درآمد خودکار 1

9.Income Autopilot I

FINDING THE MUSE

Just set it and forget it!

—RON POPEIL, founder of RONCO; responsible for more than $1 billion in sales of rotisserie chicken roasters

As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.

—RALPH WALDO EMERSON

The Renaissance Minimalist

Douglas Price was waking up to another beautiful summer morning in his Brooklyn brownstone. First things first: coffee. The jet lag was minor, considering he had just returned from a two-week jaunt through the islands of Croatia. It was just one of six countries he had visited in the last 12 months. Japan was next on the agenda.

Buzzing with a smile and his coffee mug in hand, he ambled over to his Mac to check on personal e-mail first. There were 32 messages and all brought good news.

One of his friends and business partners, also a cofounder of Limewire, had an update: Last Bamboo, their start-up poised to reinvent peer-to-peer technology, was rounding the final corners of development. It could be their billion-dollar baby, but Doug was letting the engineers run wild first.

Samson Projects, one of the hottest contemporary art galleries in Boston, had compliments for Doug’s latest work and requests for expanded involvement with new exhibits as their sound curator.

The last e-mail in his inbox was a fan letter addressed to “Demon Doc” and praise for his latest instrumental hip-hop album, onliness VI.O.I. Doug had released his album as what he termed “open source music”—anyone could download the album for free and use sounds from any track in his or her own compositions.

He smiled again, polished off his dark roast, and opened a window to deal with business e-mail next. It would take much less time. In fact, less than 30 minutes for the day and 2 hours for the week.

How much things change.

Two years earlier, in June of 2004, I was in Doug’s apartment checking e-mail for what I hoped would be the last time for a long time. I was headed to JFK Airport in New York in a matter of hours and was preparing for an indefinite quest around the world. Doug looked on with amusement. He had similar plans for himself and was finally extricating himself from a venture-funded Internet startup that had once been a cover story and his passion but was now just a job. The euphoria of the dot-com era was long dead, along with most chances for a sale or an IPO.

He bid me farewell and made a decision as the taxi pulled from the curb—enough of the complicated stuff. It was time to return to basics.

Prosoundeffects.com, launched in January of 2005 after one week of sales testing on eBay, was designed to do one thing: give Doug lots of cash with minimal time investment.

This brings us back to his business inbox in 2006.

There are 10 orders for sound libraries, CDs that film producers, musicians, video game designers, and other audio professionals use to add hard-to-find sounds—whether the purr of a lemur or an exotic instrument—to their own creations. These are Doug’s products, but he doesn’t own them, as that would require physical inventory and upfront cash. His business model is more elegant than that. Here is just one revenue stream: 1. A prospective customer sees his Pay-Per-Click (PPC) advertising on Google or other search engines and clicks through to his site, www.prosoundeffects.com.

1. The prospect orders a product for $325 (the average purchase price, though prices range from $29–7,500) on a Yahoo shopping cart, and a PDF with all their billing and shipping information is automatically e-mailed to Doug.

2. Three times a week, Doug presses a single button in the Yahoo management page to charge all his customers’ credit cards and put cash in his bank account. Then he saves the PDFs as Excel purchase orders and e-mails the purchase orders to the manufacturers of the CD libraries. Those companies mail the products to Doug’s customers—this is called drop-shipping—and Doug pays the manufacturers as little as 45% of the retail price of the products up to 90 days later (net-90 terms).

Let’s look at the mathematical beauty of his system for full effect.

For each $325 order at his cost of 55% off retail, Doug is entitled to $178.75. If we subtract 1% of the full retail price (1% of $325 = $3.25) for the Yahoo Store transaction fee and 2.5% for the credit card processing fee (2.5% of $325 = $8.13), Doug is left with a pretax profit of $167.38 for this one sale.

Multiply this by 10 and we have $1673.80 in profit for 30 minutes of work. Doug is making $3,347.60 per hour and purchases no product in advance. His initial start-up costs were $1,200 for the webpage design, which he recouped in the first week. His PPC advertising costs approximately $700 per month and he pays Yahoo $99 per month for their hosting and shopping cart.

He works less than two hours a week, often pulls more than $10,000 per month, and there is no financial risk whatsoever.

Now Doug spends his time making music, traveling, and exploring new businesses for excitement. Prosoundeffects.com is not his end-all-be-all, but it has removed all financial concerns and freed his mind to focus on other things.

What would you do if you didn’t have to think about money? If you follow the advice in this chapter, you will soon have to answer this question.

It’s time to find your muse.

THERE ARE A million and one ways to make a million dollars. From franchising to freelance consulting, the list is endless. Fortunately, most of them are unsuited to our purpose. This chapter is not for people who want to run businesses but for those who want to own businesses and spend no time on them.

The response I get when I introduce this concept is more or less universal: Huh?

People can’t believe that most of the ultrasuccessful companies in the world do not manufacture their own products, answer their own phones, ship their own products, or service their own customers. There are hundreds of companies that exist to pretend to work for someone else and handle these functions, providing rentable infrastructure to anyone who knows where to find them.

