So, I’ve added a new constraint to my startup plan – my new businesses have to be inexpensive to launch. And by inexpensive I actually mean I will be focusing on cheap start up businesses. There is a method to this form of thinking. By focusing on minimizing cost early on what I’m effectively doing is watching the pennies, and as everyone knows, if you watch the pennies the dollars (or pounds or Euros, etc) will watch themselves.
We do need to get something straight though – by watching the pennies, I don’t mean do everything the cheapest way possible (which can be to the detriment of your business), I mean scrutinizing every spending opportunity and make sure that it is both necessary and that you are getting the best value for your outlay.
Already you know I’m constraining my business to exist in the digital realm which means I don’t need a physical presence – but what I’ve discovered in my research today actually means I do need a form of physical presence in the form of an address in the public domain.
Check out this post if you want to know more about Business Mailing Address services – or at least what I learned in the UK.
I’m sure as I proceed I will be finding more and more of these areas where I will have to make a decision between spending money and compromising on something.
But you can’t start a business without money
You are correct, my business will need some form of funds to start, and not just because I need to eat and pay my bills. There are three ways to fund a business
- Bootstrapping – which involves self-funding through the savings and personal credit reserves of the founders, as well as informal investments and support from family and friends.
- Borrowing – formal borrowing facilities available from places like banks, they normally require capital to be repaid with interest. Banks will assess their risk and return when validating applications and assigning interest rates.
- Selling Shares (equity – there is no synonym that starts with B – I consulted my thesaurus just in case). As a limited company equity can be sold to external investors.
My initial plan is to self-fund using savings. At the moment I am still employed and still building my savings buffer to a minimalistic 6 months of standard living and operating costs, although this is assuming that within that 6 months I have no income at all.
How does this affect the development of my business?
So, as I’m self-funding using savings, all expenses will have to pass the test – this is “my money” that is being spent therefore it needs to return a lot of value – I worked hard to earn it in the first place!
So for my bootstrapped business, I will have some necessary expenses. Already you know I’m constraining my business to exist in the digital realm. This means immediately I need a website presence, and as you can tell from the website address I’ve opted to purchase the domain https://fleecorporate.com rather than use a free sub-domain. It will need to be hosted, which also costs money.
I will need to maximize my exposure to this website – it will need to earn its keep, therefore it needs to be search engine optimized (SEO) to generate traffic because with traffic comes monetization options and paying for traffic goes against my bootstrapping philosophy. SEO and website creation are not something that I have spent a lot of time learning to date – therefore I need training, advice, and support on this journey.
Passive Income Streams – the long term view
So I did actually start the learning phase of this experiment in January 2020 when I started researching long term semi-passive income streams. Now, if you’re like I was at the beginning there are many things in that statement that aren’t necessarily clear – therefore, here is my definition of what I’ve found:
A long term semi-passive income stream is something that once created will continue to generate value over a long period of time. An example of a passive income stream would be a song that although the artist only recorded once, they get paid every time someone plays it through a streaming service. Now being unable to sing without the neighborhood dogs joining in, I needed something more in tune with my skill set!
What I’ve discovered is that there are many ways of creating a passive online income, but the one that appealed to me was blogging. Now, this is not my first foray into blogging, but it is the first time I’ve put effort into learning how to do it properly. I first came across the idea of niche websites from someone offering to sell fully set up websites that would sit there and churn away passive affiliate marketing income ad Infinitum… While a turnkey solution sounded attractive, firstly I had to ask if these were set up and earning – why would someone want to sell them for a low four-figure sum, and secondly surely I generate more value for myself by taking a bit longer and putting in the graft to learn how to create them myself.
The Value of Assets, or Why Buy a Domain?
So back to the research, now wary of people who want me to pay for something where I either won’t come out with an asset that I own (the website domain) or the skills to work on it myself, what is the best solution to learning how to create a scaleable online passive income?
By the way, just to be clear, we’re considering an asset to be something that we own, that has value. A website domain can be bought and sold, can be monetized to generate income, and its value increased through generating traffic and/or generating income.
