Working on too many things [Mistakes I Make]

With this post, I am starting a new category on Startup desi, titled Mistakes I make. When I know where I am messing up, the chances of repeating those mistakes will go down.

The mistake I am making now: working on too many things.

Most startup owners work hard. I am no exception to that. But working hard on too many things is not good. Right now, I am working on the following,

  • 3 New excel training programs
  • 1 Video book
  • 1 Product upgrade
  • 1 e-book upgrade
  • 1 New product
  • 2 News letters

That is apart from what I already have:

  • 1 Training program
  • 2 Products
  • 1 E-book
  • 2 blogs
  • 1 News letter
  • Consulting business

The problem is not with working on too many things. But the problem is working on too many things, that go live at the same time. Since the launch is near, I am kind of psyched and worried whether I can do justice to everything.

What I am doing to fix this mistake:

I am doing a couple of things to fix this mistake.

  • Prioritize: Sounds lame, but what I did was, I wrote down all these things on a paper and then asked my self, how important each of them is for my business. Then, I crossed out anything that is not important or not a huge revenue stream for my business. Next I wrote dates next to each of the activities and arranged them in a timeline for next 3 months so that I can give enough time to each of them.
  • Hire someone: Apart from the new business ideas, I have a ton of things to take care of on day to day basis. For eg. I have a pressing issue of modifying my site’s code to enable nested comments. But I do not have time or skills to do it my self. So I have asked my classmate, Kida to help me. [my thoughts on hiring]
  • Freeze: I have a temporary freeze on any new ideas. I know this is probably harmful. But I am not entertaining any new implementations unless they are mandated by my customers.

But I am still neck deep in trouble and just waiting for the busy period to be over. I know I have made a mistake of saying yes to one too many things. But I have learned my lesson.

What mistakes do you make?

We say, “to err is to human”, but only very few understand that making mistakes is one of the great gifts of being human. You can always stand up, dust the sleeves and run again.

What mistakes did you make? and How did you realize? Share using comments.

How I keep my startup expenses low [Part 1 of 4]

As a startup owner, my first and foremost goal is to keep expenses ridiculously low. At the same time I have conflicting goals like,

  • Give insanely awesome customer service
  • Design fantastic products

But I found a decent balance between these goals and today I want to share some of the tactics I use to keep my business expenses low.

This post is unusually large, so I am going to write it in 4 parts.

  1. How I lower my Rental & Salary Expenses
  2. How I lower my Marketing & Sales Expenses
  3. How I lower my Website Expenses
  4. How I lower my Other Operational Expenses [Hardware, Software, Misc.]

Rental Expenses

I said it earlier too. I run my company from our bedroom. It is cheap, convenient and gives me tons of freedom to work and relax as I want. But it may not work for everyone. Especially if you are planning to hire some help.

My next best suggestion to move to a low cost location and set up your company there. Living in big cities can be a fancy thing. For eg. I was tempted to base my company in either Bangalore (India’s silicon valley) or Hyderabad (equally good city for tech. companies). But I decided to run it from Vizag. Running your company from a small town has various advantages:

  • Rents and other living expenses are cheap, which means, you can last longer in a small city with the same seed money.
  • Temptations are low: In a small city, you have few venues to splurge or indulge in time wasting activities. The more money and time you have, the better it is for your start-up.

Of course, starting in a small city may not work if your business involves either selling physical goods or need a big network to run, both of which can be found abundantly in big metros like Bangalore or San Fransico.

How much I spend on Rental:

We live in the outskirts of a small town in India. So the rents are not that expensive. We pay roughly Rs. 3000 ($75) per month as rent.

Resources on best city to start a business:

If you are in India, consider starting your company in Coimbattore, Vizag, Mangalore, Mysore, Trichy, Chandigarh, Indore, Bhopal, Pune, Kolkata, Bhubaneswar, Cochin, Jaipur. All these cities are low cost (compared to metros) and provide excellent opportunities for expansion, infrastructure and peaceful living.

If you are in USA, read this post by Penelope Trunk explaining how to choose a low cost city for living.