Think Microsoft manufactures the Xbox 360 or that Kodak designs and distributes their digital cameras? Guess again. Flextronics, a Singapore-based engineering and manufacturing firm with locations in 30 countries and $15.3 billion in annual revenue, does both. Most popular brands of mountain bikes in the U.S. are all manufactured in the same three or four plants in China. Dozens of call centers press one button to answer calls for the JC Penneys of the world, another to answer calls for the Dell Computers of the world, and yet another to answer calls for the New Rich like me.

It’s all beautifully transparent and cheap.

Before we create this virtual architecture, however, we need a product to sell. If you own a service business, this section will help you convert expertise into a downloadable or shippable good to escape the limits of a per-hour-based model. If starting from scratch, ignore service businesses for now, as constant customer contact makes absence difficult.21 To narrow the field further, our target product can’t take more than $500 to test, it has to lend itself to automation within four weeks, and—when up and running—it can’t require more than one day per week of management.

Can a business be used to change the world, like The Body Shop or Patagonia? Yes, but that isn’t our goal here.

Can a business be used to cash out through an IPO or sale? Yes, but that isn’t our goal either.

Our goal is simple: to create an automated vehicle for generating cash without consuming time. That’s it.22 I will call this vehicle a “muse” whenever possible to separate it from the ambiguous term “business,” which can refer to a lemonade stand or a Fortune 10 oil conglomerate—our objective is more limited and thus requires a more precise label.

So first things first: cash flow and time. With these two currencies, all other things are possible. Without them, nothing is possible.

Why to Begin with the End in Mind: A Cautionary Tale

Sarah is excited.

It has been two weeks since her line of humorous T-shirts for golfers went online, and she is averaging 5 T-shirt sales per day at $15 each. Her cost per unit is $5, so she is grossing $50 in profit (minus 3% in credit card fees) per 24 hours, as she passes shipping and handling on to customers. She should soon recoup the cost of her initial order of 300 shirts (including plate charges, setup, etc.)—but wants to earn more.

It’s a nice reversal of fortune, considering the fate of her first product. She had spent $12,000 to develop, patent, and manufacture a high-tech stroller for new moms (she has never been a new mom), only to find that no one was interested.

The T-shirts, in contrast, were actually selling, but sales were beginning to slow.

It appears she has reached her online sales ceiling, as well-funded and uneducated competitors are now spending too much for advertising and driving up costs. Then it strikes her—retail!

Sarah approaches the manager of her local golf shop, Bill, who immediately expresses interest in carrying the shirts. She’s thrilled.

Bill asks for the customary 40% minimum discount for wholesale pricing. This means her sell price is now $9 instead of $15 and her profit has dropped from $10 to $4. Sarah decides to give it a shot and does the same with three other stores in surrounding towns. The shirts begin to move off the shelves, but she soon realizes that her small profit is being eaten by extra hours she spends handling invoices and additional administration.

She decides to approach a distributor23 to alleviate this labor, a company that acts as a shipping warehouse and sells products from various manufacturers to golf stores nationwide. The distributor is interested and asks for its usual pricing—70% off of retail or $4.50—which would leave Sarah 50 cents in the hole on each unit. She declines.

To make matters worse, the four local stores have already started discounting her shirts to compete among one another and are killing their own profit margins. Two weeks later, reorders disappear. Sarah abandons retail and returns to her website demoralized. Sales online have dropped to almost nothing with new competition. She has not recouped her initial investment, and she still has 50 shirts in her garage.

Not good.

It all could have been prevented with proper testing and planning.

ED “MR. CREATINE” BYRD is no Sarah. He does not invest and hope for the best.

His San Francisco–based company, MRI, had the top-selling sports supplement in the U.S. from 2002–2005, NO2. It is still a top-seller despite dozens of imitators. He did it through smart testing, smart positioning, and brilliant distribution.

Prior to manufacturing, MRI first offered a low-priced book related to the product through ¼-page advertisements in men’s health magazines. Once the need had been confirmed with a mountain of book orders, NO2 was priced at an outrageous $79.95, positioned as the premium product on the market, and sold exclusively through GNC stores nationwide. No one else was permitted to sell it.

How can it make sense to turn away business? There are a few good reasons.

First, the more competing resellers there are, the faster your product goes extinct. This was one of Sarah’s mistakes.

It works like this: Reseller A sells the product for your recommended advertised price of $50, then reseller B sells it for $45 to compete with A, and then C sells it for $40 to compete with A and B. In no time at all, no one is making profit from selling your product and reorders disappear. Customers are now accustomed to the lower pricing and the process is irreversible. The product is dead and you need to create a new product. This is precisely the reason why so many companies need to create new product after new product month after month. It’s a headache.

