepherds or a restoration product for antique Fords, on the other hand, the market and competition shrink, making it less expensive to reach your customers and easier to charge premium pricing.

BrainQUICKEN was initially designed for students, but the market proved too scattered and difficult to reach. Based on positive feedback from student-athletes, I relaunched the product as BodyQUICK and tested advertising in magazines specific to martial artists and powerlifters. These are minuscule markets compared to the massive student market, but not small. Low media cost and lack of competition enabled me to dominate with the first “neural accelerator”²⁶ in these niches. It is more profitable to be a big fish in a small pond than a small undefined fish in a big pond. How do you know if it’s big enough to meet your TMI? For a detailed real-life example of how I determined the market size of a recent product, see “Muse Math” on this book’s companion site.

Ask yourself the following questions to find profitable niches.

1. Which social, industry, and professional groups do you belong to, have you belonged to, or do you understand, whether dentists, engineers, rock climbers, recreational cyclists, car restoration aficionados, dancers, or other?

Look creatively at your resume, work experience, physical habits, and hobbies and compile a list of all the groups, past and present, that you can associate yourself with. Look at products and books you own, include online and offline subscriptions, and ask yourself, “What groups of people purchase the same?” Which magazines, websites, and newsletters do you read on a regular basis?

2. Which of the groups you identified have their own magazines?

Visit a large bookstore such as Barnes & Noble and browse the magazine rack for smaller specialty magazines to brainstorm additional niches. There are literally thousands of occupation- and interest/hobby-specific magazines to choose from. Use Writer’s Market to identify magazine options outside the bookstores. Narrow the groups from question 1 above to those that are reachable through one or two small magazines. It’s not important that these groups all have a lot of money (e.g., golfers)—only that they spend money (amateur athletes, bass fishermen, etc.) on products of some type. Call these magazines, speak to the advertising directors, and tell them that you are considering advertising; ask them to e-mail their current advertising rate card and include both readership numbers and magazine back-issue samples. Search the back issues for repeat advertisers who sell direct-to-consumer via 800 numbers or websites—the more repeat advertisers, and the more frequent their ads, the more profitable a magazine is for them … and will be for us.

Step Two: Brainstorm (Do Not Invest In) Products

Genius is only a superior power of seeing.

—JOHN RUSKIN, famed art and social critic

Pick the two markets that you are most familiar with that have their own magazines with full-page advertising that costs less than $5,000. There should be no fewer than 15,000 readers.

This is the fun part. Now we get to brainstorm or find products with these two markets in mind.

The goal is come up with well-formed product ideas and spend nothing; in Step 3, we will create advertising for them and test responses from real customers before investing in manufacturing. There are several criteria that ensure the end product will fit into an automated architecture.

The Main Benefit Should Be Encapsulated in One Sentence.

People can dislike you—and you often sell more by offending some—but they should never misunderstand you.

The main benefit of your product should be explainable in one sentence or phrase. How is it different and why should I buy it? ONE sentence or phrase, folks. Apple did an excellent job of this with the iPod. Instead of using the usual industry jargon with GB, bandwidth, and so forth, they simply said, “1,000 songs in your pocket.” Done deal. Keep it simple and do not move ahead with a product until you can do this without confusing people.

It Should Cost the Customer $50–200.

The bulk of companies set prices in the midrange, and that is where the most competition is. Pricing low is shortsighted, because someone else is always willing to sacrifice more profit margin and drive you both bankrupt. Besides perceived value, there are three main benefits to creating a premium, high-end image and charging more than the competition.

Higher pricing means that we can sell fewer units—and thus manage fewer customers—and fulfill our dreamlines. It’s faster.

Higher pricing attracts lower-maintenance customers (better credit, fewer complaints/questions, fewer returns, etc.). It’s less headache. This is HUGE.

Higher pricing also creates higher profit margins. It’s safer.

I personally aim for an 8–10x markup, which means a $100 product can’t cost me more than $10–12.50.²⁷ If I had used the commonly recommended 5 x markup with BrainQUICKEN, it would have gone bankrupt within 6 months due to a dishonest supplier and late magazine. The profit margin saved it, and within 12 months it was generating up to $80,000 per month.

High has its limits, however. If the per-unit price is above a certain point, prospects need to speak to someone on the phone before they are comfortable enough to make the purchase. This is contraindicated on our low-information diet.

I have found that a price range of $50–200 per sale provides the most profit for the least customer service hassle. Price high and then justify.

It Should Take No More Than 3 to 4 Weeks to Manufacture.

This is critically important for keeping costs low and adapting to sales demand without stockpiling product in advance. I will not pursue any product that takes more than three to four weeks to manufacture, and I recommend aiming for one to two weeks from order placement to shippable product.

How do you know how long something takes to manufacture?

Contact contract manufacturers who specialize in the type of products you’re considering: http://www.thomasnet.com/. Call a related manufacturer (e.g., toilet bowls) if you need a referral to a related manufacturer you cannot find (e.g., toilet cleaning solutions). Still no luck? Google different synonyms for your product in combination with “organization” and “association” to contact the appropriate industry organizations. Ask them for referrals to contract manufacturers and for the names of their trade magazines, which often contain advertisements for contract manufacturers and related service providers we’ll need for your virtual architecture later. Request pricing from the contract manufacturers to ensure the proper markup is possible. Determine the per-unit costs of production for 100, 500, 1,000, and 5,000 units.

It Should Be Fully Explainable in a Good Online FAQ.

Here is where I really screwed up in my product choice with Brain-QUICKEN.

Even though ingestibles have enabled my NR life, I would not wish them on anyone. Why not? You get 1,000 questions from every customer: Can I eat bananas with your product? Will it make me fart during dinner? On and on, ad nauseam. Choose a product that you can fully explain in a good online FAQ. If not, the task of travelling and otherwise forgetting about work becomes very difficult or you end up spending a fortune on call center operators.

Understanding these criteria, a question remains: “How does one obtain a good muse product that satisfies them?” There are three options we’ll cover in ascending order of recommendation.

Option One: Resell a Product

Purchasing an existing product at wholesale and reselling it is the easiest route but also the least profitable. It is the fastest to set up but the fastest to die off due to price competition with other resellers. The profitable life span of each product is short unless an exclusivity agreement prevents others from selling it. Reselling is, however, an excellent option for secondary back-end²⁸ products that can be sold to existing customers or cross-sold²⁹ to new customers online or on the phone.

To purchase at wholesale, use these steps.

Contact the manufacturer and request a “wholesale pricelist” (generally 40% off retail) and terms.

If a business tax ID number is needed, print out the proper forms from your state’s Secretary of State website and file for an LLC (which I prefer) or similar protective business structure for $100–200.

Do NOT purchase product until you have completed Step 3 in the next chapter. It is enough at this point to confirm the profit margin and have product photos and sales literature.

That’s reselling. Not much more to it.

Option Two: License a Product

I not only use all the brains that I have, but all that I can borrow.

—WOODROW WILSON

Some of the world’s best-known brands and products have been borrowed from someone or somewhere else.

The basis for the energy drink Red Bull came from a tonic in Thailand, and the Smurfs were brought from Belgium. Pokémon came from the land of Honda. The band KISS made millions in record and concert sales, but the real profit has been in licensing—granting others the right to produce hundreds of products with their name and image in exchange for a percentage of sales.

There are two parties involved in a licensing deal, and a member of the New Rich could be either. First, there is the inventor of the product,³⁰ called the “licensor,” who can sell others the right to manufacture, use, or sell his or her product, usually for 3–10% of the wholesale price (usually around 40% off retail) for each unit sold. Invent, let someone else do the rest, and cash checks. Not a bad model.

The other side of the equation is the person interested in manufacturing and selling the inventor’s product for 90–97% of the profit: the licensee. This is, for me and most NR, more interesting.

Licensing is, however, dealmaking-intensive on both sides and a science unto itself. Creative contract negotiation is essential and most readers will run into problems if it’s their first product. For real-world case studies on both sides, ranging from Teddy Ruxpin to Tae-Bo, and full agreements with actual dollar amounts, visit www.fourhourblog.com. From how to sell inventions without prototypes or patents to how to secure rights to products as a no-name beginner, it’s all there. The economics are fascinating and the profits can be astounding.

In the meantime, we will focus on the least complicated and most profitable option open to the most people: product creation.

Option Three: Create a Product

Creation is a better means of self-expression than possession; it is through creating, not possessing, that life is revealed.

—VIDA D. SCUDDER, The Life of the Spirit in the Modern English Poets

Creating a product is not complicated. “Create” sounds more involved than it actually is. If the idea is a hard product—an invention—it is possible to hire mechanical engineers or industrial designers on www.elance.com to develop a prototype based on your description of its function and appearance, which is then taken to a contract manufacturer. If you find a generic or stock product made by a contract manufacturer that can be re-purposed or positioned for a special market, it’s even easier: Have them manufacture it, stick a custom label on it for you, and presto—new product. This latter example is often referred to as “private labeling.” Have you ever seen a massage therapist’s office with its own line of vitamin products or the Kirkland brand at Costco? Private labeling in action.

It is true that we’ll be testing market response without manufacturing, but if the test is successful, manufacturing is the next step. This means we need to keep in mind setup costs, per-unit costs, and order minimums. Innovative gadgets and devices are great but often require special tooling, which makes the manufacturing start-up costs too expensive to meet our criteria.

Putting mechanical devices aside and forgetting about welding and engineering, there is one class of product that meets all of our criteria, has a manufacturing lead time of less than a week in small quantities, and often permits not just an 8–10 x markup, but a 20–50 x markup.

No, not heroin or slave labor. Too much bribing and human interaction required.

Information.

Information products are low-cost, fast to manufacture, and time-consuming for competitors to duplicate. Consider that the top-selling non-information infomercial products—whether exercise equipment or supplements—have a useful life span of two to four months before imitators flood the market. I studied economics in Beijing for six months and observed firsthand how the latest Nike sneaker or Callaway golf club could be duplicated and on eBay within a week of first appearing on shelves in the U.S. This is not an exaggeration, and I am not talking about a look-alike product—I mean an exact duplicate for 1/20 the cost.

Information, on the other hand, is too time-consuming for most knockoff artists to bother with when there are easier products to replicate. It’s easier to circumvent a patent than to paraphrase an entire course to avoid copyright infringement. Three of the most successful television products of all time—all of which have spent more than 300 weeks on the infomercial top-10 bestseller lists—reflect the competitive and profit margin advantage of information products.

No Down Payment (Carlton Sheets)

Attacking Anxiety and Depression (Lucinda Bassett)

Personal Power (Tony Robbins)

I know from conversations with the principal owners of one of the above products that more than $65 million worth of information moved through their doors in 2002. Their infrastructure consisted of fewer than 25 in-house operators, and the rest of the infrastructure, ranging from media purchasing to shipping, was outsourced.

Their annual revenue-per-employee is more than $2.7 million. Incredible.

On the opposite end of the market size spectrum, I know a man who created a low-budget how-to DVD for less than $200 and sold it to owners of storage facilities who wanted to install security systems. It’s hard to get more niche than that. In 2001, selling DVDs that cost $2 to duplicate for $95 apiece through trade magazines, he made several hundred thousand dollars with no employees.

But I’m Not an Expert!

If you aren’t an expert, don’t sweat it.