Salaries

I once read somewhere,

The best time to hire an employee is when you couldnt do that work yourself anymore

I couldn’t agree anymore with that. I have zero employees in my company (other than me). I occasionally hire free-lancers to take care of various odd jobs I have, but I have no employees. That means, I have no salary expenses recurring every month.

If you absolutely must hire someone, consider the following options to keep costs low,

Hire Freelancers:

Freelancers are a great way to get something done quickly. Try to hire someone from your local community as it feels good for both. One disadvantage of hiring freelancers is that you need to hand-hold them during initial few weeks to get best results. Typical rates for a freelancer could be between $50 to $250 per hour.

Outsource:

If you have a regular activity that is easy to do, but time consuming, then outsourcing your best option. You can find good help either in your own country or elsewhere around the globe for reasonable price. You can hire a good employee thru outsourcing for somewhere between $500 – $2000 per month.

Take help from Friends:

Use your personal contacts from earlier work places and college to get some help on say coding, web site set up or marketing. Since they already have experience in that area, you are bound to get quality output from them within reasonable time.

I have hired freelancers as well as took help from friends to keep my business going.

Tell me how you keep expenses low:

Please share your experiences on lowering expenses using comments. I would love to know what tricks and tactics you use.

What next?

In the next installment, learn how I keep my marketing & sales expenses low.

Related Posts: How much does it cost to run a website?

Image credit: Photo by HLIT

7 Things Startups can do that Big Businesses Struggle to get right

One of the big fears when you want to start a company is that, “What if Google / Microsoft / < your favorite big company > implements same idea, but better?”

Well, the sad news is that there is nothing that you can do about company X implementing your idea better.

But there is good news. You, as a start-up can do things differently that a big business will really struggle to do.

Growing a Small Business & Differentiating from Big Businesses

[original image from Robert S Donovan]

In my experience these things are,

1. You can Email immediately:

Here is what I do. I get about 30-50 emails out of which at least 10 are from people who are either customers or members of my community. I generally star such mails (in gmail, press s while reading the mail to star it). Once every 1-2 days I view all the starred mails and reply to them with information they asked, thank for the mail, provide solution to their problems. And if the email is simple question or thank you note, I usually reply on same day, sometimes in the same minute.

While my system is not fool proof, and often I forget to email back, I try to send replies to almost everyone emailing me.

You too can do the same, and create a stunning impression to your customers.

2. List your personal phone number on your website:

Here is one thing most of us hate in big businesses. If you have trouble using their product, you have to call a helpline (typical 1800-CALL-NOW) and wait impatiently for someone as clueless as you to pick up the phone and express the problem only to get a half-witted response.

Well, as a small business owner, you are at advantage. You can just list your own personal number on your site, product brochures or sales receipts so that customers can call you and get a quick fix instead of waiting in agony. And best of all, if my experience is anything to go by you hardly get any calls.

3. Choose whom you want to sell to:

Big businesses have no control over who their customers are. Any one can buy Windows, AdWords or iPod and bitch about them openly and publicly or create a huge support PITA. As a small business owner, you are at an advantage here.

I have personally refused clients that I think are difficult to work with or refunded full money to customers who bought my products but not satisfied with what they got.

4. Service instead of sell:

Traditional model of business is that you should focus on selling and give only a reasonable amount of service. The logic behind this is simple. Sales is what gets you money, service costs you.

But this logic fails when you are running a small business. I try to keep my sales efforts as minimum as possible and instead focus on service. This includes,

  • Making minor changes to my products for customers for free of cost
  • Giving free upgrades to everyone who bought the product
  • Allowing customers / prospects to ask questions directly by commenting on relevant posts (and then replying to them)

5. Collaborate instead of Compete:

We all knew that Apple has a killer phone, Microsoft has a killer Office application set, Google has a killer search engine. But instead of collaborating, they choose to compete, and now we have,

  • A killer phone and almost mediocre office app from Apple
  • A killer office app, ok search and mediocre phones from MS
  • A killer search, ok phone OS and mediocre online office apps from Google

See, it is in the blood of big businesses to compete. But small businesses can be very different. They can collaborate.

For eg. many of my customers, students and web-site visitors asked me to do an online course on financial modeling. Now, I am not an expert in that area, but I can kick ass in Excel. So I collaborate with another small company, called Pristine and we are doing a course on Financial Modeling using Excel. It is a win-win for everyone.

