Mainly because of feedback from JD Smith (thanks JD) I have moved the Blog over to Myspace. JD pointed out that you had to be a member of MSN Live Space to add comments to the blog, which didn't suit him and judging by the lack of comments to date didn't suit anyone else either.

 

Anyway, you can find the new blog at http:\blog.myspace.com/ideas2earn

 

Wel, Mike is back from Spring Break. I didn't ask any questions so have no idea how badly he behaved but I am of course extremely jealous. My weekend was spent visiting my new nephew and I managed to miss rock climbing, St Patricks day and the Charlton Newcastle match so enough said about that.

 

The good news is that the sampl shirts are in transit to Mike and he has finally set up a blog at

http://mikesbusinessblog.blogspot.com/index.html

This is key to the project for me as it will be interesting to track the progress of the project from both mentor and mentoree perspectives. I am sure from time to time there will be issues, or conflict which we will report differently.

Current issues hot on Mike's mind are stock and pricing. I have suggested that once we understand the shipping time we may want to just ship without holding any stock. If it is less than a week this should be acceptable. The cost of shipping is high this way as we are using a courier service and it adds about US$6 a shirt to the cost but given the alternative is to hold stock when we have little idea of the business dynamics I think we can eat this for a little while.

On the shirt pricing front I think the pictures we have been sent look like high quality shirts which retail in the $60-$70 bracket and am convinced that we can sell them for close to $40 as good value. Mike is nervous of this and so we plan to start marking uo at just $5 a shirt and see how we go. We can always adjust pricing by marketing campaign later on.

 

 

 

 

This article from the financial Times is much more balanced than my own efforts but acknowledges the issue with securtised debt and the potential roll over into the main economy.

 

On a separate note, I discovered yesterday that you must be an MSN spaces member to comment on this blog. I will sign up for a different blog provider and transfer the content over shortly.

I have posted this article on www.articlewheel.com, the issues contained concern me although it is not directly related to theusual content of this site, or my homepage. Feel free to reproduce it in whole or in part. References are from the FT and Wikipedia.

 

“Accredited Home Loan Lending, a subprime mortgage specialist, said it was seeking fresh capital and waivers on its lending covenants, while the New York Stock Exchange said it planned to delist shares in New Century Financial”. This bland statement of fact comes from one of the lead stories in todays Financial Times.

 

Current news reporting covering the meltdown of the US suprime mortgage lending does not go far enough. The fact that New Century Financial has over extended itself is not completely surprising given the boom in sub-prime credit in recent years along with stories of mortgage brokers driving Ferraris and living  millionaire lifestyles.  The bigger issue is that bad debt levels across the mortgage sector are unfeasibly high, with the latest figures showing US mortgage market delinquencies at 4.95% in Q4 of 2006 up from 4.67% in the previous quarter.

 

To put this in perspective, when I used to work in the mortgage sector in the UK we would price mortgages based upon a 1% delinquency rate, compared to say 4 or 5% for personal loans. This means that the US mortgage market as a whole is running at delinquency rates comparable with an insecured credit portfolio. The sub prime sector reached 14.4% delinquent in Q4 up from 13.2% in quarter 3; which is higher than would be profitable for a badly performing credit card portfolio (typically expect 5-7% delinquent).

 

OK, so the mortgage market is in trouble, they have priced incorrectly and will suffer some losses. Banks make a lot of money and they can eat the loss right? 10 or 15 years ago this would be a reasonable standpoint but in the interim banks have been developing and heavily promoting the sale of secruitised debt. This put simply means that they sell the rights to future cashflows from their mortgage portfolios to other institutions or rich individuals. For the banks this means that they  increase the amount of lending they do and the promise to investors was cast iron financial instruments secured on individual properties. The breadth of institutions that have invested in these instruments is vast and includes Life Assurers, Retailers, Investment banks, Governments (local and federal/sovereign) as well as rich individuals.