First, “expert” in the context of selling product means that you know more about the topic than the purchaser. No more. It is not necessary to be the best—just better than a small target number of your prospective customers. Let’s suppose that your current dreamline—to compete in the 1,150-mile Iditarod dogsledding race in Alaska—requires $5,000 to realize. If there are 15,000 readers and even 50 (0.33%) can be convinced of your superior expertise in skill X and spend $100 for a program that teaches it, that is $5,000. Bring on the Huskies. Those 50 customers are what I call the “minimal customer base”—the minimum number of customers you need to convince of your expertise to fulfill a given dreamline.

Second, expert status can be created in less than four weeks if you understand basic credibility indicators. It’s important to learn how the PR pros phrase resume points and position their clients. See the boxed text later in this chapter to learn how.

The degree to which you personally need expert status also depends on how you obtain your content. There are three main options.

Create the content yourself, often via paraphrasing and combining points from several books on a topic.

Repurpose content that is in the public domain and not subject to copyright protection, such as government documents and material that predates modern copyright law.

License content or compensate an expert to help create content. Fees can be one-time and paid up front or royalty-based (5–10% of net revenue, for example).

If you choose option 1 or 2, you need expert status within a limited market.

Let’s assume you are a real estate broker and have determined that, like yourself, most brokers want a simple but good website to promote themselves and their businesses. If you read and understand the three top-selling books on home-page design, you will know more about that topic than 80% of the readership of a magazine for real estate brokers. If you can summarize the content and make recommendations specific to the needs of the real estate market, a 0.5–1.5% response from an ad you place in the magazine is not unreasonable to expect.

Use the following questions to brainstorm potential how-to or informational products that can be sold to your markets using your expertise or borrowed expertise. Aim for a combination of formats that will lend itself to $50–200 pricing, such as a combination of two CDs (30–90 minutes each), a 40-page transcription of the CDs, and a 10-page quickstart guide. Digital delivery is perfectly acceptable—in some cases, ideal—if you can create a high enough perceived value.

1. How can you tailor a general skill for your market—what I call “niching down”—or add to what is being sold successfully in your target magazines? Think narrow and deep rather than broad.

2. What skills are you interested in that you—and others in your markets—would pay to learn? Become an expert in this skill for yourself and then create a product to teach the same. If you need help or want to speed up the process, consider the next question.

3. What experts could you interview and record to create a sellable audio CD? These people do not need to be the best, but just better than most. Offer them a digital master copy of the interview to do with or sell as they like (this is often enough) and/or offer them a small up-front or ongoing royalty payment. Use Skype.com with HotRecorder (more on these and related tools in Tools and Tricks) to record these conversations directly to your PC and send the mp3 file to an online transcription service.

4. Do you have a failure-to-success story that could be turned into a how-to product for others? Consider problems you’ve overcome in the past, both professional and personal.

The Expert Builder: How to Become a Top Expert in 4 Weeks

It’s time to obliterate the cult of the expert. Let the PR world scorn me. First and foremost, there is a difference between being perceived as an expert and being one. In the context of business, the former is what sells product and the latter, relative to your “minimal customer base,” is what creates good products and prevents returns.

It is possible to know all there is to know about a subject—medicine, for example—but if you don’t have M.D. at the end of your name, few will listen. The M.D. is what I term a “credibility indicator.” The so-called expert with the most credibility indicators, whether acronyms or affiliations, is often the most successful in the marketplace, even if other candidates have more in-depth knowledge. This is a matter of superior positioning, not deception.

How, then, do we go about acquiring credibility indicators in the least time possible? Emulating the client-grooming techniques of some of the best PR firms in New York City and Los Angeles isn’t a bad place to start.

It took a friend of mine just three weeks to become a “top relationship expert who, as featured in Glamour and other national media, has counseled executives at Fortune 500 companies on how to improve their relationships in 24 hours or less.” How did she do it?

She followed a few simple steps that created a credibility snowball effect. Here’s how you can do the same.

1. Join two or three related trade organizations with official-sounding names. In her case, she chose the Association for Conflict Resolution (www.acrnet.org) and The International Foundation for Gender Education (www.ifge.org). This can be done online in five minutes with a credit card.

2. Read the three top-selling books on your topic (search historical New York Times bestseller lists online) and summarize each on one page.

3. Give one free one-to-three-hour seminar at the closest well-known university, using posters to advertise. Then do the same at branches of two well-known big companies (AT&T, IBM, etc.) located in the same area. Tell the company that you have given seminars at University X or X College and are a member of those groups from step 1. Emphasize that you are offering it to them for free to get additional speaking experience outside of academics and will not be selling products or services. Record the seminars from two angles for later potential use as a CD/DVD product.

4. Optional: Offer to write one or two articles for trade magazines related to your topics, citing what you have accomplished in steps 1 and 3 for credibility. If they decline, offer to interview a known expert and write the article—it still gets your name listed as a contributor.

5. Join ProfNet, which is a service that journalists use to find experts to quote for articles. Getting PR is simple if you stop shouting and start listening. Use steps 1, 3, and 4 to demonstrate credibility and online research to respond to journalist queries. Done properly, this will get you featured in media ranging from small local publications to the New York Times and ABC News.

Becoming a recognized expert isn’t difficult, so I want to remove that barrier now.

I am not recommending pretending to be something you’re not. I can’t! “Expert” is nebulous media-speak and so overused as to be indefinable. In modern PR terms, proof of expertise in most fields is shown with group affiliations, client lists, writing credentials, and media mentions, not IQ points or Ph.D.s.

Presenting the truth in the best light, but not fabricating it, is the name of the game.

See you on CNN.

Q&A: QUESTIONS AND ACTIONS

For this hands-on chapter, the Q&A is simple. In fact, it’s more like a Q.

The question is, “Did you read the chapter and follow the directions?” If not, do it! Instead of the usual Q&A, the end of this chapter and the following two will feature more extensive resources for taking the action steps described in detail in the text.

COMFORT CHALLENGE

Find Yoda (3 Days)

Call at least one potential superstar mentor per day for three days. E-mail only after attempting a phone call. I recommend calling before 8:30 A.M. or after 6:00 P.M. to reduce run-ins with secretaries and other gatekeepers. Have a single question in mind, one that you have researched but have been unable to answer yourself. Shoot for “A” players—CEOs, ultrasuccessful entrepreneurs, famous authors, etc.—and don’t aim low to make it less frightening. Use www.contactanycelebrity.com if need be, and base your script on the following.

Unknown answerer: This is Acme Inc. [or “the office of Mentor X”].

You: Hi, this is Tim Ferriss calling for John Grisham, please.³¹

Answerer: May I ask what this is regarding?

You: Sure. I know this might sound a bit odd,³² but I’m a first-time author and just read his interview in Time Out New York.³³ I’m a longtime³⁴ fan and have finally built up the courage to³⁵ call him for one specific piece of advice. It wouldn’t take more than two minutes of his time. Is there any way you can help me get through to him?³⁶I really, really appreciate whatever you can do.

Answerer: Hmmm … Just a second. Let me see if he’s available. [two minutes later] Here you go. Good luck. [rings to another line]

John Grisham: John Grisham here.

You: Hi, Mr. Grisham. My name is Tim Ferriss. I know this might sound a bit odd, but I’m a first-time author and a longtime fan. I just read your interview in Time Out New York and finally built up the courage to call. I have wanted to ask you for a specific piece of advice for a long time, and it shouldn’t take more than two minutes of your time. May I?³⁷

John Grisham: Uh … OK. Go ahead. I have to be on a call in a few minutes.

You (at the very end of the call): Thank you so much for being so generous with your time. If I have the occasional tough question—very occasional—is there any chance I could keep in touch via e-mail?³⁸

LIFESTYLE DESIGN IN ACTION

OVER THE MOON

My 13-year-old daughter would like to be an astronaut when she grows up. Last year she had an extreme challenge to deal with. The phrase from Apollo 13 “Failure is not an option” sort of became our motto. I got the idea of contacting the commander of Apollo 13, Jim Lovell. It didn’t take much to find him and he sent her a wonderful letter about his ordeal just to get into the Apollo program, not to mention dealing with a crippled spacecraft. His letter made a big difference to my daughter. A couple months later, we were able to take things a little further by getting her VIP access to a shuttle launch.

—ROB

TOOLS AND TRICKS

Confirming Sufficient Market Size

Compete (www.compete.com) and

Quantcast (www.quantcast.com)

Find the number of monthly visitors for most websites, in addition to the search terms that generate the most traffic for them.

Writer’s Market (www.writersmarket.com)

Here you’ll find a listing of thousands of specialty and niche magazines, including circulation and subscription numbers. I prefer the print version.

Spyfu (www.spyfu.com)

Download competitors’ online advertising spending, keywords, and ad-word details. Consistent and repeat spending generally indicates successful advertising ROI.

Standard Rate and Data Services (www.srds.com)

Check out this resource for annual listings of magazine and company customer mailing lists available for rent. If you’re considering creating a how-to video for duck hunting, check out the size of customer lists from hunting gun manufacturers and related magazines first. Use the print version in libraries instead of paying for the somewhat confusing online access.

Finding Products to Resell or Manufacturing

Affiliate Networks: Clickbank (www.clickbank.com),

Commission Junction (www.cj.com), Amazon Associates (www.amazon.com/associates)

No inventory, no invoices. Experimenting with products and categories through affiliate networks such as Clickbank and Commission Junction, which pay you 10–75% of each purchase, is a fast method for doing a proof-of-concept using similar products. It’s often worth setting up accounts at both just to observe how bestselling items are being sold and promoted.

Amazon Associates averages 7–10% commissions, but bestselling books are excellent for testing target markets for more elaborate informational products. For all of the above: Do not get into bidding wars against other affiliates using expensive general keywords or overexposed brand names. Go niche or go broke.

Alibaba (www.alibaba.com)

Based in China, Alibaba is the world’s largest business-to-business marketplace. From MP3 players for $9 each to red wine for $2 per bottle, this site is the source. If someone here doesn’t make it, it probably can’t be made.

Worldwide Brands (www.worldwidebrands.com)

Offers an extensive how-to guide for finding manufacturers willing to dropship product to your customers, which allows you to avoid pre-purchasing inventory. This is where Amazon and eBay power users find not just drop shippers, but also wholesalers and liquidators. Shopster (www.shopster.com) is also a popular option, with more than 1,000,000 dropship products to choose from.

Thomas’s Register of Manufacturers (www.thomasnet.com) (800–699–9822)

Searchable database of contract manufacturers for every conceivable product, from underwear and food products to airplane parts.

Electronics, DVDs, Books (www.ingrambook.com, www.techdata.com)

Housewares and Hardware (www.housewares.org, www.nationalhardwareshow.com) (847–292–4200)

For these product categories and related talent (on-screen demonstrations), also consider attending local or state fairs.

Consumables and Vitamin Products (www.expoeast.com, expowest.com)

Finding Public Domain Information to Repurpose

Be sure to speak with an intellectual property attorney before using apparent public domain material. If someone modifies 20% of a public domain work (through abridging and footnotes, for example), their “new” complete work can be copyrighted. Using it without permission would then be a punishable infringement. The details can get confusing. Do the beginning research yourself, but get a pro to look over your findings before moving ahead with product development.