I then came across Wealthy Affiliate, who offer a free starter membership to give it a shot without even asking for a credit card. I got the necessary training to choose a niche, build a website (not on your own domain with the free starter membership), and the first site hosted all without paying a penny. I very quickly decided to become a premium member, bought a domain and painlessly transferred my site across to its new home, you can see the results here: https://mysportsunderwear.com
They also made no bones about the fact that there were premium features that you have to pay for (a refreshing change – they even tell you how much), an active community across all timezones that are always available to help out and that this requires effort and hard work (no get rich quick promises).
Why did I choose Wealthy Affiliate?
I’ll admit, considering my bootstrapping philosophy I balked a bit at the price of premium membership to Wealthy Affiliate, but then I properly evaluated what I am getting for my money. The first thing I had neglected to consider, was the value of my time. At the point that I joined Wealthy Affiliate, I was working full-time hours and the thing that I was short of was time.
Having spent the last four years working in product and project costing, a cost-benefit analysis for any decision is second nature. To make a spending decision I need to make sure that the cost to me is worth the time that I will free up to do more value-adding activities.
The cost of a month of Wealthy Affiliate paying monthly (the most expensive way to pay), is a lot less than paying for an hour of a consultant’s time. For that cost I’m getting hosting for up to 10 sites, hundreds of hours of training at my fingertips, tools to make this journey easier and more intuitive, a community that will answer my questions and offer advice and experience almost immediately and hosting support with super-fast response times. Three months in its still a no brainer for me, as I’m saving multiple hours finding solutions each time I encounter an obstacle – and those hours saved are worth money to me.
Check out this post if you want to know more about Wealthy Affiliate as my choice for Online Income Success, and if you fancy signing up to the free starter account there are affiliate links on that post which will make me a small amount of money without costing you any extra!
Other Unavoidable Costs of Cheap Startups
Part of my corporate background is systems thinking so my default position is to automate everything! Now automation is going to be a difficult area for me because I’m going to have to judge when the balance point tips between cost and time investment or I will be getting more value from paying for automation as opposed to putting in the time.
This area has another complication – because I’m also trying to learn while doing this, I also have to weigh the benefits of new skill development and offset that against the cost and the time valuation.
So here are my currently unavoidable costs:
- Website Domain Purchase
- Website Hosting and Training
Potentially Future Costs (Update March 2021 – these are now Actual Costs – and my choice has it’s own post!)
- Company Setup – Currently considering being a sole trader in the UK, so I will be responsible for a self-assessment tax return or could hire an accountant or use paid software to take care of it for me. However, this company structure may not be appropriate in the long term especially if I end up not being physically located in the UK. The advice of an accountant (and associated cost) will become necessary
- A physical address – I don’t really want my personal address in the public domain, therefore to add gravitas to my site, create an electronic newsletter (and comply with email marketing requirements) I will need to have a physical address associated with my business. There are companies which provide this service, for a fee of course!
Check out this post if you want to know more about physical addresses and business mailing addresses!
Where Else Could I Spend Money:
At the moment I’m using a number of free versions of popular programs to support my two blogs. At the moment I’m getting sufficient value from the free tools – but there will be a tipping point where the extra value delivered by the paid version will have to be considered.
The tools I am using / or will be using are:
- sendinblue – all in one digital marketing platform, the free version allows for unlimited contacts on your email list and allows you to send a certain number of free emails per month and allows for workflow automation. This kinda worked for a bit – but I’ve binned it in favour of:
- Arkflux – an amazing CRM, business automation tool and email autoresponder (with many more tricks up its sleeve).
- Grammarly – an automated spelling and grammar checker. It works as you do (although if you’re on the Wealthy Affiliate Site Content Creator for some reason it doesn’t seem to work here – so I just edit my posts in WordPress afterward where the add-in for Safari works perfectly pointing out my spelling, punctuation and grammar errors). The Basic version is suiting me perfectly for the moment; however, depending on my business growth the Premium version may well be the first paid upgrade I go for.
