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This text is copy pasted from my main blog, http://gambool.blogspot.com
The business plan described here is outlined the book the "4 hour work week" by Tim Ferris. I'm adding my personal experience in succesfully implementing it.
Creating a muse
A muse is an automated business that provides a passive source of income. Will it makes us rich? Probably not. Will it gives as a steady monthly cashflow with minimum management time that allows us to do other stuff? You bet.
I'm gonna describe one type of muse; the one that ships products.
The most important thing is to start with the end in mind; we have the model, then the prize range, and only then we find the product.
The model is simple; we want to sell something trough internet. Production is outsourced, and distribution aswell; we are an online retail.
Prize range is anywhere between 50-300USD. Why? Smaller prizes require us to sell too much and future competition will cut down ur margins too fast. Higher prizes make customer require to talk with someone on the phone before buying. We want to avoid that.
The math is simple; say ur sales prize is 150 USD, and you profit 80 USD per unit. Selling only 20 units a month grants you a net 1600 USD. Not bad huh?
Finally, you need the product. To find it, you need to find a niche market, and make the product for them. It's easier to satisfy a need than creating it. A usefull tought process is to think in every group that you have belonged, and stuff you could use. Brainstorm and start from there.
Your niche market must be really specific; appealing everyone is appealing no one. Making a product for cars is way too broad; on the other hand, something for Ford Ranger users is a good niche market. A smaller group will also aloud you to advertise cheaperly and easily.
Your advertising will be trough either google ads or facebook ads. Both means are ridicously inexpensive and effective as you can target your niche market and avoid wasted clicks.
For my muse I use only facebook ads; chilean males aged 20-40. Does that mean other groups don't buy from me? Not at all. I have lighter bells for woman and older people, but I believe they purchase mostly cause they know the product beforehand.
Comercializadora Kettlebells Chile Ltda.
How the idea was concieved can be seen here. After creating the website, and succesfully testing there was enough demand, I contacted a chinese manufacturer to build me 4 tons of kettlebells. Had there been no demand, I would have shut down the website, moved on, and tested the idea for only 40 bucks.
It is critically important to do real sale tests BEFORE purchasing anything. Setting up a website is effortless and inexpensive. Getting merchandise and not being able to sell them is as fun as playing a Zerg vs Terran with Flash in a 2 player map.
The process is simple; people find my website, make and order (trough credit card or checking account) and I ship the product through a third party agent. Shipping is payed by the customer when product is recieved. My job is very simple; answer emails, drop packages at the post offices and tax declarations (I go to business school so I know how to do them).
On the future I plan to have automated pickups at my door from the post office, which is zero cost but currently suspended until January; I could also hire an accountant (40 USD month) and have as only responsability answering emails. I could even outsorce that, but don't want to for the moment.
Taking each 16kg bell from china to my door costed me 29.08 USD, while my sales prize is 79.2 USD. This yield me a net profit of 50,12 USD per unit with a 172% ROI. Other bells have the exact same ROI, though margin per unit varies according to weight.
I understand this guide is very general, but the fundamentals are here and this is the first of many entries. For a list of other succesfull muses check Tim Ferris blog:
http://www.fourhourworkweek.com/blog/2010/11/28/4-hour-work-week-case-studies-muse
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Very interesting read. I'm going to be honest, I got the 4 hour work week book and didn't read it, I should go read it soon >.<.
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I kind of thought so after reading his second book 4 hour body. However, it was still interesting.
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How did u test demand?
Dats kind of important.
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On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important.
I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do.
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..very interesting read.
'Looking forward to your other entries. 
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Korea (South)1897 Posts
Well done and very realistic in your approach. I've never read that particular book but your business fundamental seem great. Cheers.
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I'm confused, so do you directly work with the outsourced manufacturing (supplying them with materials, ect.), or are you just buying the product from them? And then the manufacturers ship your product overseas to you, and then you reship it to the consumer if I'm not mistaken. It seems to be really expensive on the consumer side, so you could easily be undercut by a larger company who can afford to lower their prices below their average total cost to establish a consumer base and take you out completely.. Either way it's really interesting to think about, I'm not sure how practical in application it is though.
