managing online business – Online Marketing – Websites

Big U-turn ahead! I started this blog in April 2008, actually it was probably a couple of months later and backdated the first few posts. I’d started working full-time online in the previous October. I didn’t have a clue. I was full-time because I didn’t have a job, not because I was making any money! I was going to be a success by Xmas. Maybe this Xmas?

At the time I called this blog “Passive Income” – because that’s what I wanted, and because I thought “passive income” would be a good term to rank for in the search rankings (it wasn’t – but I got to page 1 before a specific Google penalty knocked me off).

Niche Websites – Rise and Fall

My best ever Adsense month was January 2011 – I made $1383 dollars. I made the same again in a range of affiliates which ranged from Amazon to The Keyword Academy. In April 2012 the Penguin update by Google which penalized sites which had built links with insufficiently varied anchor text. The next month my Adsense was down to $700.

In August 2013 I made about NZ$46 (say US$38) from Adsense. The penalised sites haven’t recovered, and I haven’t bothered building any others. I could, and contrary to what Google would have you believe, you can still get them to rank. But they are vulnerable. And I don’t like having my business being controlled by Google – they employ more PhD’s than me – they will win.

The view from the top of Waiheke EcoZip towards Auckland, NZ

eBooks Rise and Rise

eBooks on the other hand are the same, but different. I repeated history and started with writing my passion – travel. I make a hundred or two from my books – but the market is small and the competition tough.

If Amazon changes their policies around indie authors, I’ll feel the pain. But not so much. You see the secret to eBooks – for me anyway – came with the success of my quick guide on how to format Kindle books. I wrote the book in frustration – not as a strategy.

On the back of it I launched BookFormatter.com. I started making regular money freelancing – my doing for people what I explained how to do in the book! Never, ever think that giving away technical “secrets” is a bad thing, many people, having acquired the knowledge will happily outsource to a person they trust to do a good job – you know like the author of the book!

I’ve been in this game – mostly full-time – since 2007. In that time everything has changed. Hubpages and been and gone, Niche websites have been and gone (for me). I’ve been a writer and a book formatter, A website designer and an email marketing consultant. When I started social media didn’t really matter. The controversies and flame wars happened on blogs not facebook! Search traffic were the committed buyers – now more and more people buy through social media recommendations.

Working for Passive Online Income

Until this year most of my effort has been basically on building passive income. Ultimately I’ve failed at that. Google changed the rules, my attempts at manipulating the search results failed, and I didn’t have the heart to re-build. I couldn’t see it working for a many more years anyways. Google is becoming less and less important to informing how people make buying decisions.

Working Online – How Did I Do It?

I got paid on shared-revenue sites: Hubpages to BubbleWS
you get paid for your skills by others needing your skills i.e. freelancing
you get paid for recommending other people’s products (affiliate sales)
you don’t control your income because you don’t control the terms of service of the sites that pay you

Advantages

takes little skill to get started
the rewards can be quick
you can learn a lot and make a lot of connections
it’s perfect if all you want to do is work online and not deal with hard-core “selling” (raises hand)
when it works you really do make money in your sleep – I came back from a 2-month overseas trip with more money in my bank than when I left!

Disadvantages

it’s not long-term recurring income regardless of what the third-party promises
your income is controlled by terms of service you don’t control
as an affiliate you ride the wave up and down of the service or company you’re promoting
for mainstream products e.g. Amazon, eBay – affiliate marketing is basically dead because of the way Google now prefers it’s own brands in the search results
unless you’re very, very clever you are building someone else’s brand and not yours

Examples

writing for revenue share on sites like HubPages, Squidoo, BubbleWS etc
publishing books on Amazon and other sites
developing websites which are designed for ranking in Google and getting visitors from search traffic only
making money from Adsense and affiliate sales from websites which rank in the search results
freelancing via third-party sites such as odesk and eLance

Developing An Online Business

How Does It Work

you offer something that people want, that you can deliver and that people will pay for
you develop website, social media etc – with the purpose of getting people on an email list
you may use third-party sites like Amazon to get your message/name/brand out there – but the ultimate purpose is to push people to sign-up for your email list
you develop a website and an email list that you control. Traffic comes from a variety of sources which include social media and Google

Advantages

control – you control your product and you have access to your customers, if Amazon suddenly decides to offer only a 40% royalty you can decide to move your customers elsewhere
you can leverage customers and offer more expensive services and products to a smaller group – you can ultimately make more money with less effort, and it is sustainable
developing an online, or mainly online business, costs very little money

Disadvantages

it takes far more self-belief and confidence than just developing an online income
it takes some more technical skills
it takes more business skills
you have to develop some basic ability to explain why your offering may be useful to someone (“marketing”)

Neither of us had the nerve to take the picture in mid-flight!

Exciting Times

The last few months I’ve done a fair bit of freelancing – it pays the bills – but it’s also done something much more important than that – as a direct result

Freelancing made it obvious to me that there was a gap in the market, and realise that I could help fill that gap.

I’m currently buzzing with a new business venture a business partner and I will launch before the end of the year. We know there’s market demand. We believe we can fill the gap. We have the skills to make it happen and have identified a launch platform. Plus it will pretty much use all the skills I’ve learned in the last 6 years – plus a few new ones 🙂

You might want to sign up for the newsletter – in the box that will appear below in a second… There may be a special deal in the offing for subscribers… Can’t say much else – after all I’m trying to build excitement and buzz. Oh and we are still making it up!

I’ve gotta say – if I can find the skills to start a business – than anyone can! Seriously.

Happy Thanksgiving to the Americans – may your turkey and shopping go well. And the family thing if you approach it the traditional way!