6. Keeping things really simple

Decision making is a pain in many big businesses. Front line employees are often not empowered to do anything more than what their job description says. This is not so in a small biz. You can choose to keep almost eevery aspect of your business really simple. For eg. I choose to keep refunds dead simple. Anyone not liking my products have to just ask and they will get a refund. Some ideas for you,

  • Allow customers to get in touch with you thru email or phone. Dont list generic email ids like sales@companyname.com instead give id like chandoo.d @ gmail.com so customers know that there is a real human being at the other end.
  • Keep sales process really simple: Deliver goods almost immediately or at least do it in the promised time lines. Don’t try to oversell or hard sell.
  • Do surveys when working on new products: do a simple survey like “are you interested in buying x?” and use the feedback to decide whether or not to work on a product.
  • Accept mistakes and move on: when you mess up, just say so and then move on. Life is too busy to worry over split milk.

[related: simplicity and other values for a startup]

7. Doing the right thing instead of doing the profitable thing

A big business must always have profit as its goal, even when they say “don’t be evil”. But as a small biz owner, you can do what is right, even if it costs you more. Most of the time, the extra cost is always extra time you work on x. So it doesn’t effect cash-flow as such.

For eg.

  • I could improve my revenues by 25% just by placing one more ad on my website’s article pages. But I dont do that because it would hamper my visitor’s reading experience.
  • Few of my students couldn’t finish my online course in time and asked me if they can stay back few more weeks to finish the course. I gave them an option to join 2nd batch at 75% discount. That is right 75%!!! and many of them joined batch 2. Now, I could very well have asked to pay them full fee or 50%, but I choose to cover only half of my costs because that is right thing to do.

What do you do to distinguish your small business from others?

Related info: That is a not a competitive advantage and Real unfair advantages both from excellent A Smart Bear blog.

Monitoring a Startup Business – What Metrics to use?

An important part of running a company is frequently measuring your business at macro / high-level. But doing this in a start-up can be a overhead because you are constantly running and don’t have much time to sit back and see if everything is going as per your plan. But nevertheless you should do it, at least once a month or quarter.

Here is a list of metrics that I use on regular basis to monitor my business progress:

Financial:

  • Cash generated in the last month: Remember cash ≠revenues.
  • Revenues last month and their breakup by area (I get money thru product sales, training, consulting, advertising and affiliate sales)
  • Expenses last month
  • Overall sales trend and whether it is as usual or something interesting is happening

Marketing:

  • New customers last month
  • Sign-ups to various news letters, RSS etc. on my site
  • Overall unique visitors last month
  • Customer engagement: No. of comments, tweets, link-backs on my site etc.

Operations:

  • No. of customer queries, support requests
  • Number of questions students raised
  • What I feel about how productive I have been

How do I measure these things:

I use reports generated from PayPal, E-Junkie, Google Analytics, WordPress, Aweber to keep track of most numbers. For things like customer queries, I rely on gmail search.

What metrics you use to measure your business progress?

What do you measure and how do you measure them? Please share using comments.

Why I run my company from our Bedroom?

When I wanted to start I faced a difficult choice – should I rent a office or work from our home?

I am not a pro and con guy, I do not list down pluses and minuses of choices on a notepad before choosing one. I am more of a “discuss and develop opinions guy”. So I talked with my wife and few people I know.

It became clear that working from home is a winner for the time being. Let me rationalize my choice,

No rent

Working from home means I have to pay no additional rent. We just cleaned up a corner in the master bedroom and put the computer table, surge protector and a chair there and bingo, my workspace is ready.

More time with family

Since we have babies at home (our twins are just 10 months old now), it became important that I give more time to family. So naturally working from home made it easy. I can just turn off the monitor whenever kids need me.

No lonely feelings

Since my company is a one man company, if I worked in an office, I would have felt lonely at times. While I am not a great social person, I would love to have people around me so that I can share what I am thinking and get immediate feedback. So, working from home seemed good choice until I hire people.