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TossFloss
Canada606 Posts
On December 29 2010 13:57 Endymion wrote:
I'm confused, so do you directly work with the outsourced manufacturing (supplying them with materials, ect.), or are you just buying the product from them? And then the manufacturers ship your product overseas to you, and then you reship it to the consumer if I'm not mistaken. It seems to be really expensive on the consumer side, so you could easily be undercut by a larger company who can afford to lower their prices below their average total cost to establish a consumer base and take you out completely.. Either way it's really interesting to think about, I'm not sure how practical in application it is though.
He's uncovered a niche. Either too small for large business (e.g. Amazon) to attack or gone unnoticed e.g the Elephant does not care about the flea on its back. IMO the challenge lies in figuring out what product to sell. Shipping costs scale-out rather quickly. For example, shipping from China to Canada costs ~$50 for the first kg, but only a few more dollars for each additional kg. Move enough inventory and your shipping costs proportionally nothing. The trick is to move a critical mass of inventory all at once.
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Question: Do you have all 4 tons of shipment shipped to your doorstep at once or do you get them piecemeal?
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Calgary26003 Posts
On December 29 2010 11:25 GoTuNk! wrote:Show nested quote +On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important. I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do.
That sounds terrible, I would never buy from someone who did that to me...
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On December 30 2010 05:57 Chill wrote:Show nested quote +On December 29 2010 11:25 GoTuNk! wrote:On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important. I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do. That sounds terrible, I would never buy from someone who did that to me...
How is that horrible? It's testing the waters. Might be kind of shitty if you wanted something and it was only a test, but it's necessary for him to see if there is enough demand. I'm pretty sure no one would give a fuck if you didn't want to buy something online anyway.
$0.02
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I'm skeptical after reading Timothy Ferriss's blog and then reading the reviews on Amazon.com...
Post the link to your kettlebell-selling website!
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How is that horrible? It's testing the waters. Might be kind of shitty if you wanted something and it was only a test, but it's necessary for him to see if there is enough demand. I'm pretty sure no one would give a fuck if you didn't want to buy something online anyway.
$0.02
why would people want to go through with this system, when they can just go with someone else who doesn't say they are 'testing the waters'?
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On December 30 2010 08:15 Kalingingsong wrote:Show nested quote +How is that horrible? It's testing the waters. Might be kind of shitty if you wanted something and it was only a test, but it's necessary for him to see if there is enough demand. I'm pretty sure no one would give a fuck if you didn't want to buy something online anyway.
$0.02 why would people want to go through with this system, when they can just go with someone else who doesn't say they are 'testing the waters'?
You don't have to purchase anything from him.
Cancel your fucking order for all he cares, as long as he finds out there is a demand for it, then he is golden.
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On December 30 2010 05:57 Chill wrote:Show nested quote +On December 29 2010 11:25 GoTuNk! wrote:On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important. I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do. That sounds terrible, I would never buy from someone who did that to me...
I kinda understand that for regular products (i.e Laptops, chairs, mouses, etc). However when my business started most people didn't mind at all. I even recieved some mails in the lines of "congrats on bringing kettlebells to Chile as I have been unable to get one elsewhere and I look foward to buying one etc."
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On December 29 2010 11:25 GoTuNk! wrote:Show nested quote +On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important. I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do.
If I got a screen like that, I would fucking freak out thinking my identity just got stolen and call the bank to cancel my credit cards.
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United States238 Posts
On December 31 2010 04:17 bonifaceviii wrote:Show nested quote +On December 29 2010 11:25 GoTuNk! wrote:On December 29 2010 10:55 gen.Sun wrote:
How did u test demand?
Dats kind of important. I enabled the system so people would do actual purcharses. When they did, they recieved a screen saying we are just testing but will have products soon and e-mail em when we do. If I got a screen like that, I would fucking freak out thinking my identity just got stolen and call the bank to cancel my credit cards.
I'd imagine the test screen popped up before one would have to input all those info...
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EPT