Project Gutenberg (www.gutenberg.org)

Project Gutenberg is a digital library of more than 15,000 pieces of literature considered to be in the public domain.

LibriVox (www.librivox.org)

LibriVox is a collection of audiobooks from the public domain that are available for free download.

Recording Seminars or Phone Interviews with Experts for CD Downloadable Products

HotRecorder (www.hotrecorder.com) (PC), Call Recorder (http://ecamm.com/mac/callrecorder/) (Mac)

Use these programs to record any inbound or outbound phone call via computer using Skype (www.skype.com) and other VoIP programs.

NoCost Conference (www.nocostconference.com)

Provides a free 800-number conference line, as well as free recording and file retrieval. Normal phones can be used for call-in, so no computer or web connection is required for participants. If you’ll have a Q&A, I suggest soliciting attendee questions beforehand to avoid issues with muting/ unmuting of lines.

Jing Project (www.jingproject.com) and DimDim (www.dimdim.com)

If you’d like to record the actions on your screen for video tutorials, both of these free programs will get the job done. If you need advanced editing features, Jing’s big brother Camtasia is the industry standard (www.camtasia.com).

Licensing Ideas to Others for Royalties

InventRight (www.inventright.com) (800–701–7993)

Stephen Key is the most consistently successful inventor I’ve ever met, with millions in royalties from companies like Disney, Nestlé, and Coca-Cola. He is not high-tech but specializes in creating simple products, or improving on existing products, and then licensing (renting) his ideas to large corporations. He comes up with the idea, files a provisional patent for less than $200, and then lets another company do the work while he collects checks. This site introduces his fail-proof process for doing the same. His techniques for cold-calling alone are invaluable. Highly recommended.

Guthy-Renker Corporation (www.guthyrenker.com) (760–773–9022) GRC is the 800-pound infomercial gorilla. It brings in more than $1.3 billion per year in sales with mega-hits like Tony Robbins, Proactiv Solution, and Winsor Pilates. Don’t expect more than a 2–4% royalty if you make the cut, but the numbers are huge enough to make it worth a look. Submit your product online.

Searching Patents for Unexploited Ideas to Turn into Products

United States Patent and Trademark Office (www.uspto.gov) (800–786–9199)

Licensable Technologies Developed at Universities (www.autm.net; see “view all listings” under “Technology Transfer Offices”)

Inventors Groups and Associations (call and ask if members have anything to license) (www.uiausa.org/Resources/InventorGroups.htm

Becoming an Expert

Prof Net via PR Leads (www.prleads.com) and HARO (www.helpareporterout.com)

Receive daily leads from journalists and TV and radio producers looking for experts to cite and interview for media ranging from local outlets to CNN and the New York Times. Stop swimming upstream and start responding to stories people are already working on. HARO offers select leads at no cost, and you can mention my name with PR Leads to get two months for the price of one.

PRWeb Press Releases (www.prwebdirect.com) The press release is dead for most purposes, but using this service has some serious search-engine benefits, such as appearing at the top of related Google News and Yahoo! News results.

ExpertClick (www.expertclick.com)

This is another secret of the PR pros. Put up an expert profile for media to see, receive an up-to-date database of top media contacts, and send free press releases to 12,000 journalists, all on one website that gets more than 5 million hits per month. This is how I got on NBC and ended up developing a prime-time TV show. It works. Mention my name on the phone, or use “Tim Ferriss $100” online, to get a $100 discount.

LIFESTYLE DESIGN IN ACTION

Bon Jour Tim,

I was in Barnes & Noble at the help desk this past Saturday, April 25, waiting for an employee to get a book for me (Tropic of Cancer if you must know). While I was waiting, I noticed a copy of 4-Hour Workweek on the counter that someone else had ordered. Not one to be shy, I reached over the counter and started reading their copy. As you might guess, I had the employee go back and get me my own copy. Haven’t finished Tropic of Cancer but finished your book …

… On Monday I got a yes when I asked my boss to work two days remotely per week. I start next week.

On Monday I also booked the most stunning apartment in Paris for the month of September, at a cost of half of the rent I pay in Southern California. I plan to increase my remote time now through August so that September will be an easy ask to leave for remote work. If the answer happens to be no (which I now doubt), I will be prepared to quit my job.

Now at work on my Income Autopilot project.

Tim: amazing. My life has changed in three days. (Plus, your book was funny as hell.) Thank you!!! —CINDY FRANKEY

21. There are a few limited exceptions, such as online membership sites that don’t require content generation, but as a general rule, products require much less maintenance and will get you to your TMI faster.

22. Muses will provide the time and financial freedom to realize your dreamlines in record time, after which one can (and often does) start additional companies to change the world or sell.

23. Distributors are sometimes also referred to as “wholesalers,” depending on the industry.

24. It is illegal to control how much someone sells your product for, but you can dictate how much they advertise it for. This is done by including a Minimum Advertised Pricing (MAP) policy in your General Terms and Conditions (GTC), which are agreed to automatically when a written wholesale order is placed. Sample GTC and order forms are available at www.fourhourblog.com.

25. The Wall Street Journal, July 18, 2005 (http://www.technologyinvestor.com/login/2004/Jul18–05.php).

26. This was a new product category that I created to eliminate and preempt the competition. Strive to be the largest, best, or first in a precise category. I prefer being first.

27. If you decide to resell someone else’s higher-end products like Doug, especially with drop-shipping, the risk is lower and smaller margins can suffice.

28. “Back-end” products are products sold to customers once the sale of a primary product has been made. iPod covers and car GPS systems are two examples. These products can have lower margins, because there is no advertising cost to acquire the customer.

29. “Cross-selling” is selling a related product to a customer while they’re still on the phone or in an online shopping cart after the sale of a primary product has been made. For a full marketing and direct response (DR) glossary, visit www.fourhourblog.com.

30. This also refers to owners of copyrights or trademarks.

31. Said casually and with confidence, this alone will get you through surprisingly often. “I’d like to speak with Mr./Ms. X, please” is a dead giveaway that you don’t know them. If you want to up the chances of getting though but risk looking foolish if they call the bluff, ask for the target mentor by first name only.

32. I use this type of lead-in whenever making off-the-wall requests. It softens it and makes the person curious enough to listen before spitting out an automatic “no.”

33. This answers the questions they’ll have in their head: “Who are you and why are you calling now?” I like to be a “first-time” something to play the sympathy card, and I find a recent media feature online to cite as the trigger for calling.

34. I call people I’m familiar with. If you can’t call yourself a longtime fan, tell them that you have followed the mentor’s career or business exploits for a certain number of years.

35. Don’t pretend to be strong. Make it clear you’re nervous and they’ll lower their guard. I often do this even if I’m not nervous.

36. The wording here is critical. Ask them to “help” you do something.

37. Just rework the gatekeeper paragraph for this, and don’t dillydally—get to the point quickly and ask for permission to pull the trigger.

38. End the conversation by opening the door for future contact. Start with e-mail and let the mentoring relationship develop from there.

10. Income Autopilot II. TESTING THE MUSE

Fewer than 5% of the 195,000 books published each year sell more than 5,000 copies. Teams of publishers and editors with decades of combined experience fail more times than not. The founder of Border’s Books lost $375 million of investor funding with WebVan,³⁹ a nationwide grocery delivery service. The problem? No one wanted it.

The moral is that intuition and experience are poor predictors of which products and businesses will be profitable. Focus groups are equally misleading. Ask ten people if they would buy your product. Then tell those who said “yes” that you have ten units in your car and ask them to buy. The initial positive responses, given by people who want to be liked and aim to please, become polite refusals as soon as real money is at stake.

To get an accurate indicator of commercial viability, don’t ask people if they would buy—ask them to buy. The response to the second is the only one that matters. The approach of the NR reflects this.

Step Three: Micro-Test Your Products

Micro-testing involves using inexpensive advertisements to test consumer response to a product prior to manufacturing.⁴⁰

In the pre-Internet era, this was done using small classified ads in newspapers or magazines that led prospects to call a prerecorded sales message. Prospects would leave their contact information, and based on the number of callers or response to a follow-up sales letter, the product would be abandoned or manufactured.

In the Internet era, there are better tools that are both cheaper and faster. We’ll test the product ideas from the last chapter on Google Adwords—the largest and most sophisticated Pay-Per-Click (PPC) engine—in five days for $500 or less. PPC here refers to the highlighted search results that are listed above and to the right of normal search results on Google. Advertisers pay to have these ads displayed when people search for a certain term related to the advertisers’ product, such as “cognitive supplement,” and are charged a small fee from $.05 to over $1 each time someone clicks through to their site. For a good introduction to Google Adwords and PPC, visit www.google.com/onlinebusiness. For expanded examples of the following PPC strategies, visit www.fourhourblog.com and search “PPC.”

The basic test process consists of three parts, each of which is covered in this chapter.

Best: Look at the competition and create a more-compelling offer on a basic one-to-three-page website (one to three hours).

Test: Test the offer using short Google Adwords advertising campaigns (three hours to set up and five days of passive observation).

Divest or Invest: Cut losses with losers and manufacture the winner(s) for sales rollout.

Let’s use two people, Sherwood and Johanna, and their two product ideas—French sailor shirts and a how-to yoga DVD for rock climbers—as case studies of what the testing steps look like and how you can do the same.

Sherwood bought a striped sailing shirt in France while traveling last summer, and upon returning to NYC has been continually approached by 20–30-year-old males on the street who want to know where to get their own. Sensing an opportunity, he requests back issues of NYC-based weekly magazines aimed at this demographic and calls the manufacturer in France for pricing. He learns that he can purchase shirts at a wholesale price of $20 that sell for $100 retail. He adds $5 per shirt to account for shipping to the U.S. and arrives at a per-shirt cost of $25. It’s not quite our ideal markup (4x vs. 8–10x), but he wants to test the product regardless.

Johanna is a yoga instructor who has noticed her growing client base of rock climbers. She is also a rock climber and is considering creating a yoga instructional DVD tailored to that sport, which would include a 20-page spiral-bound manual and be priced at $80. She predicts that production of a low-budget first edition of the DVD would cost nothing more than a borrowed digital camera and a friend’s iMac for simple editing. She can burn small quantities of this first-edition DVD—no menus, just straight footage and titles—on the laptop and create labels with freeware from www.download.com. She has contacted a duplication house and learned that more-professional DVDs will cost $3–5 apiece to duplicate in small quantities (minimum of 250), including cases.

Now that they have ideas and estimates of start-up costs, what next?

Besting the Competition

First and foremost, each product must pass a competitive litmus test. How can Sherwood and Johanna beat the competition and offer a superior product or guarantee?

1. Sherwood and Johanna Google the top terms each would use to try and find their respective products. To come up with related terms and derivative terms, both use search term suggestion tools.

Google Adwords Keyword Tool (http://adwords.google.com/select/KeywordToolExternal) Enter the potential search terms to find search volume and alternative terms with more search traffic. Click on the “Approx Avg Search Volume” column to sort results from most to least searched.

SEOBook Keyword Tool, SEO for Firefox Extension (http://tools.seobook.com/) This is an outstanding resource page with searches powered by Wordtracker (www.wordtracker.com).

Both then visit the three websites that consistently appear in top search and PPC positions. How can Sherwood and Johanna differentiate themselves?