I had one single supplement, BrainQUICKEN® (also sold as BodyQUICK®) for six years and maintained a consistent profit margin by limiting wholesale distribution, particularly online, to the top one or two largest resellers who could move serious quantities of product and who agreed to maintain a minimum advertised pricing.24 Otherwise, rogue discounters on eBay and mom-and-pop independents will drive you broke.

Second, if you offer someone exclusivity, which most manufacturers try to avoid, it can work in your favor. Since you are offering one company 100% of the distribution, it is possible to negotiate better profit margins (offering less of a discount off of retail price), better marketing support in-store, faster payment, and other preferential treatment.

It is critical that you decide how you will sell and distribute your product before you commit to a product in the first place. The more middlemen are involved, the higher your margins must be to maintain profitability for all the links in the chain.

Ed Byrd realized this and exemplifies how doing the opposite of what most do can reduce risk and increase profit. Choosing distribution before product is just one example.

Ed drives a Lamborghini down the California coast when not traveling or in the office with his small focused staff and his two Australian shepherds. This outcome is not accidental. His product-creation methods—and those of the New Rich in general—can be emulated.

Here’s how you do it in the fewest number of steps.

Step One: Pick an Affordably Reachable Niche Market

When I was younger … I [didn’t] want to be pigeonholed … Basically, now you want to be pigeonholed. It’s your niche.

—JOAN CHEN, actress; appeared in The Last Emperor and Twin Peaks

Creating demand is hard. Filling demand is much easier. Don’t create a product, then seek someone to sell it to. Find a market—define your customers—then find or develop a product for them.

I have been a student and an athlete, so I developed products for those markets, focusing on the male demographic whenever possible. The audiobook I created for college guidance counselors failed because I have never been a guidance counselor. I developed the subsequent speed-reading seminar after realizing that I had free access to students, and the business succeeded because—being a student myself—I understood their needs and spending habits. Be a member of your target market and don’t speculate what others need or will be willing to buy.

Start Small, Think Big

Some people are just into lavish dwarf entertainment.

–DANNY BLACK (42″), part-owner of Shortdwarf.com25

Danny Black rents dwarfs as entertainment for $149 per hour. How is that for a niche market?

It is said that if everyone is your customer, then no one is your customer. If you start off aiming to sell a product to dog- or car-lovers, stop. It’s expensive to advertise to such a broad market, and you are competing with too many products and too much free information. If you focus on how to train German shepherds or a restoration product for antique Fords, on the other hand, the market and competition shrink, making it less expensive to reach your customers and easier to charge premium pricing.

BrainQUICKEN was initially designed for students, but the market proved too scattered and difficult to reach. Based on positive feedback from student-athletes, I relaunched the product as BodyQUICK and tested advertising in magazines specific to martial artists and powerlifters. These are minuscule markets compared to the massive student market, but not small. Low media cost and lack of competition enabled me to dominate with the first “neural accelerator”26 in these niches. It is more profitable to be a big fish in a small pond than a small undefined fish in a big pond. How do you know if it’s big enough to meet your TMI? For a detailed real-life example of how I determined the market size of a recent product, see “Muse Math” on this book’s companion site.

Ask yourself the following questions to find profitable niches.

1. Which social, industry, and professional groups do you belong to, have you belonged to, or do you understand, whether dentists, engineers, rock climbers, recreational cyclists, car restoration aficionados, dancers, or other?

Look creatively at your resume, work experience, physical habits, and hobbies and compile a list of all the groups, past and present, that you can associate yourself with. Look at products and books you own, include online and offline subscriptions, and ask yourself, “What groups of people purchase the same?” Which magazines, websites, and newsletters do you read on a regular basis?

1. Which of the groups you identified have their own magazines?

Visit a large bookstore such as Barnes & Noble and browse the magazine rack for smaller specialty magazines to brainstorm additional niches. There are literally thousands of occupation- and interest/hobby-specific magazines to choose from. Use Writer’s Market to identify magazine options outside the bookstores. Narrow the groups from question 1 above to those that are reachable through one or two small magazines. It’s not important that these groups all have a lot of money (e.g., golfers)—only that they spend money (amateur athletes, bass fishermen, etc.) on products of some type. Call these magazines, speak to the advertising directors, and tell them that you are considering advertising; ask them to e-mail their current advertising rate card and include both readership numbers and magazine back-issue samples. Search the back issues for repeat advertisers who sell direct-to-consumer via 800 numbers or websites—the more repeat advertisers, and the more frequent their ads, the more profitable a magazine is for them … and will be for us.

Step Two: Brainstorm (Do Not Invest In) Products

Genius is only a superior power of seeing.

—JOHN RUSKIN, famed art and social critic

Pick the two markets that you are most familiar with that have their own magazines with full-page advertising that costs less than $5,000. There should be no fewer than 15,000 readers.

This is the fun part. Now we get to brainstorm or find products with these two markets in mind.

The goal is come up with well-formed product ideas and spend nothing; in Step 3, we will create advertising for them and test responses from real customers before investing in manufacturing. There are several criteria that ensure the end product will fit into an automated architecture.

