Business Q&A #1 - Going Full-Time, Hiring Employee #1, Tackling Big Ideas and More.

Hey everybody, this is Matthew Paulson here and we are going to do some business Q and A today. So I put a call on Facebook for people to ask me their business questions and I am going to do my best to answer the questions that you all have sent me. There's nothing fancy about this. I don't really know where these videos as a project are going. But for now today we have some great business questions and I'm going to try to answer them as best I can. So the first question comes from Andrew Sedergren and he says, I have this great idea but lack the immediate skills to accomplish it. Do I find partners or other companies to help develop and grow it, or do I spend the time to develop and learn the skills myself? He goes on to say, it deals with app development and the concept has something to do with people sending money back and forth through some kind of mobile app. So effectively, I know there's more to it than this, but it's effectively a mobile app, PayPal kind of thing. And first let me say that the idea that you have brought up is a really kind of big problem to tackle because there are a lot of different facets and knowledge sets that you would need and probably a lot of money to accomplish the this project. Because you're trying to reinvent PayPal. You know, you really would need somebody that can develop a cross platform mobile app. So you would need iOS development, Android development. You would also need somebody that can write really secure code because whenever money is involved, there'll be somebody that tries to hack it. You will also need somebody that has a solid understanding of financial regulations and how money gets moved back and forth with ACH and credit cards and wire transfers and all that stuff. Really, financial fraud is probably the biggest issue you would deal with. You look at PayPal, they have a whole office in Omaha dedicated to stopping business fraud. I think that would be a real problem you would run into. I really think this particular project is way too much for a first time entrepreneur to try to tackle themselves just because of the breadth of knowledge that you would need. I think if you're really serious about this particular idea, you would probably need a team of four people. You need you for biz dev, you need a development person, a design person, and then somebody that has a deep knowledge of how money gets moved back and forth. I actually don't recommend that you pursue this idea. I think it's just too big and too hairy, too complicated to try to do yourself when you first go around. So I would try to do something maybe more that you can tackle yourself that isn't so complicated for your first business idea as your second or third business idea, go for it. But if you don't really have a lot of skills and you need a big team to do something and a lot of money, maybe not the best first business idea. So I'd encourage you to find something smaller and it's just more easy to tackle. All right, second question. This is from my friend Halawe. I can never pronounce Halawi's last name right, but let's say Semenigas. I don't know. Sorry, Hello. But he asked what is your favorite lead generation source? You mentioned that AdWords doesn't work well for you anymore. So what are you doing to get around this? So first let me say that I no longer talk about specific strategies that I use for lead generation for MarketBeat, because there are a couple of companies that have just made a living off copying everything I do, and I don't really want to make their job any easier than it is. So I just don't talk about lead gen anymore for that particular reason. I hate the fact that I can't talk about it, but because of the copycats that are out there, I just can't do it anymore. I do want to talk more broadly about how I think about lead generation strategies though. So there are a lot of lead sources that just about everybody uses. So there's Facebook, there's AdWords, there's SEO, Twitter, Twitter ads, LinkedIn. And as more people use any of these advertising networks or lead generation strategies, it just becomes more expensive to do and less profitable because really it's kind of a bidding game. So the more people that are bidding on something, the more likely it is to get closer to its true value. So really, as more people enter into start using any of these lead generation strategies, the, the margins kind of collapse and it just becomes less worth it than it used to be to do. So I kind of stay away from what everyone else is doing, really. Kind of the strategy I use is I start with who is my audience? What are their demographics, age, gender, ethnicity, as well as psychographics, interests, stuff like whether or not they're married, have kids, where they live, all the kind of stuff like that. Then after that I say, okay, you know, this is my person, who is my ideal audience member. Some people call this an avatar. And then I ask, you know, what kind of media do these people consume? Do they go any websites? Do they read any books, do they read any magazines? You know, where do they go to learn about whatever it is that I'm selling? And then I say, okay, here's this media platform. How do I best leverage that for my audience? And then the other thing I do is if that's not a good option is just how else can I reach out to these people directly? What contact information for them do I have? I'll kind of share kind of the example of how I use this process for Goku Photo Contest. I started that business just over three years ago now with my friends Jason and Stevie Shay. If you don't know what that business is, it is a company that has software that helps animal shelters raise money for photo contests or through photo contest fundraisers. So somebody will, you know, an animal shelter will have a contest. People will pay a dollar to submit a picture of their cat and then