Use more credibility indicators? (media, academia, associations, and testimonials)

Create a better guarantee?

Offer better selection?⁴¹

Free or faster shipping?

Sherwood notices that the shirts are often hard to find on the competitive sites, all of which feature dozens of products, and the shirts are either made in the U.S. (inauthentic) or shipped from France (customers must wait two to four weeks). Johanna cannot find a “yoga for rock climbing” DVD, so she is starting from a blank slate.

2. Sherwood and Johanna now need to create a one-page (300–600 words) testimonial-rich advertisement that emphasizes their differentiators and product benefits using text and either personal photos or stock photos from stock photo websites. Both have spent two weeks collecting advertisements that have prompted them to make purchases or that have caught their attention in print or online—these will serve as models.⁴² Johanna asks her clients for testimonials and Sherwood lets his friends try on the shirts to get several for his page. Sherwood also asks the manufacturer for photos and advertising samples.

See www.pxmethod.com for a good example of how I have created a test page using testimonials from seminar attendees. Please note that it’s just a template for readers and not a live sales page. Free how-to seminars as recommended in the Expert Builder are ideal for identifying popular selling points and securing testimonials.

Testing the Advertisement

Sherwood and Johanna now need to test actual customer response to their advertisements. Sherwood first tests his concept with a 72-hour eBay auction that includes his advertising text. He sets the “reserve” (the lowest price he’ll accept) for one shirt at $50 and cancels the auction last minute to avoid legal issues since he doesn’t have product to ship. He has received bids up to $75 and decides to move to the next phase of testing. Johanna doesn’t feel comfortable with the apparent deception and skips this preliminary testing.

Sherwood’s cost: <$5.

Both register domain names for their soon-to-be one-page sites using the cheap domain registrar www.domainsinseconds.com. Sherwood chooses www.shirtsfromfrance.com and Johanna chooses www.yogaclimber.com. For additional domain names, Johanna uses www.domainsinseconds.com.

Cost to both: <$20.

Sherwood uses www.weebly.com to create his one-page site advertisement and then creates two additional pages using the form builder www.wufoo.com. If someone clicks on the “purchase” button at the bottom of the first page, it takes them to a second page with pricing, shipping and handling,⁴³ and basic contact fields to fill out (including e-mail and phone). If the visitor presses “continue with order,” it takes them to a page that states, “Unfortunately, we are currently on back order but will contact you as soon as we have product in stock. Thank you for your patience.” This structure allows him to test the first-page ad and his pricing separately. If someone gets to the last page, it is considered an order.

Johanna is not comfortable with “dry testing,” as Sherwood’s approach is known, even though it is legal if the billing data isn’t captured. She instead uses the same two services to create a single webpage with the content of her one-page ad and an e-mail sign-up for a free “top 10 tips” list for using yoga for rock climbing. She will consider 60% of the sign-ups as hypothetical orders.

Cost to both: <$0.

Both set up simple Google Adwords campaigns with 50–100 search terms to simultaneously test headlines while driving traffic to their pages. Their daily budget limits are set at $50 per day. (At this segue into PPC testing, I recommend you first visit www.adwords/google.com/onlinebusiness and then follow along by creating your own account, which should take about 10 minutes. It would be a waste of rain forests to use ten pages to explain terms that can be understood at a glance online.)

Sherwood and Johanna decide on the best search terms by using the search term suggestion tools mentioned earlier. Both aim for specific terms when possible (“french sailor shirts” vs. “french shirts;” “yoga for sports” vs. “yoga”) for higher conversion rates (the percentage of visitors that purchase) and lower cost-per-click (CPC). They aim also for second through fourth positioning, but no more than $.20 CPC.

Sherwood will use Google’s free analytical tools to track “orders” and page abandonment rates—what percentage of visitors leave the site from which pages. Johanna will use www.wufoo.com to track e-mail sign-ups on this small testing scale.⁴⁴

Cost to both: $0.

Both Johanna and Sherwood design Adwords ads that focus on their differentiators. Each Google Adwords ad consists of a headline and then two lines of description, neither of which can exceed 35 characters. In Sherwood’s case, he creates five groups of 10 search terms each. The following are two of his ads.

SAILOR SHIRTS FROM FRANCE

Johanna creates the same five groups of 10 terms each and tests a number of ads, including these:

Notice that these ads can be used to test not just headlines but guarantees, product names, and domain names. It’s as simple as creating several ads, rotated automatically by Google, that are identical except for the one variable to be tested. How do you think I determined the best title for this book?

Both Sherwood and Johanna disable the feature on Google that serves only the best-performing ad. This is necessary to later compare the click-through rates from each and combine the best elements (headline, domain name, and body text) into a final ad.

Last but not least, ensure that the ads don’t trick prospects into visiting the site. The product offer should be clear. Our goal is qualified traffic, so we do not want to offer something “free” or otherwise attract window shoppers or the curious who are unlikely to buy.

Cost to both: $50 or less per day x 5 days = $250.⁴⁵

Investing or Divesting

Five days later, it’s time to tally the results.

What can we consider a “good” click-through and conversion rate? This is where the math can be deceiving. If we’re selling a $10,000 abominable snowman suit with an 80% profit margin, we obviously need a much lower conversion rate than someone who is selling a $50 DVD with a 70% profit margin. For sophisticated tools and free spreadsheets that do all sorts of calculations for you, visit the reader-only resources at www.fourhourblog.com.

Johanna and Sherwood decide to keep it simple at this stage: How much did they spend on PPC ads and how much did they “sell”?

Johanna has done well. The traffic wasn’t enough to make the test stand up to statistical scrutiny, but she spent about $200 on PPC and got 14 sign-ups for a free 10-tip report. If she assumes 60% would purchase, that means 8.4 people x $75 profit per DVD = $630 in hypothetical total profit. This is also not taking into account the potential lifetime value of each customer.

The results of her small test are no guarantee of future success, but the indications are positive enough that she decides to set up a Yahoo Store for $99 per month and a small per-transaction fee. Her credit isn’t excellent, so she will opt to use www.paypal.com to accept credit cards online instead of approaching her bank for a merchant account.⁴⁶ She e-mails the 10-tip report to those who signed up and asks for their feedback and recommendations for content on the DVD. Ten days later, she has a first attempt at the DVD ready to ship and her store is online. Her sales to the original sign-ups cover costs of production and she is soon selling a respectable 10 DVDs per week ($750 profit) via Google Adwords. She plans to test advertising in niche magazines and blogs and now needs to create an automation architecture to remove herself from the equation.

Sherwood didn’t fare as well but still sees potential. He spent $150 on PPC and “sold” three shirts for a hypothetical $225 in profit. He had more than enough traffic, but the bulk of visitors left the site on the pricing page. Rather than drop pricing, he decides to test a “2x money-back guarantee” on the pricing page, which will enable customers to get a $200 refund if the $100 shirts aren’t the “most comfortable they’ve ever owned.” He retests and “sells” seven shirts for $525 in profit. Based on these results, he sets up a merchant account through his bank and Authorize.net to process credit cards, orders a dozen shirts from France, and sells them all over the following ten days. This gives him enough profit to buy a small display ad at 50% off (asking for a “first-time advertiser discount” and then citing a competing magazine to get another 20% off) in a local weekly art magazine, in which he calls the shirt “Jackson Pollock Shirts.” He orders two dozen more shirts with net-30 payment terms and puts a toll-free number⁴⁷ in the print ad that forwards to his cell phone. He does this instead of using a website for two reasons: (1) He wants to determine the most common questions for his FAQ online, and (2) he wants to test an offer of $100 for one shirt ($75 in profit) or “buy two, get one free” ($200 - $75 = $125 profit).

He sells all 24 shirts in the first five days the magazine runs, most through the special offer. Success. He redesigns the print ad, putting answers to common questions in the text to cut down on calls for information, and decides to negotiate a longer-term ad agreement with the magazine. He sends his sales rep a check for four issues at 30% of their published rates. He calls to confirm that they received his check via FedEx and, with check in hand and deadlines looming, they don’t refuse.

Sherwood wants to go to Berlin during a two-week break from his job, which he is now considering quitting. How can he roll out his success and escape his own company? He needs to build the architecture and get his mobile M.B.A.

That’s where the next chapter comes in.

New Rich Revisited: How Doug Did It

Remember Doug from ProSoundEffects.com? How did he test the idea and go from $0 to $10,000 per month in the process? He followed these steps.

1. Market Selection

He chose music and television producers as his market because he is a musician himself and has used these products.

2. Product Brainstorm

He chose the most popular products available for resale from the largest manufacturers of sound libraries and arranged a wholesale purchase and drop-ship agreement with them. Many of these libraries cost well above $300 (up to $7,500), and this is precisely why he needs to answer more customer-service questions than someone with a lower-priced product of $50–200.

3. Micro-Testing

He auctioned the products on eBay to test demand (and the highest possible pricing) before purchasing inventory. He ordered product only when people placed orders from him, and product shipped immediately from the manufacturers’ warehouses. Based on this demand confirmed on eBay, Doug created a Yahoo Store with these products and began testing Google Adwords and other PPC search engines.

4. Rollout and Automation

Following this testing, and upon generating sufficient cash flow, Doug began experimenting with print advertising in trade magazines. Simultaneously, he streamlined and outsourced operations to reduce his time requirements from two hours per day to two hours per week.

COMFORT CHALLENGE

Rejecting First Offers and Walking Away (3 Days)

Before performing this exercise, if possible, read the bonus chapter “How to Get $700,000 of Advertising for $10,000” on our companion site, and then set aside two hours on a consecutive Saturday, Sunday, and Monday.

On Saturday and Sunday, go to a farmers’ market or other outdoor event where goods are sold. If this isn’t possible, go to small independent retailers (not chains or mass retail).

Set a budget of $100 for your negotiating tuition and look for items to purchase that total at least $150. Your job is to get the sellers down to a total of $100 or less for the lot. It is better to practice on many cheap items rather than a few big items. Be sure to reply to their first offer with, “What type of discount can you offer?” to let them negotiate against themselves. Negotiate near closing time, choose your objective price, bracket, and make a firm offer with cash in hand for that amount.⁴⁸ Practice walking away if your objective price isn’t met. On Monday, call two magazines (expect the first to be awkward) and use the script on the companion site to negotiate, minus the last firm offer. Get them as low as possible and then call them back later to indicate that your proposal was refused by upper management or otherwise vetoed.

This is the negotiating equivalent of paper trading.⁴⁹ Get used to refusing offers and countering in person and—most importantly—on the phone.

TOOLS AND TRICKS

Sample Muse Test Page

The PX Method (www.pxmethod.com)

This sales template was used to determine the viability of a speed-reading product, which tested successfully. Notice how testimonials, credibility indicators, and risk-reversal guarantees are used, as well as how the pricing is put on a separate page so it can be isolated as a testing variable. Use this as a reference—it is a simple and effective model that can be copied. Please do not input your credit card information, as it is just a mock-up for teaching purposes.

Fast and Simple Website Creation for Non-Techies (and Techies)

Weebly (www.weebly.com)

Weebly, which the BBC labeled “a must,” allowed me to create www.timothyferriss.com in less than two hours and have it appear on the front page of Google for “timothy ferriss” searches within 48 hours. It is, like WordPress.com below, designed to be very SEO-friendly (search-engine optimization) without any knowledge or action on your part. No HTML or Internet expertise is required.

