The 4-Hour Workweek (22 page)

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.