No time wasted

My work involves consulting, writing, thinking, reading, connecting, marketing, launching and sharing. Now, most of this happens on sporadic basis – ie I get a lot of work on one day and no work on another. The creative parts of my work require that I am in a good mood to pull them off. If I feel down or lazy, I just postpone what I am doing as giving my best to what I do is very important. This is where working in an office would have failed me. Because I work in chunks, I would end up with loads of free time in between tasks.When working from home, I could just turn off my comp when I have no work and play with kids or help my wife or run some chores.

So, is working from home all rainbows and butterflies?

Of course, working from home is not all hunky dory. I do find some problems in working from home.

It is difficult to focus for longer durations:

Sometimes, when a client is in emergency or when I need to develop an idea further, I need hours of time. I am finding difficult to get more than 2-3 hours at a time, thanks to kids who need our attention constantly. But thankfully, I found a simple solution for this. I wake up early (4am or so) and work 3-4 hours at a stretch.

Laziness:

Sometimes I become too lazy, thanks to temptations at home. Mostly I find myself indulging in naps, playing, reading magazines or watching tv. Most of these could be avoided had I worked in an office.

But overall, I am happy that I am working from our bedroom.

What about you?

Where do you work from? What kind of good things you find in that work environment? Please share using comments.

What are my Start-up’s Values? [and why you should define them too?]

During Strategic Management classes in my MBA, we have learned about Vision, Mission and Values. I used to think they are a bunch of loaded cr*p. So much so that I have my own working definition of what these are,

Our vision is to maintain our values thru our mission

But after starting my own company, I am converted. I understand the importance of having my own values. Not because they help me flaunt what I stand for, but because these values help me make better decisions and choose an alternative when stuck in a dilemma.

So, without further ado, let me list down the values that I stand for,

  1. Fun: because boring is for big companies
  2. Passion: genuine interest with hard work can bring success and fulfillment
  3. Awesomeness: Dont do lame work, do awesome products, awesome consulting, kick-ass work – always.
  4. Sharing: Share my knowledge, ideas, stupidity, wealth as much as possible. That is the only way to multiply them.
  5. Simplicity: Keep things simple. Be it my sales pages or websites or ideas or implementations or life style. Simplicity over complexity, lavishness or boring.
  6. Humility: Success can be quite heady. Never take it too seriously.

This is not my complete list, yet. I will be adding more values as I go. But, I found these simple values to work great wonders and help me make better decisions for me and my community.

For eg.

  • Should I write a long or short sales copy? – short because it is simple
  • Should I give free downloadable excel workbooks with my articles or not? – give free workbooks because it is awesome and I like sharing.
  • Should I give my products upgrades for free or fee? – free because that will make everyone awesome.

What about you? What values have you defined for your self / your start up?

Share using comments.

How to Launch Products Online?

There is no point running a company that doesn’t sell anything. Selling is an important aspect of any startup. So the important question is, how do you sell?

Well if you have an established product, you could rely on methods like advertising to sell what you got. But if your product is new, then your best bet to generate sales is to go thru a product launch. Today I want to tell you how I do my product launches and generate sales.

Assumptions: You already have a blog or some such platform where you interact with your community.