WordPress.com (www.wordpress.com)

I used WordPress.com to set up www.litliberation.org from a coffee shop in Bratislava, Slovakia, when a U.S.-based designer flaked out and left me scrambling. It took me less than three hours to learn how to use it and build the site. The site, an experimental educational fundraiser, ended up raising 200%+ more than Stephen Colbert in the same period of time. I also use their free open-sourced version of WordPress (www.wordpress.org, which requires separate hosting) to manage everything for my top-1,000 blog at www.fourhourblog.com. This offers greater customization but requires more management and technical know-how.

Both Weebly and WordPress.com host your site for you, so additional hosting setup isn’t required.

If you choose to use www.wordpress.org (not.com) for greater customizability, I suggest using a hosting service with one-click WordPress installation like www.bluehost.com. The Shopp plug-in (http://shopplugin.net/) or Market Theme plug-in (http://www.markettheme.com/) can then be used to add e-commerce capabilities. Shopify.com (discussed later) is another good all-in-one alternative.

Create Forms in Seconds for Testing Checkout with or Without Payment

Wufoo (www.wufoo.com)

Wufoo does not offer a full-featured shopping cart, but it provides the cleanest, easiest-to-use forms on the web. Create a checkout page that connects to PayPal and you can (1) link to this checkout page from your site on Weebly, WordPress.com, or elsewhere, or (2) drop the code into your own website and have it hosted there. Wufoo is appropriate for testing and selling single products, as people can’t add multiple items to a shopping cart or otherwise customize the order à la Amazon. For those additional options, which are often desirable after successful testing, you will want to use an “end-to-end site solutions” listed later in these resources.

Cost-Effective Trademark Filing and Company Formation (LLC, C-Corp, etc.)

Though I also have a C-Corporation (often used to issue common and preferred stock to investors), created through the second option below, LLCs and S-Corps are generally favored by small businesses. Consult your accountant to determine the best entity form.

LegalZoom (www.legalzoom.com)

Company formation, trademarks, and nearly all legal documents. I know one founder who used this service to incorporate his tech start-up, which is now worth more than $200 million.

Corporate Creations (www.corporatecreations.com)

Domestic and overseas company formation.

Services for Selling Downloadable Products (e-books, videos, audio, etc., in descending order of reader preference)

E-Junkie (www.e-junkie.com)

Lulu (www.lulu.com)

Lulu will also do print-on-demand and other forms of manufacture and fulfillment. Like Lightning Source (www.lightningsource.com), it offers distribution through Amazon, Barnes & Noble online, and other major outlets.

CreateSpace (www.createspace.com)

A subsidiary of Amazon.com that offers inventory-free, physical distribution of books, CD and DVDs on Demand, as well as video downloads through Amazon Video On Demand^(tm).

Clickbank (www.clickbank.com)

Provides integrated access to affiliates willing to sell your product for a percentage of sales.

Introduction to Pay-Per-Click (PPC) Advertising and Testing

Google Adwords (www.google.com/adwords)

Market Sizing and Keyword Suggestion Tools

Brainstorm additional PPC search terms and determine the number of people who are searching for them.

Google Adwords Keyword Tool (http://adwords.google.com/select/KeywordToolExternal)

Enter the potential search terms to find search volume and alternative terms with more search traffic. Click on the “Approx Avg Search Volume” column to sort results from most to least searched.

SEOBook Keyword Tool, SEO for Firefox Extension (http://tools.seobook.com/)

Outstanding resource page with searches powered by Wordtracker (www.wordtracker.com).

Low-Cost Domain Registration

Domains in Seconds (www.domainsinseconds.com) I have registered more than 100 domains through this service.

Joker (www.joker.com)

GoDaddy (www.godaddy.com)

Inexpensive but Dependable Hosting Services

Shared hosting solutions, where your site is hosted alongside other sites on a single server, are so cheap that I recommend using two providers, one as a primary and one as a backup. Put your site pages on each host and sign up with www.no-ip.com, which can redirect traffic (DNS) to the backup in five minutes instead of the usual 24 to 48 hours.

1and1 (www.1and1.com)

BlueHost (www.bluehost.com)

RackSpace (www.rackspace.com; known for dedicated and managed servers)

Hosting.com (www.hosting.com; known for dedicated and managed servers)

Royalty-Free Photos and Materials

iStockphoto (www.istockphoto.com)

iStockphoto is the Internet’s original member-generated image and design site, which has more than 4 million photographs, vector illustrations, videos, audio tracks, and Flash files available for use.

Getty Images (www.gettyimages.com)

This is where the pros go. Stock photos and film of anything for a price. I pay $150–400 for most images I use in national print campaigns and the quality is outstanding.

E-mail Sign-up Tracking and Scheduled Autoresponders

Both of these programs can be used to embed e-mail address sign-up forms on your site.

AWeber (www.aweber.com)

MailChimp (www.mailchimp.com)

End-to-End Site Solutions with Payment Processing

Shopify (www.shopify.com)

This is a reader favorite that, in addition to beautiful design, offers full SEO (search-engine optimization), drag-and-drop use, statistics, and product fulfillment through one of their certified partners such as Fulfillment by Amazon.com. Clients range from small-business owners to Tesla Motors. Unlike with Yahoo and eBay, however, you will need to set up a payment-processing service to accept payments from customers. (See below—PayPal is the easiest to integrate.)

Yahoo! Store (http://smallbusiness.yahoo.com/ecommerce) (866–781–9246)

This is what Doug of Pro Sound Effects used. As little as $40 a month with 1.5% per transaction.

eBay Store (http://pages.ebay.com/storefronts/start.html)

From $15–500 per month, plus eBay fees.

Simple Payment Processing for Testing Pages, from Least to Most Involved

PayPal Cart (www.paypal.com; see “merchant”)

Accept credit card payments in minutes. No monthly fees, 1.9–2.9% of each transaction (called “discount rate”) and $0.30 per transaction.

Google Checkout (http://checkout.google.com/sell)

Get $10 in free processing for each $1 spent on AdWords; 2% and $0.20 per transaction thereafter. Requires that customers have a Google ID, and is thus most useful as a supplement to one of the aforementioned payment solutions. Be sure to link your Checkout account to your AdWords account to receive credit. Important note: free transaction processing for nonprofits.

Authorize.net (www.authorize.net)

The Authorize.Net Payment Gateway can help you accept credit card and electronic check payments quickly and affordably. More than 230,000 merchants trust Authorize.net to manage their transactions, help prevent fraud, and grow their business. The fees per transaction are lower than PayPal or Google Checkout, but setup will require a merchant account, covered in the next chapter, and other time-consuming applications. I suggest setting up Authorize.net only after a product has tested successfully through one of the other two options above.

Software for Understanding Web Traffic (Web Analytics)

How are people finding, browsing, and leaving your site? How many prospective customers are being delivered by each PPC ad, and which pages are most popular? These programs tell you all this and more. Google is free for most low-volume sites—and better than a lot of paid software-and the others cost $30 and upward per month.

Google Analytics (www.google.com/analytics)

CrazyEgg (www.crazyegg.com)

I use CrazyEgg to see exactly where people are clicking most and least on homepages and landing pages. It is particularly helpful for repositioning the most important links or buttons to help prompt visitors to take specific next actions. Don’t guess what’s working or not—measure it.

Clicktracks (www.clicktracks.com)

WebTrends (www.webtrends.com)

A/B Testing Software

Testing is, as you know, the name of the game, but testing all the variables can be confusing. How do you know which combination of headlines, text, and images on your homepage results in the most sales? Instead of using one version for a bit, then alternating, which is time-consuming, use software that serves up different versions to prospects at random, then does the math for you.

Google Website Optimizer (WO) (http://www.google.com/websiteoptimizer)

This is a free tool that, like Google Analytics, is better than most paid services. I used Google WO to test three potential homepages for www.dailyburn.com and increased sign-ups 19%, then again by more than 16%.

Offermatica (www.offermatica.com)

Vertster.com (www.vertster.com)

Optimost (www.optimost.com)

Low-Cost Toll-free Numbers

TollFreeMAX (www.tollfreemax.com) (877–888–8MAX) and Kall8 (www.kall8.com)

TollFreeMAX and Kall8 both allow you to set up toll-free numbers in 2–5 minutes. Calls can then be forwarded to any other numbers, and voicemail and statistics can be managed online or via e-mail.

Checking Competitive Site Traffic

Want to see how much traffic your competition is getting and who is linking to them?

Compete (www.compete.com)

Quantcast (www.quantcast.com)

Alexa (www.alexa.com)

Freelance Designers and Programmers

99Designs (www.99designs.com) and Crowdspring (www.crowdspring.com)

I used 99Designs to get an excellent logo for www.litliberation.org in 24 hours for less than $150. I submitted the concept, more than 50 designers worldwide uploaded their best attempts, which I could browse, and I chose the best after suggesting a few improvements. From Crowdspring’s site: “Name your price, name your deadline, see entries within hours and be done in just days. The average project gets a whopping 68 entries. 25 entries or your money back.”

eLance (www.elance.com) (877–435–2623)

Craigslist (www.craigslist.org)

LIFESTYLE DESIGN IN ACTION

I’m a U.S. citizen and it was impossible for my friends and relatives to track me down by phone. Enter Skype In. It’s not new but allows you to lease a fixed U.S. (or other country) phone number which then forwards to your Skype account. About $60/year. Within Skype you can then set up call forwarding to ring you at your local number. You pay the rate as if you were calling from the United States to wherever you are. I’ve used this in about 40 countries and it works like a treat. The call quality is usually great and the convenience is amazing. http://www.skype.com/allfeatures/onlinenumber/. A caveat is to always, ALWAYS get a local SIM card for your unlocked GSM phone. Roaming is for amateurs. A local SIM also gets you GPRS, Edge, or 3G. Sometimes even free Wifi. Cheers, —TY KROLL

Basically I try to keep all of my tools online so that if my laptop gets stolen, I can buy a new one and have everything up and running within 24 hours. Here are a few of the tools I use on a regular basis:

RememberTheMilk.com has been really crucial to me keeping on top of my daily tasks.

Freshbooks.com for online invoicing

Highrise (http://www.highrisehq.com/) for online CRM

Dropbox (getdropbox.com) for easy file sharing/automatic backup of critical files while on the road

TrueCrypt (truecrypt.org) for keeping your laptop data secure while on the road. [Tim comment: This can also be used with a USB flash drive, and another cool feature—it provides two levels of “plausible deniability” (hidden volumes, etc.) if someone forces you to reveal the password.]

PBwiki.com-Wiki site that helps me keep on top of the notes and ideas that I collect as I go through life.