 

Again I hear you thinking that these institutions are large and can afford to lose a few dollars if the mortgage market suffers a few wrinkles, but there is a bigger picture. Interest rates are on an upwards trend around the globe and  that makes it harder for home owners to meet their monthly commitments. If the banks or their debt buyers push for a large scale round of repossessions the market could be flooded with cheap housing stocks, which in turn will depress the price of housing stocks putting many owners who have bought at the peak of the recent market boom into negative equity. The natural reaction at this point is to simply walk away, which will boost delinquency further and could create a downward cycle.

 

Under these circumstances it is forseeable that all the debt instruments, which only last year were being heralded as the financial success story of the decade, will effectively attain junk status and any companies that are holding them should see a swift correction to their stock price. On any kind of scale this could lead to a melt down in equities similar, if not more severe than the housing stock crisis outlined above.

 

Defined contribution pension funds that have become the norm are generally invested in equities and bonds but with recent relaxing of the rules some now permit property investments if not directly then in the form of Reits. Any major correction in either equity or housing markets could drastically affect the ability of millions of baby boomers to retire.

 

Taking our worst case scenario then, your house would be worth less than your mortgage, your investments decimated and nothing will have happened to alleviate your credit card balances. Your income will not have changed if you are lucky but you will be faced with a situation where you must save massively if you ever hope to retire. This mind set is what ultimately will curb US consumerism as we know it, and that ultimately will be the cause of depression across the United States.

 

It seems that no-one quite agrees on the causes of the great depression in the 1930s, but causes which are listed as contributing include: - lack of consumption caused by saving as opposed to spending, excessive borrowing by commercial entities and consumers exacerbated by deflation meaning that the debt levels spiralled as earnings dropped and borrowers were unable to repay the loans, and pretty soon Construction companies went under en-masse as demand for property fell off.

 

It is certainly not unforseeable that many of these factors could repeat given the current environment, added to which automated selling systems and the widespread use of complex derivative instruments have been shown to compound the speed with which the equity markets can head south.

 

There is little that you or I can do to forestall these events. Conventional wisdom says you can do one of two things. Either you trust in government to alleviate the pressure on the housing and debt markets caused by the failings of companies such as Accredited Home Lending and New Century financial, or you cash in all your chips now, wait for the crash and then buy “while there’s blood on the streets”. Either way I wish you luck.

I signed up with an affiliate package this week to see what I could learn. I have  read a lot of e-books that they gave me free but the most positive outcome was signing up for advertising on Yahoo aswell as Google. I also upgraded from the standard adwords package to the advanced version with Google. Net net my hits have increased again as of Thursday but it has cost me real cash to do so.

 

I put a landing page up for my ads this week, which basically has my article on why you should start your own business on it with links through to the rest of the site. This has not had a positive impact on conversion rates so far though.

 

I bought a great E-book online yesteday Traffic Sign Ups and Sales by Brett Ingram. It has very clear instrutions with screen shots on how to set up a traffic generating system. I followed the instructions and if it works should see the number of targetted hits increasing dramatically. Watch this space.

 

Edit: Sunday lunchtime and traffic has picked up steadily since Thursday. Over 100 hits yesterday and a steady upward trend. Some traffic from Google and Yahoo but most is not, so I guess the traffic generation scheme is working. I will keep you posted.

Mike has emailed a bunch of Tea shops and thus far had no response. He has however found a supplier of shirts out of India who seems to be very sympathetic of his position as a new entrepreneur and has been exceptionally helpful so far.

 

With this in mind I have advised Mike to do two things.

Firstly I told him to order 4 of each of 5 styles although he may be able to get away with less as suggested by the manufacturer. who incidentally also asked him to order in his size so that he can wear them...very smart!

 

Secondly I have produced a Direct mail piece for Mike that outlines the benefits of these particular shirts, extols their quality, offers a money back guarantee and implores the customer to order within 7 days or lose the opportunity to order at the super low introductory price of $37.50. Mike need to proof read this, print it in colour on good quality paper and drop it door to door to guage the response. I have suggested an initial drop of 200 pieces which should in theory garner at least 1 order.

 

Initial feedback from Mike was that

a)The price may be too high as Express sells shirts for $30,

b)We should have the company name on top of the flyer

c)He wasn't sure how he would feel if this landed on his door step.