it's a dollar per vote. And then at the end of the contest, whoever's cat picture or dog picture that has the most votes will win some kind of prize. And at first I thought this is going to be a challenging marketing strategy. Animal shelter employees, executive directors, there's not really a place other than some of the conventions and trade shows where they go to find out about this kind of stuff. So we kind of realized early on that if we're going to be able to reach these people, we are going to have to go find them and communicate the value we offer directly to them. So what we found is there are a ton of animal shelter directories online. So we can just email these people saying, hey, we have this great product, it'll help you raise money. Other animal shelters that have done this raise about five grand. So it's really kind of a no brainer for them. And that strategy has worked out really well for us. We've been able to do about 700 contests in that three years. And we've helped animal shelters raise about four and a half million dollars now. So that has been a good successful regeneration strategy. And it is really based off that formula of who are my people, where are they at, how can I reach them? And how can I reach them using a strategy that not a lot of other people are doing and that really lets you get a very high margin acquisition of that customer. So you don't have a huge lead generation cost when you're doing something creative that not everyone else is doing. Next question. It comes from my friend Greg Kloot. I had the chance to work with Greg when I used to work at a day job doing web design work. I did a Project for Greg. So Greg, it's nice to hear from you. So he asks, I have been a part time consultant during my entire career, computer consultant. What is the best footprint or process to go as a full time consultant? So my first kind of recommendation would be to clean up your personal finances, do all the Dave Ramsey stuff, pay down some debt, you know, build up some savings so that you're in a good financial position to start out if you have lots of debt and no savings, or excuse me, if you have no debt and lots of savings, you can weather income fluctuations, those income fluctuations that come with going from part time to full time with anything. So after that I would say your next goal should be to try to come up with half of your income in recurring revenue. So if you're a computer consultant, I assume this is it work. Say you make 50 grand a year or I would say 50 grand a year. So I would say try to come up with business contracts that will get you 25 grand a year every year. So this might be getting them on a retainer. Or say I'll be your computer guy for a thousand bucks a month. You do that with two or three people and then you're kind of there. So once you have half your regular day job income and you have say three to six months of living expenses and savings, I think that's kind of a good place to make a jump off and go full time with your business. And the reason why I say you only have to make half as much as you do now is because in my experience, everybody that quits their day job and is doing reasonably well with a part time business, their revenue typically doubles when they go full time with their business. And that is simply because they are giving their best energy to their business and not to their day job anymore. So I quit my day job in November of 2012 and in 2013, 2014 and almost in 2015, we doubled revenue. So MarketBeat almost grew by a thousand percent in the three years after that. I quit my day job. Not quite, but pretty darn close. I mean that's the reason we won the Inc. 5000 award that is over there on my desk is because I quit my day job in my best energy and went to the business and I was able to try all the ideas and concepts that I never had time to do. So once you get half your income that comes in pretty regularly and you got not a lot of debt and a bunch of savings, I think that's a great time to try to make a leap. I got two More questions. Next question is from Pete Krentz, a new Pete from college. And he asks a two part question and I only know an answer to the first part maybe. So he says, what are your thoughts on the stock market in the upcoming year? I hear both sides saying it's going up and other people say that it's going to lose 70% of its value. I understand it's the future and it's impossible to answer, but I was curious of the opinion of someone I know that researches stocks knows more than me about the markets. So if you see signs one way or the other, let me know. Also, I'm also interested in private money lending and what the implications are for me to find a local private lender for say, a real estate deal. I don't know the second part of that question, but I can address the stock market. So if you look at what the price to earnings ratio of The S&P 500 is right now it's at about 25. So that means the value of the stock market or the average share price is 25 times earnings. If I saw Marketbeat today, I get like five times. Historical average for publicly traded companies is about 15 times. So if the historical average is kind of 15 and it's at 25 right now, we can say without a doubt that the stock market is just expensive right now. We see that the Dow is kind of at an all time high, the S&P 500 also at an all time high. And is it the best time to buy stocks? Probably not. But we also don't know when we're going to hit a peak and then when that decline is going to start. We just do not know that it is impossible to say. Anybody that's trying to call a peak or a valley almost always gets it wrong. So we're just not even going to go there. So given this reality of we don't know what's going to happen, I like to buy stocks that I would love to own in any environment. So instead of focusing on what is the share price, I could sell all of my stocks for today. I focus on what is the income that