FogBugz on Demand: http://www.fogcreek.com/FogBUGZ/IntrotoOnDemand.html. It’s a “bug tracker” aimed at software development companies, but I use it every day for both personal and business tasks. It’s almost like a VA, as you can route your mail through it and it will help you sort it and keep track of it. It has great features to track e-mails, and there’s a free version for two users (me + VA!). —RB CARTER

A really useful service is Amazon’s Mechanical Turk. With a small investment in time or money, a business that requires hundreds of people doing small bits of defined work becomes possible for extraordinarily low work-per-unit costs. Examples include the search for Steve Fosset (literally thousands of people looked at satellite photos that would have overwhelmed SAR agencies) and a trouble-ticket business that utilizes qualified labor all over the world (see Amazon.com/webservices). I am not an owner nor do I have any stake in Amazon—but I have used their services and some are trans forming when it comes to muse creation. Cheers, —J MARYMEE

FAST TO MARKET

The fastest way to market with a product idea is: Registera.com. Get hosting from dathorn.com [a cheap reseller account, like www.domainsinseconds.com]. With two clicks set up a wordpress blog. Apply a theme to it. Add your content and a buy now button. The buy now button links to an enter e-mail address, phone number, etc., page. The user then clicks a continue to PayPal button. This automatically e-mails me their details, but then shows the user a message stating that the link to PayPal is currently not working. I use this to determine how many sales I would have achieved. I use Google ads to drive traffic … I calculate theoretical ROI (ideally using Google analytics). If after a week or two I can see a positive ROI that’s worth my effort I create or outsource the creation of the product (emag, PDF, whatever). I set it all up with a working link to PayPal, and then retrospectively send a message to the users who already tried to buy. Normally within hours I’ve got all my money back, and the cash starts to roll. An example is the DIY public relations pack at www.mybusinesspr.com.au. Great work of the 4HWW … looking forward to the next edition. Regards, MATT SCHMIDT

39. http://news.com.com/2100–1017–269594.html?legacy=cnet.

40. It can be illegal to charge customers prior to shipment—so we will not charge customers—but it is still common practice. Why do so many commercials state “allow three to four weeks for delivery” if it only takes three to five days for a shipment to get from New York to California? It gives the companies time to manufacture product and use customers’ credit card payments to finance it. Clever but often against the law.

41. This applies to Sherwood and not Johanna.

42. How did I come up with the most successful BodyQUICK headline (“The Fastest Way to Increase Power and Speed Guaranteed”)? I borrowed it from the longest-running, and thus most profitable, Rosetta Stone headline: “The Fastest Way to Learn a Language Guaranteed.^(tm)” Reinventing the wheel is expensive—become an astute observer of what is already working and adapt it. I keep a folder of all print and direct mail advertising that compels me to call a number or visit a website, and I use www.delicious.com to bookmark websites that convince me to provide my e-mail address or make a purchase.

43. Sherwood includes shipping and handling prior to the final order page so that people don’t finalize the order just to confirm total pricing. He wants his “orders” to reflect real orders and not price checkers.

44. If you are rolling out after a successful test or building a large e-mail database, tools like www.aweber.com in the resources are better at scaling.

45. Keeping in mind that 100 specific terms at $0.10 per click will perform better than 10 broad terms at $1.00 per click, the more you spend, and thus the more traffic you drive, the more statistically valid the results will be. If budget permits, increase the number of related terms and daily expenditure so that the entire PPC test costs $500–1,000.

46. This is a checking account for receiving credit card payments.

47. Set this up using services detailed at the end of this chapter and the next.

48. See the online bonus chapter on www.fourhourblog.com to understand all of these terms in context. Search “Jedi Mind Tricks.”

49. “Paper trading” refers to setting an imaginary budget, “purchasing” stocks (writing their current values on a piece of paper), and then tracking their performance over time to see how your investment would have done had it been for real. It is a no-risk method for honing investment skills before putting skin in the game.

11. Income Autopilot III. MBA—MANAGEMENT BY ABSENCE

Hmm … Whom to follow? If you are fast on your feet, you’ll notice that I just offered you an either-or option. The good news is that, as usual, there is a third option.

The contradictory advice you find in business books and elsewhere usually relates to managing employees—how to handle the human element. Herb tells you to give them a hug, Revson tells you to kick them in the balls, and I tell you to solve the problem by eliminating it altogether: Remove the human element.

Once you have a product that sells, it’s time to design a self-correcting business architecture that runs itself.

The Remote-Control CEO

The power of hiding ourselves from one another is mercifully given, for men are wild beasts, and would devour one another but for this protection.

—HENRY WARD BEECHER, U.S. abolitionist and clergyman, “Proverbs from Plymouth Pulpit”

RURAL PENNSYLVANIA

In a 200-year-old stone farmhouse, a quiet “experiment in 21st-century leadership” is proceeding exactly as planned.⁵¹Stephen McDonnell is upstairs in his flip-flops looking at a spreadsheet on his computer. His company has increased its annual revenue 30% per year since it all began, and he is able to spend more time with his three daughters than he ever thought possible.

The experiment? As CEO of Applegate Farms, he insists on spending just one day per week at the company headquarters in Bridgewater, New Jersey. He’s not the only CEO who spends time at home, of course—there are hundreds who have heart attacks or nervous breakdowns and need time to recover—but there is a huge difference. McDonnell has been doing it for more than 17 years. Rarer still, he started doing it just six months after founding the company.

This intentional absence has enabled him to create a process-driven instead of founder-driven business. Limiting contact with managers forces the entrepreneur to develop operational rules that enable others to deal with problems themselves instead of calling for help.

This isn’t just for small operations. Applegate Farms sells more than 120 organic and natural meat products to high-end retailers and generates more than $35 million in revenue per year.

It is all possible because McDonnell started with the end in mind.

Behind the Scenes: The Muse Architecture

Orders are nobody can see the Great Oz! Not nobody, not nohow!

—GUARDIAN OF THE EMERALD CITY GATES, The Wizard of Oz

Starting with the end in mind—an organizational map of what the eventual business will look like—is not new.

Infamous deal-maker Wayne Huizenga copied the org chart of McDonald’s to turn Blockbuster into a billion-dollar behemoth, and dozens of titans have done much the same. In our case, it’s the “end in mind” that is different. Our goal isn’t to create a business that is as large as possible, but rather a business that bothers us as little as possible. The architecture has to place us out of the information flow instead of putting us at the top of it.

I didn’t get this right the first time I tried.

In 2003, I was interviewed in my home office for a documentary called As Seen on TV. We were interrupted every 20–30 seconds with beeping e-mail notifications, IM pings, and ringing phones. I couldn’t leave them unanswered, because dozens of decisions depended on me. If I didn’t ensure the trains were running on time and put out the fires, no one would.

The Anatomy of Automation

THE 4-HOUR WORKWEEK VIRTUAL ARCHITECTURE

Splitting the Pie: Outsourcer Economics

Each outsourcer takes a piece of the revenue pie. Here is what the general profit-loss might look like for a hypothetical $80 product sold via phone and developed with the help of an expert, who is paid a royalty. I recommend calculating profit margins using higher-than-anticipated expenses. This will account for unforeseen costs (read: screwups) and miscellaneous fees such as monthly reports, etc.

How do you factor in advertising cost? If a $1,000 ad or $1,000 in PPC produces 50 sales, my advertising cost per order (CPO) is $20. This makes the actual‘ per-unit profit $40.94.

I set a new goal after that experience, and when I was interviewed six months later as a follow-up, one change was more pronounced than all others: silence. I had redesigned the business from the ground up so that I had no phone calls to answer and no e-mail to respond to.

I’m often asked how big my company is—how many people I employ full-time. The answer is one. Most people lose interest at that point. If someone were to ask me how many people run Brain-QUICKEN LLC, on the other hand, the answer is different: between 200 and 300. I am the ghost in the machine.⁵²

From advertisements—print in this example—to a cash deposit in my bank account, the diagram is what a simplified version of my architecture looks like, including some sample costs. If you have developed a product based on the guidelines in the last two chapters, it will plug into this structure hand-in-glove.

Where am I in the diagram? Nowhere.

I am not a tollbooth through which anything needs to pass. I am more like a police officer on the side of the road who can step in if need be, and I use detailed reports from outsourcers to ensure the cogs are moving as intended. I check reports from fulfillment each Monday and monthly reports from the same the first of each month. The latter reports include orders received from the call center, which I can compare to the call center bills to gauge profit. Otherwise, I just check bank accounts online on the first and fifteenth of each month to look for odd deductions. If I find something, one e-mail will fix it, and if not, it’s back to kendo, painting, hiking, or whatever I happen to be doing at the time.

Removing Yourself from the Equation: When and How

The system is the solution.

—AT&T

The diagram should be your rough blueprint for designing a self-sustaining virtual architecture. There could be differences—more or fewer elements—but the main principles are the same:

1. Contract outsourcing companies⁵³ that specialize in one function vs. freelancers whenever possible so that if someone is fired, quits, or doesn’t perform, you can replace them without interrupting your business. Hire trained groups of people who can provide detailed reporting and replace one another as needed.

2. Ensure that all outsourcers are willing to communicate among themselves to solve problems, and give them written permission to make most inexpensive decisions without consulting you first (I started at less than $100 and moved to $400 after two months).

How do you get there? It helps to look at where entrepreneurs typically lose their momentum and stall permanently.

Most entrepreneurs begin with the cheapest tools available, bootstrapping and doing things themselves to get up and running with little cash. This isn’t the problem. In fact, it’s necessary so that the entrepreneurs can train outsourcers later. The problem is that these same entrepreneurs don’t know when and how to replace themselves or their homemade infrastructure with something more scalable.

By “scalable,” I mean a business architecture that can handle 10,000 orders per week as easily as it can handle 10 orders per week. Doing this requires minimizing your decision-making responsibilities, which achieves our goal of time freedom while setting the stage for doubling and tripling income with no change in hours worked.

Call the companies at the end of the chapter to research costs. Plan and budget accordingly to upgrade infrastructure at the following milestones, which I measure in units of product shipped:

Phase I: 0–50 Total Units of Product Shipped

Do it all yourself. Put your phone number on the site for both general questions and order-taking—this is important in the beginning—and take customer calls to determine common questions that you will answer later in an online FAQ. This FAQ will also be the main material for training phone operators and developing sales scripts.

Is PPC, an offline advertisement, or your website too vague or misleading, thus attracting unqualified and time-consuming consumers? If so, change them to answer common questions and make the product benefits (including what it isn’t or doesn’t do) clearer.

Answer all e-mail and save your responses in one folder called “customer service questions.” CC yourself on responses and put the nature of the customers’ questions in the subject lines for future indexing. Personally pack and ship all product to determine the cheapest options for both. Investigate opening a merchant account from your local small bank (easier to get than with a larger bank) for later outsourced credit card processing at higher roll-out volumes.

Phase II: >10 Units Shipped Per Week

Add the extensive FAQ to your website and continue to add answers to common questions as received. Find local fulfillment companies in the yellow pages under “fulfillment services” or “mailing services.” If you cannot find one there or at www.mfsanet.org, call local printers and ask them for recommendations. Narrow the field to those (often the smallest) who will agree not to charge you setup fees and monthly minimums. If this isn’t possible, ask for at least 50% off both and then request that the setup fee be applied as an advance against shipping or their other fees.

Limit the candidates further to those who can respond to order status e-mail (ideal) or phone calls from customers. The e-mail from your “customer service” folder will be provided as copy-and-paste responses, especially those related to order status and refund requests.⁵⁴

To lower or eliminate miscellaneous fees, explain that you are a start-up and that your budget is small. Tell them you need the cash for advertising that will drive more shipments. If needed, mention the competitive companies that you are considering and pit them against one another, using lower pricing or concessions from one to get larger discounts and bonuses from the others.