 

Typically unsolicited mail through a letterbox will get 0.5-1% response rate possibly less. You are not selling  to yourself, or people that you know. You are seling to that 1 guy in 200 who likes what you've got and wants it now,and can be bothered to send the coupon back or pick up the phone.

 

I tried in the flyer to stress the quality of the shirts, we included pictures and laid it out in a tabular form, which Mike said he liked. If no-one buys at $37.50 we can re-test at $27.50 on a different street, and this is the approach I have reccomended. Each version of the flyer should get a better response, or we will go back to the previous version.

 

As wedon't yet have a company name, or website or anything else to brand with point B was some what moot, but I suspect that Mike will address this before we go live.

 

Mike is going  to set up a blog and start writing about this but has not yet done so. I am pushing and will let you know once he has a URL

 

 

 

 

As a result of the website I have had a couple of enquiries about starting businesses. I mentioned www.netwonclothiers.com the other day, which we did not help set up but who have used the Tailor www.gulatifashions.com who I reccomended on Jan 19th. I also had an enquiry from Mike, a student in the US who works part time and wants to start a business.

 

We chatted a little while and Mike told me that he is very into sports but does not need to tie his hobby to any business that he sets up. I mentioned my Chinese Teacher (Richie) and the fact that he can get Tea at cost, I also showed him Mat's tailored shirt site and we talked about possibilities.

 

Things moved on a little whilst I was away and Richie and Mike were in contact. Richie gave Mike the prices that he sells Tea at in Taiwan and Mike was immediately put off. After some research Mike discovered that the Tea was available at about the same price in America as what Richie was selling it for in Taiwan. I spent some time with Richie yesterday reviewing his costs and will pass this information on to Mike today to see whether he is comfortable with the potential profit margins.

 

The difficulty for Richie is that he can get the Tea very cheaply but thus far has been unable to market it efficiently. Mike on the other hand is willing to get out and sell, but has no understanding of Tea as a product particularly the higher quality loose leaf variety. We have contacted some Tea shops in the USA and are waiting for answers. Mike is keen that we start something quickly so we have made an offer to provide samples to the Tea shops, which will allow us to test delivery mechanisms, and that we wil provide our price lists at the same time.

 

My intention is to keep everyone posted as to progress through this blog, and Mike will do the same with his blog. I will post the URL later today. If we can get it to work I help  two budding entrepreneurs in one go and hopefully build some credibility for myself outside of the companies that I have started for my employer......which has nothing to do with Tea.

 

 

 

Digg this article at http://digg.com/business_finance/Does_Big_Business_Kill_Creativity

Recent press articles have focussed on how the big players like Yahoo are losing revenues to the likes of Google and other new comers. My suspicion is that this is to do with remuneration schemes. When Yahoo first started out, I imagine they were a small start up, with very bright individuals getting paid smallish salaries plus stock options. As the company grew these options became very valuable and thus the need to be creative was inbuilt into the first wave or two of employees. Google still has this structure for many of its key employees and thus the urge to be creative and build revenues is more focussed than at Yahoo, which has become large and unwieldy enough to stop any additional remuneration for new ideas being earth shatteringly large.

 

Whilst the above is conjecture I suspect that anyone reading it from Google or Yahoo would probably be nodding their head as they read. The guys at Google will obviously be trying to avoid falling into the same trap whilst they need to keep innovating, whilst I suspect the Yahoo team are wondering how they can get back to a point where they will pay sufficiently well for new ideas that their employees are encouraged to innovate.

 

The difficulty is also plain to see in more traditional businesses. I work for a Life Insurance company and prior to this worked in Banking.  In both industries suggestion schemes are the norm, but tend to carry token payments or rewards for new ideas as opposed to any share of the generated profits.

 

Taking a theoretical example, someone I know well shares an idea with me that is brilliant and could generate millions of dollars worth of profits. My very first instinct is to protect the idea and make sure that my employer does not access it. The reason for this is that I believe my friend can make more money by taking the idea independently to a small player than either of us could benefit by taking the idea to my large employer.

 

Naturally my employer would be angry to know that this is the way I would react. I hold a fairly senior management position, but suspect that there are people in more senior positions who would react the same way. Note that my employer has written into my contract that any intellectual property developed whilst working for them belongs to them, which is a nice attempt to try and overcome the issue through aggression, however in my theoretical example the idea is not mine and I have done nothing to develop it, but clearly the company could benefit.