The Main Benefit Should Be Encapsulated in One Sentence.

People can dislike you—and you often sell more by offending some—but they should never misunderstand you.

The main benefit of your product should be explainable in one sentence or phrase. How is it different and why should I buy it? ONE sentence or phrase, folks. Apple did an excellent job of this with the iPod. Instead of using the usual industry jargon with GB, bandwidth, and so forth, they simply said, “1,000 songs in your pocket.” Done deal. Keep it simple and do not move ahead with a product until you can do this without confusing people.

It Should Cost the Customer $50–200.

The bulk of companies set prices in the midrange, and that is where the most competition is. Pricing low is shortsighted, because someone else is always willing to sacrifice more profit margin and drive you both bankrupt. Besides perceived value, there are three main benefits to creating a premium, high-end image and charging more than the competition.

Higher pricing means that we can sell fewer units—and thus manage fewer customers—and fulfill our dreamlines. It’s faster.

Higher pricing attracts lower-maintenance customers (better credit, fewer complaints/questions, fewer returns, etc.). It’s less headache. This is HUGE.

Higher pricing also creates higher profit margins. It’s safer.

I personally aim for an 8–10x markup, which means a $100 product can’t cost me more than $10–12.50.27 If I had used the commonly recommended 5 x markup with BrainQUICKEN, it would have gone bankrupt within 6 months due to a dishonest supplier and late magazine. The profit margin saved it, and within 12 months it was generating up to $80,000 per month.

High has its limits, however. If the per-unit price is above a certain point, prospects need to speak to someone on the phone before they are comfortable enough to make the purchase. This is contraindicated on our low-information diet.

I have found that a price range of $50–200 per sale provides the most profit for the least customer service hassle. Price high and then justify.

It Should Take No More Than 3 to 4 Weeks to Manufacture.

This is critically important for keeping costs low and adapting to sales demand without stockpiling product in advance. I will not pursue any product that takes more than three to four weeks to manufacture, and I recommend aiming for one to two weeks from order placement to shippable product.

How do you know how long something takes to manufacture?

Contact contract manufacturers who specialize in the type of products you’re considering: http://www.thomasnet.com/. Call a related manufacturer (e.g., toilet bowls) if you need a referral to a related manufacturer you cannot find (e.g., toilet cleaning solutions). Still no luck? Google different synonyms for your product in combination with “organization” and “association” to contact the appropriate industry organizations. Ask them for referrals to contract manufacturers and for the names of their trade magazines, which often contain advertisements for contract manufacturers and related service providers we’ll need for your virtual architecture later. Request pricing from the contract manufacturers to ensure the proper markup is possible. Determine the per-unit costs of production for 100, 500, 1,000, and 5,000 units.

It Should Be Fully Explainable in a Good Online FAQ.

Here is where I really screwed up in my product choice with Brain-QUICKEN.

Even though ingestibles have enabled my NR life, I would not wish them on anyone. Why not? You get 1,000 questions from every customer: Can I eat bananas with your product? Will it make me fart during dinner? On and on, ad nauseam. Choose a product that you can fully explain in a good online FAQ. If not, the task of travelling and otherwise forgetting about work becomes very difficult or you end up spending a fortune on call center operators.

Understanding these criteria, a question remains: “How does one obtain a good muse product that satisfies them?” There are three options we’ll cover in ascending order of recommendation.

Option One: Resell a Product

Purchasing an existing product at wholesale and reselling it is the easiest route but also the least profitable. It is the fastest to set up but the fastest to die off due to price competition with other resellers. The profitable life span of each product is short unless an exclusivity agreement prevents others from selling it. Reselling is, however, an excellent option for secondary back-end28 products that can be sold to existing customers or cross-sold29 to new customers online or on the phone.

To purchase at wholesale, use these steps.

Contact the manufacturer and request a “wholesale pricelist” (generally 40% off retail) and terms.

If a business tax ID number is needed, print out the proper forms from your state’s Secretary of State website and file for an LLC (which I prefer) or similar protective business structure for $100–200.

Do NOT purchase product until you have completed Step 3 in the next chapter. It is enough at this point to confirm the profit margin and have product photos and sales literature.

That’s reselling. Not much more to it.

Option Two: License a Product

I not only use all the brains that I have, but all that I can borrow.

—WOODROW WILSON

Some of the world’s best-known brands and products have been borrowed from someone or somewhere else.

The basis for the energy drink Red Bull came from a tonic in Thailand, and the Smurfs were brought from Belgium. Pokémon came from the land of Honda. The band KISS made millions in record and concert sales, but the real profit has been in licensing—granting others the right to produce hundreds of products with their name and image in exchange for a percentage of sales.

There are two parties involved in a licensing deal, and a member of the New Rich could be either. First, there is the inventor of the product,30 called the “licensor,” who can sell others the right to manufacture, use, or sell his or her product, usually for 3–10% of the wholesale price (usually around 40% off retail) for each unit sold. Invent, let someone else do the rest, and cash checks. Not a bad model.