Before making your final selection, ask for at least three client references and use the following to elicit the negatives: “I understand they’re good, but everyone has weaknesses. If you had to point out where you’ve had some issues and what they’re not the best at, what would you say? Can you please describe an incident or a disagreement? I expect these with all companies, so it’s no big deal, and it’s confidential, of course.”

Ask for “net-30 terms”—payment for services 30 days after they’re rendered—after one month of prompt payment for their services. It is easier to negotiate all of the above points with smaller operations that need the business. Have your contract manufacturer ship product directly to the fulfillment house once you have decided on one and put the fulfillment house’s e-mail (you can use an e-mail address at your domain and forward it) or phone number on the online “thank you” page for order status questions.

Phase III: >20 Units Shipped Per Week

Now you will have the cash flow to afford the setup fees and the monthly minimums that bigger, more sophisticated outsourcers will ask for. Call the end-to-end fulfillment houses that handle it all—from order status to returns and refunds. Interview them about costs and ask them for referrals to call centers and credit card processors they’ve collaborated with for file transfers and problem solving. Don’t assemble an architecture of strangers—there will be programming costs and mistakes, both of which are expensive.

Set up an account with the credit card processor first, for which you will need your own merchant account. This is critical, as the fulfillment house can only handle refunds and declined cards for transactions they process themselves through an outsourced credit card processor.

Optionally, set up an account with one of the call centers your new fulfillment center recommends. These will often have toll-free numbers you can use instead of purchasing your own. Look at the percentage split of online to phone orders during testing and consider carefully if the extra revenue from the latter is worth the hassle. It often isn’t. Those who call to order will generally order online if given no other option.

Before signing on with a call center, get several 800 numbers they answer for current clients and make test calls, asking difficult product-related questions and gauging sales abilities. Call each number at least three times (morning, afternoon, and evening) and note the make-or-break factor: wait time. The phone should be answered within three to four rings, and if you are put on hold, the shorter the wait the better. More than 15 seconds will result in too many abandoned calls and waste advertising dollars.

The Art of Undecision: Fewer Options = More Revenue

Companies go out of business when they make the wrong decisions or, just as important, make too many decisions. The latter creates complexity.

—MIKE MAPLES, cofounder of Motive Communications (IPO to $260 million market cap), founding executive of Tivoli (sold to IBM for $750 million), and investor in companies such as Digg.com

Joseph Sugarman is the marketing genius behind dozens of direct-response and retail successes, including the BluBlocker sunglasses phenomenon. Prior to his string of home runs on television (he sold 20,000 pairs of BluBlockers within 15 minutes of his first QVC appearance), his domain was print media, where he made millions and built an empire called JS&A Group. He was once recruited to design an advertisement for a manufacturer’s watch line. The manufacturer wanted to feature nine different watches in the ad, and Joe recommended featuring just one. The client insisted and Joe offered to do both and test them in the same issue of The Wall Street Journal. The result? The one-watch offer outsold the nine-watch offer 6-to-1.⁵⁵

Henry Ford once said, referring to his Model-T, the bestselling car of all time,⁵⁶ “The customer can have any color he wants, so long as it’s black.” He understood something that businesspeople seem to have forgotten: Serving the customer (“customer service”) is not becoming a personal concierge and catering to their every whim and want. Customer service is providing an excellent product at an acceptable price and solving legitimate problems (lost packages, replacements, refunds, etc.) in the fastest manner possible. That’s it.

The more options you offer the customer, the more indecision you create and the fewer orders you receive—it is a disservice all around. Furthermore, the more options you offer the customer, the more manufacturing and customer service burden you create for yourself.

The art of “undecision” refers to minimizing the number of decisions your customers can or need to make. Here are a few methods that I and other NR have used to reduce service overhead 20–80%:

Offer one or two purchase options (“basic” and “premium,” for example) and no more.

Do not offer multiple shipping options. Offer one fast method instead and charge a premium.

Do not offer overnight or expedited shipping (it is possible to refer them to a reseller who does, as is true with all of these points), as these shipping methods will produce hundreds of anxious phone calls.

Eliminate phone orders completely and direct all prospects to online ordering. This seems outrageous until you realize that success stories like Amazon.com have depended on it as a fundamental cost-saver to survive and thrive.

Do not offer international shipments. Spending 10 minutes per order filling out customs forms and then dealing with customer complaints when the product costs 20–100% more with tariffs and duties is about as fun as headbutting a curb. It’s about as profitable, too.

Some of these policies hint at what is perhaps the biggest time-saver of all: customer filtering.

Not All Customers Are Created Equal

Once you reach Phase III and have some cash flow, it’s time to re-evaluate your customers and thin the herd. There are good and bad versions of all things: good food, bad food; good movies, bad movies; good sex, bad sex; and, yes, good customers and bad customers.

Decide now to do business with the former and avoid the latter. I recommend looking at the customer as an equal trading partner and not as an infallible blessing of a human being to be pleased at all costs. If you offer an excellent product at an acceptable price, it is an equal trade and not a begging session between subordinate (you) and superior (customer). Be professional but never kowtow to unreasonable people.

Instead of dealing with problem customers, I recommend you prevent them from ordering in the first place.

I know dozens of NR who don’t accept Western Union or checks as payment. Some would respond to this with, “You’re giving up 10–15% of your sales!” The NR, in turn, would say, “I am, but I’m also avoiding the 10–15% of the customers who create 40% of the expenses and eat 40% of my time.” It’s classic 80/20.

Those who spend the least and ask for the most before ordering will do the same after the sale. Cutting them out is both a good lifestyle decision and a good financial decision. Low-profit and high-maintenance customers like to call operators and spend up to 30 minutes on the phone asking questions that are unimportant or answered online, costing—in my case—$24.90 (30 x $0.83) per 30-minute incident, eliminating the minuscule profit they contribute in the first place.

Those who spend the most complain the least. In addition to our premium $50–200 pricing, here are a few additional policies that attract the high-profit and low-maintenance customers we want:

Do not accept payment via Western Union, checks, or money order.

Raise wholesale minimums to 12–100 units and require a tax ID number to qualify resellers who are real businesspeople and not time-intensive novices. Don’t run a personal business school.

Refer all potential resellers to an online order form that must be printed, filled out, and faxed in. Never negotiate pricing or approve lower pricing for higher-volume orders. Cite “company policy” due to having had problems in the past.

Offer low-priced products (à la MRI’s NO2 book) instead of free products to capture contact information for follow-up sales. Offering something for free is the best way to attract time-eaters and spend money on those unwilling to return the favor.

Offer a lose-win guarantee (see boxed text) instead of free trials.

Do not accept orders from common mail fraud countries such as Nigeria.

Make your customer base an exclusive club, and treat the members well once they’ve been accepted.

The Lose-Win Guarantee—How to Sell Anything to Anyone

If you want a guarantee, buy a toaster.

—CLINT EASTWOOD

The 30-day money-back guarantee is dead. It just doesn’t have the pizzazz it once did. If a product doesn’t work, I’ve been lied to and will have to spend an afternoon at the post office to return it. This costs me more than just the price I paid for the product, both in time and actual postage. Risk elimination just isn’t enough.

This is where we enter the neglected realm of lose-win guarantees and risk reversal. The NR use what most consider an afterthought—the guarantee—as a cornerstone sales tool.

The NR aim to make it profitable for the customer even if the product fails. Lose-win guarantees not only remove risk for the consumer but put the company at financial risk.

Here are a few examples of putting your money where your mouth is.

Delivered in 30 minutes or less or it’s free!

(Domino’s Pizza built its business on this guarantee.)

We’re so confident you’ll like CIALIS, if you don’t we’ll pay for the brand of your choice.

(The “CIALIS® Promise Program” offers a free sample of CIALIS and then offers to pay for competing products if CIALIS doesn’t live up to the hype.)

If your car is stolen, we’ll pay $500 of your insurance deductible.

(This guarantee helped THE CLUB become the #1-selling mechanical automobile anti-theft device in the world.)

110% guaranteed to work within 60 minutes of the first dose.

(This was for BodyQUICK and a first among sports nutrition products. I offered to not only refund customers the price of the product if it didn’t work within 60 minutes of the first dose, but also to send them a check for 10% more.)

The lose-win guarantee might seem like a big risk, especially when someone can abuse it for profit like in the BodyQUICK example, but it isn’t … if your product delivers. Most people are honest.

Let’s look at some actual numbers.

Returns for BodyQUICK, even with a 60-day return period (and partially because of it⁵⁷), are less than 3% in an industry in which the average is 12–15% for a normal 30-day 100% money-back guarantee. Sales increased more than 300% within four weeks of introducing the 110% guarantee, and returns decreased overall.

Johanna adopted this lose-win offer and came up with “Increase sport-specific flexibility 40% in two weeks or return it for a full refund (including shipping) and keep the 20-minute bonus DVD as our gift.”

Sherwood found his guarantee as well: “If these shirts are not the most comfortable you’ve ever worn, return them and get 2-times your purchase price back. Each shirt is also guaranteed for life—if it gets threadbare, send it back and we’ll replace it free of charge.”

Both of them increased sales more than 200% in the first two months. Return percentage remained the same for Johanna and increased 50% for Sherwood, from 2 to 3%. Disaster? Far from it. Instead of selling 50 and getting one back with a 100% guarantee [(50 x $100) – $100 = $4,900 in revenue], he sold 200 and got six back with the 200% guarantee [(200 x $100) – (6 x $200) = $18,800 in revenue]. I’ll take the latter.

Lose-win is the new win-win. Stand out and reap the rewards.

Little Blue Chip: How to Look Fortune 500 in 45 Minutes

Are you tired of sand being kicked in your face? I promise you new muscles in days!

—CHARLES ATLAS, strongman who sold more than $30 million worth of “dynamic-tension” muscle courses through comic books

If approaching large resellers or potential partners, small company size will be an obstacle. This discrimination is often as insurmountable as it is unfounded. Fortunately, a few simple steps can dramatically upgrade your budding Fortune 500 image and take your muse from coffee shop to boardroom in 45 minutes or less.

1. Don’t be the CEO or founder.

Being the “CEO” or “Founder” screams start-up. Give yourself the mid-level title of “vice president” (VP), “director,” or something similar that can be added to depending on the occasion (Director of Sales, Director of Business Development, etc.). For negotiation purposes as well, remember that it is best not to appear to be the ultimate decision-maker.

2. Put multiple e-mail and phone contacts on the website.

Put various e-mail addresses on the “contact us” page for different departments, such as “human resources,” “sales,” “general inquiries,” “wholesale distribution,” “media/PR,” “investors,” “web comments,” “order status,” and so on. In the beginning, these will all forward to your e-mail address. In Phase III, most will forward to the appropriate outsourcers. Multiple toll-free numbers can be used in the same fashion.

3. Set up an Interactive Voice Response (IVR) remote receptionist.

It is possible to sound like a blue chip for less than $30. In fewer than ten minutes on a site such as www.angel.com, which boasts clients such as Reebok and Kellog’s, it is possible to set up an 800 number that greets callers with a voice prompt such as, “Thank you for calling [business name]. Please say the name of the person or department you would like to reach or just hold on for a list of options.”

Upon speaking your name or selecting the appropriate department, the caller is forwarded to your preferred phone or the appropriate outsourcer—with on-hold music and all.