  1. Create a product concept: come up with a concept for your product. It could be some software, online training, e-book or anything that you care about.
  2. Start writing about this concept in your blog: Lets say you want to sell a software related to real-estate financial modeling. So start writing about it. Explain what goes in to the model, how one should design it, how to do x,y and z etc. Structure your posts like a series and release useful, concise information on this. Don’t yet sell your product or even mention it in the posts.
  3. At the end of series, propose the product: During the end of series, casually mention that you are working a product that would remove most of this grudge work and simplify / awesomify your reader’s work. Ask if your readers would be up for it?
  4. Invite readers to join your product’s mailing list: This is important! Don’t just leave your product proposal without action. Ask your readers to give you their email address and name if they are interested in such a product. I use aweber to handle stuff like this. I like aweber’s simplicity and kickass email list capabilities. You can use it or some other program to build your prospect list.
  5. [Optional] Conduct a poll: This is not necessary. But you can conduct a short poll and invite your prospects / readers to tell you more about the product. Ideally, include questions on these things in the poll,
    1. What do you want in the product
    2. How much are you willing to pay
      I use google docs – forms for stuff like this. It is free and super awesome.
  6. Develop the product: If you have done good job at step 2, then you should have enough material, ideas for your product. Just consolidate them nicely in to a software / ebook / online course etc.
  7. [Optional] Do some beta testing: Invite a few prospects to test your product. This is not necessary, but you can do it.
  8. Design a sales page: Ok, this is a big scary step. But don’t worry. You got to begin somewhere. At the least, your sales page should,
    1. Explain what your product is all about.
    2. Give some reasons why it should be purchased (dont give lame reasons, mention reasons that would make your customer a hero)
    3. Provide clear options to purchase your product
    4. Answer a few frequently asked questions (and link to a detailed FAQ)
    5. Tell them who you are (include a small photo and brief bio)
    6. Provide some testimonials
    7. Mention clearly about money-back guarantee and other terms
  9. Get ready to accept money: If you do not already have a merchant account, you should get one. I use PayPal and I recommend it. You can try others like Google Checkout or Clickbank too. If you are going to sell online goods (ebooks, software or online courses) consider using E-Junkie shopping cart service. They are dead cheap and provide seriously good service.
  10. Get some partners: As a startup, you should have positive and healthy relationship with people in your niche. If you have a blog, this is easy to do. Just write some kickass content and often send your readers to other’s sites in your niche by doing a “daily links” post. Slowly email them and develop your relationship by either helping them or giving them suggestions or exposing them new business opportunities. Then, at the time of your product launch, just email them and tell them that you have a new product coming up and you would love to have their support. Ask them to promote your product their blog readers and newsletter subscribers. Offer them commission (this is called as affiliate program). You can manage such things easily using a shopping cart program like e-junkie.
  11. Announce the product launch date: Email your prospects, affiliates and tell them that your product will be ready on a given date. Make a blog post if possible.
  12. Double check everything: This is important! Make sure you checked everything twice. Things like payment buttons or sales page browser compatibility can always go wrong. So double check and if possible have a few others test them too.
  13. Launch your product with a compelling offer: Finally launch your product by making your sales page public. Email your prospects about it. Write a blog post about it. Tweet about it. Tell your facebook fans about it. Write to your affiliates and ask them to promote your product. If possible, include a few ads to your product on your blog’s home page.
    • About the compelling offer: Make sure your product is priced in such a way that it provides excellent value for money. Include a few free bonuses, offer money-back guarantee. Make sure your product itself is designed to help your customers kick ass.
    • Optional: Either include a time discount (buy before end of month to get 25% off) or trail offer (first month free) or limited time offer (closes next Friday). This creates a sense of urgency and helps in converting faster.
  14. Remind your prospects: After a few days, remind your prospects about your product. Include facts like how many people bought it, what they think about it etc. to create trust and get new customers. But, don’t be too pushy.
  15. Get the feedback: Now, you will obviously get some feedback from these paying customers. Use that to modify / upgrade your product or design a new product. Go back to step 1.

I have used the above approach to launch many products (Formula E-Book in Feb 2009, Project Management Templates in Oct 2009, Excel School in Feb 2010, Excel School 2 in June 2010). While I made several mistakes and continue to make them, it seems like the approach has been working well for me.

What approaches do you use when launching your products online?

Go ahead and comment. Tell me what approaches / ideas you use to launch your products online?

PS: The links to e-junkie, paypal and aweber are affiliate links. That means, when you sign up with the above link, I make a small commission. However, keep in mind that these are stellar products and I would have recommended them anyway.

What is your Startup’s Goal ?

There is an interesting article on TechCrunch by Vivek Wadhwa on Is Entrepreneurship all about Exit?

I like this article as it raises an important question. Read an excerpt (emphasis mine):

What business schools teach, and the conventional wisdom in Silicon Valley, is that a tech startup must have a clearly defined exit strategy and focus all of its energy on reaching this final goal. In other words, entrepreneurship is all about the exit—wealth needs to be built by taking the company public or selling it to a larger player.

But must this be so? Technology entrepreneur and strategy consultant Sramana Mitra asks a great question: “What if the idea of exit was removed from the equation… what if the investor and entrepreneur agreed to a different model—the model of sharing dividends”?