The other side of the equation is the person interested in manufacturing and selling the inventor’s product for 90–97% of the profit: the licensee. This is, for me and most NR, more interesting.

Licensing is, however, dealmaking-intensive on both sides and a science unto itself. Creative contract negotiation is essential and most readers will run into problems if it’s their first product. For real-world case studies on both sides, ranging from Teddy Ruxpin to Tae-Bo, and full agreements with actual dollar amounts, visit www.fourhourblog.com. From how to sell inventions without prototypes or patents to how to secure rights to products as a no-name beginner, it’s all there. The economics are fascinating and the profits can be astounding.

In the meantime, we will focus on the least complicated and most profitable option open to the most people: product creation.

Option Three: Create a Product

Creation is a better means of self-expression than possession; it is through creating, not possessing, that life is revealed.

—VIDA D. SCUDDER, The Life of the Spirit in the Modern English Poets

Creating a product is not complicated. “Create” sounds more involved than it actually is. If the idea is a hard product—an invention—it is possible to hire mechanical engineers or industrial designers on www.elance.com to develop a prototype based on your description of its function and appearance, which is then taken to a contract manufacturer. If you find a generic or stock product made by a contract manufacturer that can be re-purposed or positioned for a special market, it’s even easier: Have them manufacture it, stick a custom label on it for you, and presto—new product. This latter example is often referred to as “private labeling.” Have you ever seen a massage therapist’s office with its own line of vitamin products or the Kirkland brand at Costco? Private labeling in action.

It is true that we’ll be testing market response without manufacturing, but if the test is successful, manufacturing is the next step. This means we need to keep in mind setup costs, per-unit costs, and order minimums. Innovative gadgets and devices are great but often require special tooling, which makes the manufacturing start-up costs too expensive to meet our criteria.

Putting mechanical devices aside and forgetting about welding and engineering, there is one class of product that meets all of our criteria, has a manufacturing lead time of less than a week in small quantities, and often permits not just an 8–10 x markup, but a 20–50 x markup.

No, not heroin or slave labor. Too much bribing and human interaction required.

Information.

Information products are low-cost, fast to manufacture, and time-consuming for competitors to duplicate. Consider that the top-selling non-information infomercial products—whether exercise equipment or supplements—have a useful life span of two to four months before imitators flood the market. I studied economics in Beijing for six months and observed firsthand how the latest Nike sneaker or Callaway golf club could be duplicated and on eBay within a week of first appearing on shelves in the U.S. This is not an exaggeration, and I am not talking about a look-alike product—I mean an exact duplicate for 1/20 the cost.

Information, on the other hand, is too time-consuming for most knockoff artists to bother with when there are easier products to replicate. It’s easier to circumvent a patent than to paraphrase an entire course to avoid copyright infringement. Three of the most successful television products of all time—all of which have spent more than 300 weeks on the infomercial top-10 bestseller lists—reflect the competitive and profit margin advantage of information products.

No Down Payment (Carlton Sheets)

Attacking Anxiety and Depression (Lucinda Bassett)

Personal Power (Tony Robbins)

I know from conversations with the principal owners of one of the above products that more than $65 million worth of information moved through their doors in 2002. Their infrastructure consisted of fewer than 25 in-house operators, and the rest of the infrastructure, ranging from media purchasing to shipping, was outsourced.

Their annual revenue-per-employee is more than $2.7 million. Incredible.

On the opposite end of the market size spectrum, I know a man who created a low-budget how-to DVD for less than $200 and sold it to owners of storage facilities who wanted to install security systems. It’s hard to get more niche than that. In 2001, selling DVDs that cost $2 to duplicate for $95 apiece through trade magazines, he made several hundred thousand dollars with no employees.

But I’m Not an Expert!

If you aren’t an expert, don’t sweat it.

First, “expert” in the context of selling product means that you know more about the topic than the purchaser. No more. It is not necessary to be the best—just better than a small target number of your prospective customers. Let’s suppose that your current dreamline—to compete in the 1,150-mile Iditarod dogsledding race in Alaska—requires $5,000 to realize. If there are 15,000 readers and even 50 (0.33%) can be convinced of your superior expertise in skill X and spend $100 for a program that teaches it, that is $5,000. Bring on the Huskies. Those 50 customers are what I call the “minimal customer base”—the minimum number of customers you need to convince of your expertise to fulfill a given dreamline.

Second, expert status can be created in less than four weeks if you understand basic credibility indicators. It’s important to learn how the PR pros phrase resume points and position their clients. See the boxed text later in this chapter to learn how.

The degree to which you personally need expert status also depends on how you obtain your content. There are three main options.

Create the content yourself, often via paraphrasing and combining points from several books on a topic.

Repurpose content that is in the public domain and not subject to copyright protection, such as government documents and material that predates modern copyright law.

