The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future (32 page)

In Murfreesboro, Tennessee, Erica Cosminsky was a human resources professional for a pharmacy chain and a parent to two-year-old Riley. Working long hours during the day, she traded off child care with Riley’s father, with Erica taking the weekend shift while he took the weekdays. When she was unexpectedly laid off, the shock gradually turned to relief—Erica had been thinking about starting a service company but never had the time.

The goal was to operate a small transcription service, typing up the contents of conference calls, interviews, and meetings for other businesses. Erica first had the idea to provide her service in real time, attending live conferences, typing on the fly, and delivering the contents before the end of the day. She was good at the jobs she took under this arrangement, but there were two problems: Live conference work was scarce, and it interfered with her child care needs.

Erica was worried about competing as a basic transcription service, since many other companies already performed that role. Live transcription wasn’t the best differentiator, but Erica found another: adding basic formatting and a nice-looking layout to the transcriptions she delivered. Most competitors refused to do any design whatsoever, making clear that their job was just to transcribe. Many of Erica’s clients were solopreneurs or other very small businesses, and not everyone had access to a graphic designer or layout person who could take over after receiving a transcription. The
differentiation worked; within three months of reversing course and putting out the word that she was available, Erica could no longer keep up and was ready to expand the team.

Then she made another key decision: not to hire employees but only hire contractors. By building the team on a contract-only basis, she had more flexibility to increase or downsize the numbers, depending on market needs. This was important because of the way the industry works: From November to May in a recent cycle, she was completely booked up and had to recruit seventeen transcriptionists serving 180 clients, plus a virtual assistant to keep everyone on track. But in the summertime, very few businesses need transcription work, so the team shrinks to four people. (The contractors all understand that the work is cyclical and future projects aren’t guaranteed.)

These days Erica manages the business without doing any actual transcription herself. She has created a flexible structure that allows her to respond to the market without feeling locked in or overloaded by doing it all herself. The business experienced a testing point in the fall of 2009, when Erica’s daughter contracted a bad case of the flu, requiring Erica to spend almost her whole time as a caregiver for three weeks. It was hard to deal with on a personal level, she says, but fortunately, the team was there to back her up and most of the business clients didn’t even realize she was gone. Riley recovered, and Erica went back to work, leaving her delayed on invoices but thankfully not delayed on actual income. The model of team building through contractors worked.

You may be familiar with affiliate programs, in which merchants cooperate with partners to bring in more traffic and sales, rewarding
affiliates with a cut of the earnings. Although a few other businesses had experimented with this model earlier,
Amazon.com
started the first mainstream “associates” partnership back in 1996, inviting its customers to join as revenue-sharing partners.

Since then, almost every major retailer has come up with some kind of affiliate program, as have many small businesses of all kinds. You can start your own affiliate program very easily (a four-step startup guide is available for free at
100startup.com
), and this can be an easy way to franchise yourself. Do it right, and hundreds of eager affiliates will line up to promote your work. Do it better, though, and you’ll create a true partnership that will bring you steady income over time no matter what else is happening in your business or the general economy.

It works like this:

There are two big problems with most affiliate programs. First, the merchants tend to pay very small commissions, leaving little for the affiliate who sent them the referral in the first place, and second, the affiliates tend to do no more than blindly pass over referrals. Big problems create big opportunities, so a good merchant can offer a better program by paying much higher commissions to start with but also expecting more from the affiliate.

For years I’ve paid a 51 percent commission to affiliates in my business under the principle that they should earn more than I do for promoting my work. At the same time, I make it clear that they’ll need to do more than just slap up a link somewhere. If they want to be successful, they’ll need to create a closer connection between their readers and my business. They can do that by using the products themselves, writing reviews, and offering some kind of bonus to the referrals they make. If you structure your affiliate program in a similar manner, you’ll attract higher-quality partners.

Partnerships and outsourcing can be a good way to build some businesses, but relying on someone else doesn’t always work out as planned. Let’s look at a (very) small business that did not benefit from a contract arrangement.

Spencer and Hannah Copley, ages twelve and ten, lived with their parents on board a hospital ship deployed to West Africa. Four hundred other adults (some with children) also lived on the ship, which spent six months at a time bringing surgeons and medical teams to countries such as Sierra Leone and Liberia.

Living on a ship in West Africa presented a number of challenges.
What might be small concerns at home quickly became real issues on an old ship deployed to a poor country. Particular to our story, everyone was responsible for taking out their own garbage, but it wasn’t always an easy task. A large dumpster was located at the edge of the dock, requiring a long walk under the hot sun. Often the dumpster was full, and everyone had to keep their garbage in their small cabins until dumpster use became available again, sometimes several days later.

An entrepreneur in the making, twelve-year-old Spencer hit on an idea: What if he started a garbage collection service? The price was a steal. For just $1 a week, you could leave your garbage in the hall on Tuesdays and Fridays, and the tag team duo of Spencer and Hannah would be responsible for hauling it out to the dumpster. Spencer made a poster advertising the offer and tacked it to the bulletin board by the snack bar. The offer was an immediate hit: Ten customers signed up right away, and another fifteen in the next few weeks.

Having acquired a strong customer base, Spencer and Hannah made sure to keep their clients regularly informed with important updates. One day the dumpster was completely out of commission, and customers received a notice: “We regret to inform you that Copley Trash Services will not be open this Friday. We will perform an extra pickup on Sunday instead. Have a great day!” Another time, a leaky garbage bag created difficulties for ten-year-old Hannah, so a customer notice went out titled “Important Things to Know about Your Trash.”
^‡

Spencer and Hannah had created recurring income of $25 a week, a substantial preteen wage that was spent in three ways: Ten
percent went out as a tithe to an orphanage they had been visiting on the weekends, and 40 percent was put in reserve as a puppy saving fund for when they returned to their home in Washington State. The remaining 50 percent was used for discretionary purchases, often video games for sale on the local aftermarket and Snickers bars at the snack bar.

The business hit a rough patch when Spencer and Hannah, along with their parents, went home to Washington State on a three-month leave. They didn’t want to lose their customer base while they were away, so they decided to turn the business over to two other children also living on the ship. Unfortunately, the new management was not nearly as diligent about the business as Spencer and Hannah. Service was intermittent: Some days the trash would not be picked up at all, with no notice or explanation. Many customers opted out of their weekly subscription and returned to carrying out their own garbage again. Among the customers who stayed, bill collection and revenue declined due to administrative oversights. Without an active manager like Spencer and without a One-Page Partnership Agreement, the business suffered greatly in the absence of its founders.

Who says you’re just one person? You can hire an army of virtual assistants to do your bidding. You can carefully pursue partnerships with the goal of having 1 + 1 = 3 or more. You can grow the business by reaching more prospects with the same message, or like Nathalie Lussier (the Raw Foods Witch), you can reach out to a whole different crowd while retaining your existing business.

Just don’t open a sandwich shop with someone else’s name on it. A better way is to franchise yourself.