There was a recent thread in the forum at TKA regarding managing your Internet Marketing income which I added my 2c to. I then got quite a number of PMs from people asking me follow up questions – given the thread wasn’t even mine – I guess my commonsense approach to record keeping and taxes are not so common. So here’s what I think is important – your mileage may vary.

My approach is quite simple – I’m not an accountant – though I did pass ACCY101 a million years ago. I have never found a “system” which manages multiple currencies the way I need to – so I developed my own. I use an OpenOffice spreadsheet – but any spreadsheet program which can sum figures and do the odd bit of multiplication will do just fine. The system has evolved over the years – but I’ve never had to start again. If I didn’t have some complex real estate investments I could do my own taxes off these figures – as it is I give them to my accountant.

Having a system to record your expenses and payments is what’s important – once you have that you can do your taxes – or give the figures to someone else to do. But either way you need to provide the basic figures.

Online Income and Record Keeping
Ignoring taxes to start off with – the first thing you need to have in place is a way to manage your online income. Long before I was making enough to worry about tax – I used to track my monthly income – it kept me sane and motivated. If you don’t know what you are earning how do you know how to improve it?

Tracking Income as You Earn it.
So my first spreadsheet was very simple: each column across the page is a month – and ever row was a source of income. As a I got more sources of income I simply added more rows in.

fig1 — My Original Earning Income by Month Spreadsheet

I split my income three ways:

truly passive – ie advertising and affiliate sales
not at all passive income – freelancing – one row per a client plus some more general one off stuff I do like hosting other people’s site and generic SEO consultancy.
one-off income – from selling domains or websites – which tend to really be windfall income while the other two groups are more ongoing.

Initially I thought that my three biggest earners would be Adsense, Amazon and eBay and that’s why they are highlighted – its never really worked out that way – I generally suck at eBay and Amazon – but I keep the highlighting …I don’t really know why 🙂

This spreadsheet is dead easy to maintain – near the start of the month I login to all my major affiliates and check what I earned for the previous month – note I won’t have been paid yet by most of them – but I look at the earnings.

Managing Passive Income in a Foreign Currency
American readers can probably skip this section. I don’t live in the US but most of my income is made in US$. I decided early on to manage all my income for planning purposes in US$ – I have my goals in US$ I worry about whether my income is going up or down in US$. Now this is different to whether my income is going up or down in my local currency – but I can’t control the exchange rate so I don’t worry about it to much – I focus on the US dollars. Note my paypal account is in US$ – its my cheap foreign currency account really.

To come back to the currency that matters to me – ie the currencies I pay taxes in and spend money in – I have an conversion line to my local currencies. I use a conversion published by my local tax department to keep thing consistent

Tracking Income as You are Paid It
The above spreadsheet worked for several years. Yes I didn’t track expenses (they were too low to mention, as was my income) and yes I recorded income when I earned it not when I was paid it (again something I couldn’t control). But then I started earning more passive income – and I needed to add a second sheet to my spreadsheet – to record income as I was paid it (this is what the accountants call an cash basis). Certainly in Australia and New Zealand if you are a small business or individual you can chose to pay taxes only on what you have been paid – not what you have earned – that’s what I do.

So I added a second sheet to my spreadsheet it looks like this:

fig2 — Managing Tax Records Across Two Currencies with GST (VAT)

Although most of my income is earned in US$, Adsense then pays me direct into my local bank account i.e. in NZ dollars – where I get a payment (or make a payment) in NZ$ I account for it as such. The US$ payments and expenses have to be converted to NZ$ for my tax records.

I also do work for local clients – who obviously pay me in NZ$. We have a local tax (GST, like VAT or other sales tax) which I need to apply for local clients but not for overseas income.

My local tax department allows you to chose my own conversion rate – so long as its believable and consistent – they also publish monthly figures for major currencies – I use their’s – fewer room for arguments. Whatever you do – be consistent – for your own sanity if nothing else.

Of course if you are earning enough to earn tax you really need to start tracking your expenses – after all why pay more tax than you have to?

All of my direct business expenses are paid via Paypal in US$ including domain registration, membership site subs, backlink services (Advertising), software etc etc.

However there is also the whole other bunch of expenses which are at “home”. These include both paying my contractors (when its from a local bank account), books I buy locally, electornics and furniture for my home office, a percentage of my ISP expenses, my house insurance, my Council rates, home maintenance, power, parking (for local clients) paper and printer supplies – it adds up – and it all comes off the profit BEFORE I pay tax.

I keep records – well I keep the receipts and throw them in an envelope a month – if I needed them I could prove these expenses. (I do expect to be audited one day by the tax department – my business is so “odd” in terms of amount of overseas income and low local expenses I am sure it will blow an automatic whistle at some point).

At the bottom of the page I do a couple of things – I project my annual profit – I take the last 4 months of my NZ$ profit/loss – divide it by 4 and multiple it by 12 – thus projecting an annnual income – its useful a) to shut up those who still think I just play online and b) it gives me an idea when I will have to start paying provisional tax.

The YTD NZ$ is just my total net profit for the tax year. Our tax year end is 31 March – so at the end of March I use the blue column to total all figures for the year and for the tax return.

Online Income and Tax Residency
Tax residency is not always the same as where you live. Often it is – but not always. For example if I – a New Zealand tax resident – decided to move to somewhere with very low taxes (e.g. most of the oil rich nations) – I may be resident in Saudi or Dubai – but I would still be a tax resident of New Zealand. That’s because New Zealand taxes me on my income – wherever in the world I might live. You can in fact be tax resident in two different countries at the same time – but that’s rare.

The above spreadsheet takes me about an hour a month to maitain. I download the figures from my affiliates, I download the month’s data from PayPal and allocate it to the various expenses/income categories that I use in the spreadsheets. I look up the figures on the household bills and use a separate sheet ot itemise them and work out the % that I am claiming.