While people, groups trying to build next Google or Microsoft may want to eventually sell or go public, start-ups like mine have no such glorious objectives.

When I started my company, I had these goals in mind:

  • Make twice as much of what I made in my day job. (make = profits, not revenues)
  • Enjoy the freedom and challenge of working on my own.
  • Fulfill my passion of helping others thru teaching and leading (glorious objective #1: help a million people)
  • Become an expert in online marketing, web programming & design, online training.

While I had no clear exit-strategy in mind, I joking tell my friends that if I can make Rs. 1 crore in revenues before I turn 31 (that will be in 2012 October) I would consider my startup as a success. That is around $250,000 for my western friends.

But that is not exit strategy. I don’t know if any company would ever consider buying me. I cant imagine the ridicule of going public. So my only exit option seems to be staying.

What about you?

What is your exit option? Do you agree with Vivek’s views in the quoted article? Please share your opinion using comments.

Do not treat customers like kings, instead make them heros

Here is an age old wisdom that can break your back when you are starting. We always hear this

“Customer is king”

Well, I want to  break that notion.

First lets understand what king means.

In my view,

  • King has attention and respect of you at his beck and call
  • King can get things done, by forcing you to do
  • King can walk out and tarnish your image if he chooses to
  • King wants things to be done to him and not want to be part of building the stuff.

While the King view might work in industries where supply outstrips demand, in the world of internet / web based start-ups, it may not work.

I think, instead of approaching customers as Kings, if you approach them as Heros, you might build a lasting product and sell more.

Here is why,

  • Hero feels awesome about the products (s)he uses
  • Hero feels wanted and gifted because (s)he knows how best to use your product
  • Hero feels proud to showcase his / her talents while using your products
  • Hero wants to work with you to make him more awesome. (S)he does not want you to work for him / her.

How to make your customers heros?

Very simple. Design a product whose USP (Unique Selling Proposition) is “Our product <name> should be bought because it makes you rock / awesome / fly / cool“.

For example, Apple iPod (or iPhone) has this USP. We want to purchase an iPod not because it is the best music player in the world. It is because, iPod can make you cool. You feel awesome the moment you flick fingers to browse songs or tap the screen to make a call.

iPod or iPhone are from a company with zillion dollars in marketing and product design budgets. But what about a tiny teeny startup like mine or yours?

Again very simple. At the heart of hero approach is passion.

  • So be genuinely passionate about your customers. Always think, “how can this idea / product / article / image / whatever make my customers awesome / cool / rock”.
  • Instead of focusing on features and benefits alone, think in terms of how your customers will be able to use your product to become awesome in front of their colleagues / boss.
  • Instead of saying “Our product can do x”, say, “you can do x better /cooler / faster / with our product” and work your ass off to mean it.

If you make your customers heros, you have a rocking future ahead.

So who are you making heros? Please share using comments.

Inspiration for this article:

PS: Image credit from yosoyjulito

The easiest way to start your own company – start a blog!

Every once in a while, I get an email from someone who wants to make a living without working for the man. The emails go something like this,

I like doing x. In my free time I help my colleagues / friends become better at x. How can I become like you and start my own venture?

So, today I want to address the burning question all the 3 readers of this blog have. How to plant seeds for your company?

Simple. Start a blog.

I do not mean “start a blog” as in “start a blog to get rich quick”. I think starting a blog can be a very effective and low cost way to understand your target market and test your products. Here are my top 5 reasons,

  1. Blogs help you solve real problems of real people (in other words, customers)
  2. Blogs help you test your product ideas without huge launch or testing expenses
  3. Blogs help you keep your passion alive and kicking while you are stuck in the cubicle
  4. Blogs help you meet competition, understand their technique and collaborate better
  5. Blogs help you communicate better with your prospects, customers and investors

Of course, not any blog would do. You have to start a blog in the area where you eventually want to set up your venture. Writing about anything and everything is not good. Instead select a niche or narrowly defined area and use your blog to communicate with people having needs in that area.