License content or compensate an expert to help create content. Fees can be one-time and paid up front or royalty-based (5–10% of net revenue, for example).

If you choose option 1 or 2, you need expert status within a limited market.

Let’s assume you are a real estate broker and have determined that, like yourself, most brokers want a simple but good website to promote themselves and their businesses. If you read and understand the three top-selling books on home-page design, you will know more about that topic than 80% of the readership of a magazine for real estate brokers. If you can summarize the content and make recommendations specific to the needs of the real estate market, a 0.5–1.5% response from an ad you place in the magazine is not unreasonable to expect.

Use the following questions to brainstorm potential how-to or informational products that can be sold to your markets using your expertise or borrowed expertise. Aim for a combination of formats that will lend itself to $50–200 pricing, such as a combination of two CDs (30–90 minutes each), a 40-page transcription of the CDs, and a 10-page quickstart guide. Digital delivery is perfectly acceptable—in some cases, ideal—if you can create a high enough perceived value.

1. How can you tailor a general skill for your market—what I call “niching down”—or add to what is being sold successfully in your target magazines? Think narrow and deep rather than broad.

2. What skills are you interested in that you—and others in your markets—would pay to learn? Become an expert in this skill for yourself and then create a product to teach the same. If you need help or want to speed up the process, consider the next question.

3. What experts could you interview and record to create a sellable audio CD? These people do not need to be the best, but just better than most. Offer them a digital master copy of the interview to do with or sell as they like (this is often enough) and/or offer them a small up-front or ongoing royalty payment. Use Skype.com with HotRecorder (more on these and related tools in Tools and Tricks) to record these conversations directly to your PC and send the mp3 file to an online transcription service.

4. Do you have a failure-to-success story that could be turned into a how-to product for others? Consider problems you’ve overcome in the past, both professional and personal.

The Expert Builder: How to Become a Top Expert in 4 Weeks

It’s time to obliterate the cult of the expert. Let the PR world scorn me. First and foremost, there is a difference between being perceived as an expert and being one. In the context of business, the former is what sells product and the latter, relative to your “minimal customer base,” is what creates good products and prevents returns.

It is possible to know all there is to know about a subject—medicine, for example—but if you don’t have M.D. at the end of your name, few will listen. The M.D. is what I term a “credibility indicator.” The so-called expert with the most credibility indicators, whether acronyms or affiliations, is often the most successful in the marketplace, even if other candidates have more in-depth knowledge. This is a matter of superior positioning, not deception.

How, then, do we go about acquiring credibility indicators in the least time possible? Emulating the client-grooming techniques of some of the best PR firms in New York City and Los Angeles isn’t a bad place to start.

It took a friend of mine just three weeks to become a “top relationship expert who, as featured in Glamour and other national media, has counseled executives at Fortune 500 companies on how to improve their relationships in 24 hours or less.” How did she do it?

She followed a few simple steps that created a credibility snowball effect. Here’s how you can do the same.

1. Join two or three related trade organizations with official-sounding names. In her case, she chose the Association for Conflict Resolution (www.acrnet.org) and The International Foundation for Gender Education (www.ifge.org). This can be done online in five minutes with a credit card.

2. Read the three top-selling books on your topic (search historical New York Times bestseller lists online) and summarize each on one page.

3. Give one free one-to-three-hour seminar at the closest well-known university, using posters to advertise. Then do the same at branches of two well-known big companies (AT&T, IBM, etc.) located in the same area. Tell the company that you have given seminars at University X or X College and are a member of those groups from step 1. Emphasize that you are offering it to them for free to get additional speaking experience outside of academics and will not be selling products or services. Record the seminars from two angles for later potential use as a CD/DVD product.

4. Optional: Offer to write one or two articles for trade magazines related to your topics, citing what you have accomplished in steps 1 and 3 for credibility. If they decline, offer to interview a known expert and write the article—it still gets your name listed as a contributor.

5. Join ProfNet, which is a service that journalists use to find experts to quote for articles. Getting PR is simple if you stop shouting and start listening. Use steps 1, 3, and 4 to demonstrate credibility and online research to respond to journalist queries. Done properly, this will get you featured in media ranging from small local publications to the New York Times and ABC News.

Becoming a recognized expert isn’t difficult, so I want to remove that barrier now.

I am not recommending pretending to be something you’re not. I can’t! “Expert” is nebulous media-speak and so overused as to be indefinable. In modern PR terms, proof of expertise in most fields is shown with group affiliations, client lists, writing credentials, and media mentions, not IQ points or Ph.D.s.

Presenting the truth in the best light, but not fabricating it, is the name of the game.

See you on CNN.

Q&A: QUESTIONS AND ACTIONS

For this hands-on chapter, the Q&A is simple. In fact, it’s more like a Q.

The question is, “Did you read the chapter and follow the directions?” If not, do it! Instead of the usual Q&A, the end of this chapter and the following two will feature more extensive resources for taking the action steps described in detail in the text.