 

If I worked for a company such as Virgin, with a reputation for innovating in numerous industries including banking and insurance I might expect to be rewarded by being given shares in a new entity or by being paid to run the project concerned. In larger more traditional industries however the idea of setting up spin off units is usually frowned upon and considered to water down shareholder value.

 

My argument would be that the disincentive to innovate found in most large corporations is such that shareholders lose value every day. I have lost count of the number of executives who have told me that they have a secret idea which they hope will make them rich one day. If these executives were rewarded appropriately, surely they would come forward with their ideas and generate additional profits for the company? Certainly some more junior employees will put forward ideas in the hope of advancement up the corporate ladder, but when you are already above midway and earning a tidy sum you are a) more likely to be able to pitch the idea and carry it through to fruition, and b) less likely to put it forward because you understand the worth to the company versus the incremental value to the individual.

 

There is an analogy here with the sporting world. Many think that the money paid to sports stars in games such as football, basketball and soccer far outweighs the value that they bring to the world as a whole. Sports teams and organisations realised long ago however that without the incentives they were getting less than 100% in certain situations, which meant less crowd enjoyment and lower incomes throughout the league. Higher salaries and bigger incentives have lead to more creative play and stronger commitment from many athletes, which in turn have lead to higher $ values for gates, TV deals and advertising.

 

Should large business then go down the same road? Should we be developing our own superstars to innovate and generate ideas that will take our businesses forward? Is there a model possible where the guys who generate the most revenues for the firm share in that wealth directly, thus creating higher (not lower) value for their shareholders?

 

If you wish to comment please drop me a line using brad@ideas2earn.com . Fell free to copy this article if it is useful to you, but I would appreciate link back to my homepage at www.ideas2earn.com

 

 

www.newtonclothiers.com is up and running and using the same tailors that I reccomended on January 19th (check the archive at www.ideas2earn.com/archive.html). The guy who has set it up (Mat Newton) has done so independently of any advice from us, but is now keeping me abreast of his progress. The website was built by www.white-graphics.com after a tendering process at www.sitepoint.com and I am sure you will agree it looks very professional.

 

We are also in discussions with a college student in the USA, who is keen to do something, we are in discussions as to what exactly turns him on, and will work with him to build a successful business. This level of involvement will not be possible for all our subscribers, but we feel is important at this stage to build our own credibility. We believe all of the ideas that we have posted to date are viable businesses and indeed everything that we have tabled for future release, hopefully we can prove this to all the doubters and nay-sayers.

 

Whilst travelling from New York back to Taipei my Adsense revenue has flipped past the US$1 mark and sits at $1.52 from 4 clicks. I realise that this is not ground shattering and will not cover the cost of time put into one single idea but it is a start and I am a big believer that the first $ of revenue means you are in business.

 

Many people question the raison d'étre of the site and it is not purely to be a vehicle for Google adverts, or there would be a lot more of them. We are edging close to the first 100 ideas and when I hit that milestone I will start approaching publishers to see whether there is in fact a book in amongst all of this. For now though I am happy learning about internet marketing and building my presence. We have about 500 listings on Google now after 2 months so the chance of us being found randomly are getting better.

 

I will of course keep updating the progress here. Let me know if you have any specific questions.

This is kind of a thankyou to Kenneth who wrote and told me the site wasn't working properly yesterday, but more an observation that as I have developed the site I have consistently had positive feedback, as well as people letting me know when things go wrong. Naturally I say thankyou at the time, then I go away and beat myself up for making the mistake, but each time I learn something new and of course these helpful people are saving me from looking bad indefinitely.

 

Silly mistakes I have made included: -

Putting the wrong URL in the email header when I first started

Cutting the email in half before sending it out

Not renaming the new idea page as index.html (yes I know I should be using a CMS by now)

Sending the email to my exclusion list instead of the subscriber list (big no no)

 

I could actually go on. 2 months in and I realise that these are obvious and if I had staff I would be shouting at them. Does anyone have any suggestions as to how I avoid making more?