For eg. if you want to do financial planning for living, you can write about money matters in a blog. But that will not be so helpful. Instead if you narrow down your scope to a specific set of people or a type of financial planning your chances of meeting real customers goes up. So, instead of you blog about “financial planning for call center employees” or “financial planning for child education” you will have clear focus.

Go ahead, plant that seed now. Go!

Resources for starting a blog and writing:

  • Problogger – for all things blogging. Darren Rowse writes about blogging, blog platforms, techniques etc. Add to your daily reading list to get inspiration and ideas.
  • Copy Blogger – contains helpful articles on how to write and how to sell.
  • WordPress.com, WordPress.org – To start your own free blog and to host a blog on your servers

How much does it cost to run a website based business?

One of the advantages of a web based startups is that, they cost very little to setup. Today I want to give you a lowdown on how much it actually costs to run a mildly busy website. I will use Chandoo.org’s real traffic and running expenses to break it down for you.

Please note that the costs go up faster as your site grows in popularity.

Some basic stats about Chandoo.org traffic:

  • Page views per month: 350,000
  • RSS readers (daily): 9500
  • Email Subscribers (daily): 4900
  • News letter subscribers – 600+
  • Bandwidth per month: 25GB
  • Breakdown of bandwidth: 80% images, 10% CSS and JS and 10% text content
  • Breakdown of places viewers visit: Blog  – 85%, Forum – 5%, Formulas pages – 5% , Misc (including sales pages, home page etc.)  – 5%
  • No. of transactions (sales per month) – 65 (roughly 2 every day)
  • Affiliates (people who sell my products for me) – 5

I think this is a very good example of the kind of traffic a small startup generates.

Now lets breakdown the costs behind running a site like this:

There are 3 types of costs in running an online business.

  1. Recurring costs
  2. Fixed costs
  3. Invisible costs

Recurring costs for running a web based business:

  • Domain name – $10 per year
  • Hosting – $15 per month
  • Paypal Commissions – roughly $2 per transaction or $130 per month
  • Affiliate commissions – fluctuates, but  roughly $50 per month
  • News letter costs – $29 per month
  • Shopping Cart costs – $5 per month
  • Amazon S3 space and bandwidth costs (for hosting videos and other files securely) – $10 per month
  • Online backup of computer data – $5 per month

Fixed costs or one-time expenses:

  • Any software you need (for me, this was about $500 spent screen recording software, membership plugins etc.)
  • Web site design (no cost as I knew coding and I modified a free template to suit what I do)
  • Logos, Branding (again no cost as I try to do this on my own)
  • Set up fees (some hosting companies charge one time setup fees when you get a website. For my host there was no hosting fee)
  • Computer / Laptop – to run an online business, you need to have decent laptop or desktop and they usually cost $1000 or so.

Invisible costs:

  • The biggest invisible cost is your time (I work roughly 8 hours a day, 7 days a week). Even if you assume $10 per hour, this number will be 8*30*10  = $2,400. But this is all invisible and you do not feel this cost as a burden on your business.
  • Internet, telephone and electricity charges
  • House rent – most of the online businesses are run from home. You have to factor in certain portion of house rent / mortgage towards the cost of running this business.
  • Books, resources etc – To stay ahead in your business, you need to constantly read books or access resources to improve your knowledge. I purchase one book a month on excel / charting / dashboards / presentations / design concepts and read at least 70 different blogs on regular basis. Most of this is invisible cost.

Total costs:

There you go. If you add up the numbers, it would be $250 per month approx. As you can guess, major portion of it ($130 for paypal transaction charges and $50 for affiliates) is variable costs. That is if I have a bad month, I pay low on these and on good months, I pay more.

If you convert the amount to Indian rupees, it is INR 11,000 approx. It is not such a huge amount if your business can generate atleast a thousand dollars in revenues every month.

But the best part of this set up is that you can run your web based business for very little monthly costs ($10 for hosting, 5 for shopping cart and another 19 for email news letters) and scale up your operations as your revenue builds up.

What are the expenses like for you?

If you already own a business, share the expense details (in %s or in $s) with me thru comments. I would love to know how you keep your business lean and mean.

If you are planning to start a business, share your estimates and constraints thru comments. I can probably guide you by giving some suggestions on how you can reduce the expenses of running an online business.

Go!