COMFORT CHALLENGE

Find Yoda (3 Days)

Call at least one potential superstar mentor per day for three days. E-mail only after attempting a phone call. I recommend calling before 8:30 A.M. or after 6:00 P.M. to reduce run-ins with secretaries and other gatekeepers. Have a single question in mind, one that you have researched but have been unable to answer yourself. Shoot for “A” players—CEOs, ultrasuccessful entrepreneurs, famous authors, etc.—and don’t aim low to make it less frightening. Use www.contactanycelebrity.com if need be, and base your script on the following.

Unknown answerer: This is Acme Inc. [or “the office of Mentor X”].

You: Hi, this is Tim Ferriss calling for John Grisham, please.31

Answerer: May I ask what this is regarding?

You: Sure. I know this might sound a bit odd,32 but I’m a first-time author and just read his interview in Time Out New York.33 I’m a longtime34 fan and have finally built up the courage to35 call him for one specific piece of advice. It wouldn’t take more than two minutes of his time. Is there any way you can help me get through to him? 36I really, really appreciate whatever you can do.

Answerer: Hmmm … Just a second. Let me see if he’s available. [two minutes later] Here you go. Good luck. [rings to another line]

John Grisham: John Grisham here.

You: Hi, Mr. Grisham. My name is Tim Ferriss. I know this might sound a bit odd, but I’m a first-time author and a longtime fan. I just read your interview in Time Out New York and finally built up the courage to call. I have wanted to ask you for a specific piece of advice for a long time, and it shouldn’t take more than two minutes of your time. May I? 37 John Grisham: Uh … OK. Go ahead. I have to be on a call in a few minutes.

You (at the very end of the call): Thank you so much for being so generous with your time. If I have the occasional tough question—very occasional—is there any chance I could keep in touch via e-mail? 38 LIFESTYLE DESIGN IN ACTION

OVER THE MOON

My 13-year-old daughter would like to be an astronaut when she grows up. Last year she had an extreme challenge to deal with. The phrase from Apollo 13 “Failure is not an option” sort of became our motto. I got the idea of contacting the commander of Apollo 13, Jim Lovell. It didn’t take much to find him and he sent her a wonderful letter about his ordeal just to get into the Apollo program, not to mention dealing with a crippled spacecraft. His letter made a big difference to my daughter. A couple months later, we were able to take things a little further by getting her VIP access to a shuttle launch.

—ROB

TOOLS AND TRICKS

Confirming Sufficient Market Size

Compete (www.compete.com) and

Quantcast (www.quantcast.com)

Find the number of monthly visitors for most websites, in addition to the search terms that generate the most traffic for them.

Writer’s Market (www.writersmarket.com)

Here you’ll find a listing of thousands of specialty and niche magazines, including circulation and subscription numbers. I prefer the print version.

Spyfu (www.spyfu.com)

Download competitors’ online advertising spending, keywords, and ad-word details. Consistent and repeat spending generally indicates successful advertising ROI.

Standard Rate and Data Services (www.srds.com)

Check out this resource for annual listings of magazine and company customer mailing lists available for rent. If you’re considering creating a how-to video for duck hunting, check out the size of customer lists from hunting gun manufacturers and related magazines first. Use the print version in libraries instead of paying for the somewhat confusing online access.

Finding Products to Resell or Manufacturing

Affiliate Networks: Clickbank (www.clickbank.com),

Commission Junction (www.cj.com), Amazon Associates (www.amazon.com/associates)

No inventory, no invoices. Experimenting with products and categories through affiliate networks such as Clickbank and Commission Junction, which pay you 10–75% of each purchase, is a fast method for doing a proof-of-concept using similar products. It’s often worth setting up accounts at both just to observe how bestselling items are being sold and promoted.

Amazon Associates averages 7–10% commissions, but bestselling books are excellent for testing target markets for more elaborate informational products. For all of the above: Do not get into bidding wars against other affiliates using expensive general keywords or overexposed brand names. Go niche or go broke.

Alibaba (www.alibaba.com)

Based in China, Alibaba is the world’s largest business-to-business marketplace. From MP3 players for $9 each to red wine for $2 per bottle, this site is the source. If someone here doesn’t make it, it probably can’t be made.

Worldwide Brands (www.worldwidebrands.com)

Offers an extensive how-to guide for finding manufacturers willing to dropship product to your customers, which allows you to avoid pre-purchasing inventory. This is where Amazon and eBay power users find not just drop shippers, but also wholesalers and liquidators. Shopster (www.shopster.com) is also a popular option, with more than 1,000,000 dropship products to choose from.

Thomas’s Register of Manufacturers (www.thomasnet.com) (800–699–9822)

Searchable database of contract manufacturers for every conceivable product, from underwear and food products to airplane parts.

Electronics, DVDs, Books (www.ingrambook.com, www.techdata.com)

Housewares and Hardware (www.housewares.org, www.nationalhardwareshow.com) (847–292–4200)

For these product categories and related talent (on-screen demonstrations), also consider attending local or state fairs.