4. Do not provide home addresses.

Do not use your home address or you will get visitors. Prior to securing an end-to-end fulfillment house that can handle checks and money orders—if you decide to accept them—use a post office box but leave out the “PO Box” and include the street address of the post office itself. Thus “PO Box 555, Nowhere, US 11936” becomes “Suite 555, 1234 Downtown Ave., US 11936.”

Go forth and project professionalism with a well-designed image. Perceived size does matter.

COMFORT CHALLENGE

Relax in Public (2 days)

This is the last Comfort Challenge, placed prior to the chapter that tackles the most uncomfortable turning point for most office dwellers: negotiating remote work agreements. This challenge is intended to be fun while showing—in no uncertain terms—that the rules most follow are nothing more than social conventions. There are no legal boundaries stopping you from creating an ideal life … or just being self-entertained and causing mass confusion.

So, relaxing in public. Sounds easy, right? I’m somewhat famous for relaxing in style to get a laugh out of friends. Here is the deal, and I don’t care if you’re male or female, 20 or 60, Mongolian or Martian. I call the following a “time-out.”

Once per day for two days, simply lie down in the middle of a crowded public place at some point. Lunchtime is ideal. It can be a well-trafficked sidewalk, the middle of a popular Starbucks, or a popular bar. There is no real technique involved. Just lie down and remain silent on the ground for about ten seconds, and then get up and continue on with whatever you were doing before. I used to do this at nightclubs to clear space for break-dancing circles. No one responded to pleading, but going catatonic on the ground did the trick.

Don’t explain it at all. If someone asks about it after the fact (he or she will be too confused to ask you while you’re doing it for 10 seconds), just respond, “I just felt like lying down for a second.” The less you say, the funnier and more gratifying this will be. Do it on solo missions for the first two days, and then feel free to do it when with a group of friends. It’s a riot.

It isn’t enough to think outside the box. Thinking is passive. Get used to acting outside the box.

TOOLS AND TRICKS

Looking Huge—Virtual Receptionist and IVR

Angel (www.angel.com)

Get an 800 number with professional voice menu (voice recognition departments, extensions, etc.) in five minutes. Incredible.

Ring Central (www.ringcentral.com)

Offers toll-free numbers, call screening and forwarding, voicemail, fax send and receive, and message alerts, all online.

CD/DVD Duplication, Printing, and Product Packaging

AVC Corporation (www.avccorp.com)

SF Video (www.sfvideo.com)

Local Fulfillment (fewer than 20 units shipped per week)

Mailing Fulfillment Service Association (www.mfsanet.org)

End-to-End Fulfillment Companies (more than 20 units shipped per week, $500+ setup)

Motivational Fulfillment (www.mfpsinc.com)

The secret backend to campaigns from HBO, PBS, Comic Relief, Body by Jake, and more.

Innotrac (www.innotrac.com)

They are currently one of the largest DR marking companies.

Moulton Fulfillment (www.moultonfulfillment.com)

200,000-square-foot facility with real-time online inventory reports.

Call Centers (per-minute and/or per-sale fees)

There are generally two classes of call centers: order takers and commissioned reps. Interview each provider you consider to understand the options and costs involved.

The former is a good option if you give the product price in an advertisement (hard offer), are offering free information (lead generation), or don’t need trained salespeople who can overcome objections. In other words, your ad or website is pre-qualifying prospects.

The latter would more appropriately be called “sales centers.” Operators are commissioned and trained “closers” whose sole goal is to convert callers to buyers. These calls are often in response to “call for information/ trial/sample” ads that don’t feature a price (soft offers). Expect higher costs per sale.

LiveOps (www.liveops.com)

Pioneer in home-based reps, which often ensures more calls are answered. Provides comprehensive service with agents, IVR, and Spanish. Often used for one-step order taking instead of soft offers.

West Teleservices (www.west.com)

29,000 employees worldwide, processes billions of minutes per year. All the high-volume and low-price players use them for lower-priced products or higher-end products with free trials and installment plans.

NexRep (www.nexrep.com)

Highly skilled home-based sales agents that specialize in B2C and B2B, inbound and outbound programs. If performance, speed to respond, Internet integration, and quality customer experience are your priorities, this is a strong option to consider.

Triton Technology (www.tritontechnology.com)

Commission-only sales center know for incredible closing abilities (see the movie Boiler Room and Alec Baldwin’s character in Glengarry, Glen Ross). Don’t call unless your product sells for at least $100.

CenterPoint Teleservices (http://www.centerpointllc.com)

This sales force has experience to convert sales from hard offers, soft offers, and multiple offers (upselling additional products after a caller agrees to purchase the advertised product) originating from radio, TV, print, or the web.

Stewart Response Group (www.stewartresponsegroup.com)

Sales-driven call center leveraging the home-agent model for both inbound and outbound programs. Another high-touch boutique center.

Credit Card Processors (merchant account through your bank necessary)

These companies, unlike options in the last chapter, specialize in not only processing credit cards but interacting with fulfillment on your behalf, removing you from the flowchart.

TransFirst Payment Processing (www.transfirst.com)

Chase Paymentech (www.paymentech.com)

Trust Commerce (www.trustcommerce.com)

PowerPay (www.powerpay.biz)

One of the Inc. 500 Fastest-Growing Private Companies. Process credit cards from your iPhone and more.

Affiliate Program Software

My Affiliate Program (www.myaffiliateprogram.com)

Also see the affiliate programs listed in the “Tools and Tricks” at the end of Chapter 9.

Discount Media Buying Agencies

If you go to a magazine, radio station, or TV channel and pay rate card—the “retail” pricing first given—you will never make it big. To save a lot of headache and expense, consider using ad agencies that negotiate discounts of up to 90% in their chosen media.

Manhattan Media (Print) (www.manhmedia.com)

Great agency with fast turnaround. I’ve used them since the beginning.

Novus Media (Print) (www.novusprintmedia.com)

Relationships with 1,400+ magazine and newspaper publishers with an average of 80% of rate card. Clients include Sharper Image and Office Depot.

Mercury Media (TV) (www.mercurymedia.com)

Largest private DR media agency in the U.S. Specialists in TV but can also handle radio and print. Offer full tracking and reporting to determine ROI.

Euro RSCG (Cross Media) (http://www.eurorscgedge.com/)

One of the worldwide leaders in DRTV media across all platforms.

Canella Media Response Television (TV) (http://www.drtv.com)

Uses the innovative P/I (per inquiry) model for compensation, where you split order profits instead of paying for time upfront. This is more expensive per order if you have a successful campaign, but it lowers upfront investment in media.

Marketing Architects (Radio) (www.marketingarchitects.com)

The de facto leaders in radio DR but a bit on the expensive side. Almost all of the most successful DR products—Carlton Sheets No Money Down, Tony Robbins, etc.—have used them.

Radio Direct Response (Radio) (www.radiodirect.com)

Mark Lipsky has put together a great firm, with clients ranging from small direct marketers to Travel Channel and Wells Fargo.

Online Marketing and Research Firms (PPC campaign management, etc.)

Starting Small—Find a Local Individual to Help

SEMPO (www.sempo.org; see the member directory)

Excellent Mid-Size Firms

Clicks 2 Customers (www.clicks2customers.com)

Working Planet (www.workingplanet.com)

The Hard-Hitting Pros—Small Campaigns Start at Several Thousand Dollars

Marketing Experiments (www.marketingexperiments.com) This is my team.

Did It (www.did-it.com)

ROIRevolution (www.roirevolution.com)

Cost is determined by a percentage above monthly PPC spend.

iProspect (www.iprospect.com)

Full-Service Infomercial Producers

These are the companies that made Oreck Direct, Nutrisystem, Nordic-Track, and Hooked on Phonics household names. The first has an excellent DRTV glossary and both sites offer excellent resources. Don’t call unless you can budget at least $15,000 for a short-form commercial or $50,000+ for a long-form infomercial.

Cesari Direct (http://www.cesaridirect.com/)

Hawthorne Direct (www.hawthornedirect.com)

Script-to-Screen (www.scripttoscreen.com)

Retail and International Product Distribution

Want to get your product on the shelves of Wal-Mart, Costco, Nordstrom, or the leading department store in Japan? Sometimes it pays to have experts with relationships get you there.

Tristar Products (http://www.tristarproductsinc.com)

Behind the PowerJuicer and other hits. Tristar also owns their own production studio and can therefore offer end-to-end services in addition to retail distribution.

BJ Direct (International) (www.bjgd.com)

Celebrity Brokers

Want a celebrity to endorse your product or be a spokesperson? It can cost a lot less than you think, if you do it right. I know of one clothing endorsement deal with the best pitcher in Major League Baseball that cost just $20,000 per year. Here are the brokers who can make it happen:

Celeb Brokers (www.celebbrokers.com)

President Jack King was the one who first turned me on to this fascinating world. He knows it all inside and out.

Celebrity Endorsement Network (www.celebrityendorsement.com)

Celebrity Finding

Contact Any Celebrity (www.contactanycelebrity.com)

It is possible to do it yourself, as I have done many times. This online directory and its helpful staff will help you find any celebrity in the world.

LIFESTYLE DESIGN IN ACTION

After I read the section on outsourcing, I thought it sounded like a novel idea but would never work for me. However, since the rest of the book was “spot on,” I decided to try it. Rather than ship my money overseas, I opted to keep it in the U.S. and use my niece in college, with skills on computers I can’t even fathom, to test the theory. Turns out it has been a great experience and timesaver for me, as well as moneymaker for her. It seems I have all of the positives of out sourcing but none of the hassles of language and such…. Being able to mold a young mind for the better ties in well with the rest of your book …

—KEN D.

Hey Tim, You mentioned www.weebly.com a few months ago, and I’ve been using that to build all my muse sites and think it’s great! Also, Facebook groups has (almost) every niche imaginable. So what I have found success in doing is: (1) Finding a niche group that would buy my muse, (2) sending a message to each admin telling them how my muse will help their group members. Then politely asking them to put a blurb in the “Recent News” section of the group. This makes it more trustworthy than a wall post, and it stays up there (free advertising) until the admin removes it. One hundred times better than a wall post. In one case, the admin purchased my muse, posted my note for me on the groups’ “Recent News” section, then e-mailed the entire group telling them they have to check out my site.

—GAVIN

50. Richard Tedlow, Giants of Enterprise: Seven Business Innovators and the Empires They Built (2001; reprint, HarperBusiness, 2003).

51. This is adapted from “The Remote Control CEO,” Inc. magazine, October 2005.

52. Actually, I’m the ghost in new machines now, as I sold BrainQUICKEN in 2009 to a private equity firm.

53. “Contract outsourcing companies” can be as simple as dependable web-based services. Don’t let the term intimidate you.

54. Sample e-mail responses for fulfillment purposes can be found at www.fourhourblog.com.

55 Joseph Sugarman, Advertising Secrets of the Written Word (DelStar Books, 1998).

56 Depending on whose math is used (number of cars vs. gross sales), some claim the original Volkswagen Beetle holds the record.

57. For the benefit of the customer and to capitalize on universal laziness (me included), provide as much time as possible to consider or forget the product. Ginsu knives offered a 50-year guarantee. Can you offer a 60-, 90-, or even 365-day guarantee? Gauge average return percentages with a 30- or 60-day guarantee first (for budgeting calculations and cash-flow projections) and then extend it.