- Canva – Easy to use graphics creator. The free version has loads of functionality that has proved sufficient to date, but there are additional great looking features in the Pro paid version including loads of extra stock photos, extra templates, branding plus loads more.
Passive income sounds great, but where exactly does the money come from?
So we’ve already discussed how I’m learning to use SEO to bring traffic to my websites, and this is great for sharing valuable information with visitors, but how can that translate into income? Well, it turns out that there are multiple income streams that can be explored once your website has visitors, some of these are explored in great detail in the Wealthy Affiliate training, others can be found via other reputable training mediums – such as https://neilpatel.com but here are some areas that I’m investigating and / or exploring:
- Affiliate Marketing – my niche site https://mysportsunderwear.com which explores athletic underwear as well as some kinds of adventure clothing and accessories (like my favourite Christmas present – the Overboard Waterproof Backpack, a key item it in my remote working arsenal – my laptop can travel with me safe from the elements).
Setting up your own work from home or remote office? Don’t forget anything important using my checklist for the ultimate home or remote office.
- It is monetized through affiliate links. Affiliate marketing means that when I promote a product with a link that is unique to me if someone purchases something from the website after following my link, the customer pays the same amount as they would do if they’d gone to the site direct, but I earn a small commission from the vendor for being their marketing funnel. Some of the biggest names in the business use affiliate marketing – you might be surprised to know that in 2020 Amazon has one of the world’s biggest affiliate networks.
- Advertising – yes those often annoying banners and advertising pop-ups are earning their hosting sites money. There are both Pay-per-click adverts (where I could get paid if someone leaves my site because they clicked on an advertisement), and high traffic sites can also sell advertising space on their sites.
- Sell a Product or Service – I could use my site to sell my own product or service and combined passive and active income. For instance, although I’m in the process of leaving corporate life I have a number of valuable skills that I can offer as a consultant. This website could serve as a method of attracting interested parties to my startup consultancy service (it’s started! Check out Confident Costing‘s page). Alternatively, by creating a physical or product of my own, I could also sell it via my website…
Other ways of generating money using SEO skills
- Create sites to sell – using skills developed by creating my own website, I could choose a good domain name in a desirable niche and develop sites with the goal of selling them via a website broker or an online business sale site. These sites could be either built to maximize traffic without monetizing at all (this appeals to some buyers) or generate a passive income for you to keep prior to sale. Bear in mind that website valuation can vary depending on whether the site is monetized and how much it is earning.
- Buy sites with potential – I could use my existing analytical skills to evaluate websites that are for sale and my newly acquired SEO skills to increase their income or valuation with the intention of flipping the sites (re-selling) or keeping them for their ongoing passive income. You can find sites via the same website broker or online business sale sites that you would use to sell a website.
- Dropped domain lists – similar to the buying sites with potential, but without the content. There are lists of the websites that have not yet been renewed and are about expire or have expired. Often a source of excellent opportunities to build out new sites to either keep or flip.
- Provide website SEO as a service – there are multiple ways of approaching this, partnering with local companies to improve their existing online presence, creating optimized content to improve companies’ lead generation, providing content or, more lucratively sales copy, as a service.
Wrapping it all up
My cheap startup business won’t be free to launch – and really although it might fall under one umbrella its really going to be a series of active and passive income streams (or businesses) in one wrapper. I’m more than ok with this because this does mean that I’m planning a diversified business, also known as not putting all of my eggs in one basket!
I’ve also set myself up in a good position of being able to scale the active and passive streams of my business plan – because in addition to focus, what the passive income elements really need is time to grow. I am allowing for this time by having the longest possible period of not needing to draw money of the business through making sure that the expenses are minimised, and that all outgoings (money and time) pass a value generation test. In parallel with this passive growth phase, I intend to put focus into active income generation particularly around the sales of service – although the “what” element of the service still requires some fleshing out!