Consumables and Vitamin Products (www.expoeast.com, expowest.com)

Finding Public Domain Information to Repurpose

Be sure to speak with an intellectual property attorney before using apparent public domain material. If someone modifies 20% of a public domain work (through abridging and footnotes, for example), their “new” complete work can be copyrighted. Using it without permission would then be a punishable infringement. The details can get confusing. Do the beginning research yourself, but get a pro to look over your findings before moving ahead with product development.

Project Gutenberg (www.gutenberg.org)

Project Gutenberg is a digital library of more than 15,000 pieces of literature considered to be in the public domain.

LibriVox (www.librivox.org)

LibriVox is a collection of audiobooks from the public domain that are available for free download.

Recording Seminars or Phone Interviews with Experts for CD Downloadable Products

HotRecorder (www.hotrecorder.com) (PC), Call Recorder (http://ecamm.com/mac/callrecorder/) (Mac)

Use these programs to record any inbound or outbound phone call via computer using Skype (www.skype.com) and other VoIP programs.

NoCost Conference (www.nocostconference.com)

Provides a free 800-number conference line, as well as free recording and file retrieval. Normal phones can be used for call-in, so no computer or web connection is required for participants. If you’ll have a Q&A, I suggest soliciting attendee questions beforehand to avoid issues with muting/ unmuting of lines.

Jing Project (www.jingproject.com) and DimDim (www.dimdim.com)

If you’d like to record the actions on your screen for video tutorials, both of these free programs will get the job done. If you need advanced editing features, Jing’s big brother Camtasia is the industry standard (www.camtasia.com).

Licensing Ideas to Others for Royalties

InventRight (www.inventright.com) (800–701–7993)

Stephen Key is the most consistently successful inventor I’ve ever met, with millions in royalties from companies like Disney, Nestlé, and Coca-Cola. He is not high-tech but specializes in creating simple products, or improving on existing products, and then licensing (renting) his ideas to large corporations. He comes up with the idea, files a provisional patent for less than $200, and then lets another company do the work while he collects checks. This site introduces his fail-proof process for doing the same. His techniques for cold-calling alone are invaluable. Highly recommended.

Guthy-Renker Corporation (www.guthyrenker.com) (760–773–9022) GRC is the 800-pound infomercial gorilla. It brings in more than $1.3 billion per year in sales with mega-hits like Tony Robbins, Proactiv Solution, and Winsor Pilates. Don’t expect more than a 2–4% royalty if you make the cut, but the numbers are huge enough to make it worth a look. Submit your product online.

Searching Patents for Unexploited Ideas to Turn into Products

United States Patent and Trademark Office (www.uspto.gov) (800–786–9199)

Licensable Technologies Developed at Universities (www.autm.net; see “view all listings” under “Technology Transfer Offices”)

Inventors Groups and Associations (call and ask if members have anything to license) (www.uiausa.org/Resources/InventorGroups.htm

Becoming an Expert

Prof Net via PR Leads (www.prleads.com) and HARO (www.helpareporterout.com)

Receive daily leads from journalists and TV and radio producers looking for experts to cite and interview for media ranging from local outlets to CNN and the New York Times. Stop swimming upstream and start responding to stories people are already working on. HARO offers select leads at no cost, and you can mention my name with PR Leads to get two months for the price of one.

PRWeb Press Releases (www.prwebdirect.com) The press release is dead for most purposes, but using this service has some serious search-engine benefits, such as appearing at the top of related Google News and Yahoo! News results.

ExpertClick (www.expertclick.com)

This is another secret of the PR pros. Put up an expert profile for media to see, receive an up-to-date database of top media contacts, and send free press releases to 12,000 journalists, all on one website that gets more than 5 million hits per month. This is how I got on NBC and ended up developing a prime-time TV show. It works. Mention my name on the phone, or use “Tim Ferriss $100” online, to get a $100 discount.

LIFESTYLE DESIGN IN ACTION

Bon Jour Tim,

I was in Barnes & Noble at the help desk this past Saturday, April 25, waiting for an employee to get a book for me (Tropic of Cancer if you must know). While I was waiting, I noticed a copy of 4-Hour Workweek on the counter that someone else had ordered. Not one to be shy, I reached over the counter and started reading their copy. As you might guess, I had the employee go back and get me my own copy. Haven’t finished Tropic of Cancer but finished your book … … On Monday I got a yes when I asked my boss to work two days remotely per week. I start next week.

On Monday I also booked the most stunning apartment in Paris for the month of September, at a cost of half of the rent I pay in Southern California. I plan to increase my remote time now through August so that September will be an easy ask to leave for remote work. If the answer happens to be no (which I now doubt), I will be prepared to quit my job.

Now at work on my Income Autopilot project.

Tim: amazing. My life has changed in three days. (Plus, your book was funny as hell.) Thank you!!! —CINDY FRANKEY