these stocks that I own generate. So as you would expect, I buy dividend stocks. So I never really give too much of a, too much of a dang about what can I sell my shares for today I care about what kind of income are they creating for me and how is that income growing over time. So you know, if I buy a stock that gives me a 4% dividend and it goes down by 20% in the next 12 months. I don't really care because I wasn't planning on selling it in the next 12 months anyway. I just know it's a good company that had lots of money to pay great dividends and they grow their dividends over time. So eventually the market will see that. And as things recover, you know, the stock price will go back up. You know, I buy companies like General Electric and Wells Fargo, you know, really boring companies like that that throw out great cash flow, they're going to grow it over time, they're going to raise their dividend over time. So that way I can just hold the stock for like 20 or 30 years. As long as they remain committed to their dividend, I can just collect the money. And that's really what I'm focusing on, is the payments that I receive for owning the stock. So if it goes down, who cares in the short term because they know it's going to go up in the long term. So again, I just simply like to buy stocks that I'd like to own in any market condition because the focus is on the income and not the share price. So it doesn't really matter what the share price is today. Other than that, in fact, I might be getting less of a deal than I would otherwise, but I'm not really too concerned about a recession. All right, last question comes from Jason Cannon and he says, I'm at a point in my business where I need additional help, but I don't have enough work to keep them busy for 40 hours a week. It's been a challenge for me to find someone with the skills I need who also wants to work part time. How do you handle this in between position? First, I want to say don't be afraid to hire a full time employee. Yes, you have to do payroll, you have to do unemployment insurance and all the stuff like that. But that stuff is actually a lot easier than it sounds like because there are plenty of part time bookkeepers and accountants and payroll companies like Paychex and Zenefits that can do all this stuff for you. So my rule of thumb is first, don't let the idea of doing payroll scare you and don't hire people as a contractor just because you're too lazy to figure out how to do payroll. It's okay to do payroll. It's not impossible to do payroll. I figured it out. I have two employees other than myself. They have real payroll, they have real benefits, they have a 401k plan, they get unemployment insurance, they get money towards their health Care. It's really not that hard or expensive to do. You can do it. My rule of thumb is to hire a full time person when you can keep them busy for 20 hours a week. So the tasks that you have for someone else to do that will take you 20 hours a week, will probably take them 30 to 35 hours a week initially because they haven't been doing this job as long as you have. So there's going to be a learning curve for them to get up to speed. And then by the time they're up to speed, you'll probably have more work for them anyway. So it just won't be an issue. Also, when somebody starts working for you, you're going to find out strengths that they have that you didn't know about that will be valuable to your business. So I hired a woman named Stevie Shea in 2013 and she started out as my customer service person. And I kind of figured out pretty quickly she has an amazing attention to detail. So pretty soon Stevie was in charge of placing email ads, doing invoicing, and doing a bunch of other really detail oriented tasks. And she's really great at them. And I didn't know she could do these things when I hired her. She really didn't either. But I recognized that skill set in her after I hired her and was able to give her all those additional responsibilities and kind of grow her role in that position. Also, leaving some space in the person's time just means you don't have to panic and hire a second person right away. Soon after you hire the first person. It's okay to have a little bit of margin in your new employees time just so they get up to speed and so that you can add additional responsibilities later as they get better at their job. So hires, when you have 20 hours a week for somebody, don't hesitate. Make a full time hire. Totally okay to do that. And if you can't keep them busy, it's okay. If you have to let somebody go, that's part of small business, it sucks. It's not fun. Nobody wants to have to let a contractor or employee go. I've had to do that because they just weren't working out or we didn't need them anymore. I know that the money that I was giving them was feeding their family. Sometimes you do have to let people go and you just try to do this as gracefully and as gently as possible and you give them maybe some extra money on the way out to help them make a smooth transition. But that is just part of the game. So don't not hire because you're afraid that it might not work out and you have to let them go. Don't do that because that's just part of business. I think that's pretty much it for that question. So those are the five questions that I have answered. Thank you to everyone that asked questions. I'm going to try to do this regularly, maybe once a week. I'm not really sure yet. I'm not really sure what the long term plans for these videos are. Maybe it'll be a show someday, I don't know. But I'm kind of having fun doing these videos so I'm going to keep doing them for now. I'll probably do another kind of Q and A style video next week. So if you have more business, entrepreneurship, personal finance kind of questions, feel free to comment them on this video and I'll try to include them in a future episode of whatever this is going to be. Thanks everybody. Goodbye.