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Wednesday, April 5, 2017

Announcing the World's First Bed and Breakfast Aimed at Stamp Collectors!

As many of my readers are now aware, my partner Steph and I recently moved from Toronto to historic Saint John, New Brunswick as we had a dream of operating a Bed and Breakfast, in conjunction with my stamp business. We bought a lovely 140 year old house located in the west side of the city, which used to be a Bed and Breakfast. We decided that it would be a fabulous idea to operate it as a Bed and Breakfast with a twist: it will be the first Bed and Breakfast that I know of, which is aimed at providing a quiet and cozy, stamp filled getaway for those of you philatelists looking to immerse yourself in your stamps, while having all your needs catered to.

We offer two guest bedrooms, each with their own self-contained bathroom, so that you can be assured of complete privacy in your room. Our room rates range from a low $95 per night for our Rose Gold Room, to $105 per night for our large Grandma Green Room. You can bring your stamps with you and sit in our comfy office, at a large table, with excellent lighting, and access to all the equipment you could want or need to aid you in your study: watermark trays and fluid; a signoscope; micrometers, ultra-violet lamps, instanta gauges, colour keys and so on. You will have access to our bar and coffee and tea station at all times, so that you can sip a cup of tea, coffee or a glass of spirits while you work. We provide a tasty range of fresh baked goods throughout the day as well, so you never have to go hungry while you are here. We will also provide you with most any philatelic literature that you request to have available during your stay.

If you do not wish to bring stamps with you during your stay, then you can always browse our extensive, specialized stock of Canada and British West Africa material from the comfort of our office. Our Nigeria stock is one of the most extensive in the world, and contains many rare items.

During your stay you will have access to me and we can discuss any philatelic topic that you wish to discuss. Our basic package for $100 includes all the accouterments described, plus a 10% discount on any of our stock items, plus a scrumptious breakfast. We can recommend a variety of restaurants for lunch and dinner. For those wanting the ultimate, pampered experience, we offer an unlisted deluxe package, which includes lunch and a gourmet dinner with your choice of drinks for each day of your stay.

We are situated on a large corner property, with a large yard, where you can relax with a book and a drink, while you are not working on your stamps. New Brunswick, and Saint John itself offer a wide range of physical attractions that you can visit during the day, that are all within driving distance. Some of the attractions that are well worth the day trip to visit are pictured below:

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Here we have Hopewell Rocks Park where there are some of the highest and most rapidly rising tides in the world. It is located just 2 hours away from Saint John to the east of the city. When the tide is out, you can venture well past the rocks, and when it is fully in, the water level will be well above the heads of the people that you see on the beach in the above picture.

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Then there is the Hartland Bridge, which is the oldest and longest covered bridge in the world at 1282 feet long. It is also located 2 hours away from Saint John, but to the north.

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For those who like to golf, there is the Royal Oaks Golf Club in Moncton, which is an hour and a half to the north-east of the City.

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About 10 minutes away from us, by car, there is a large covered market in downtown Saint John, where there is a large selection of organic produce and artisan goods.

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Carlton Martello Tower, is located about 400 metres away from our property, and offers a beautiful view of the city. It dates from the War of 1812, and was built as a fortification to defend the city against outside hostilities.

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The main street downtown offers a lovely array of shops and restaurants that lead down to a picturesque waterfront.

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The reversing falls, located in the city, are a series of rapids where the Saint John River empties into the Bay of Fundy. The tides of the bay force the water to flow in the opposite direction to the current when the tide is high, which is a unique phenomenon, and well worth a look.

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These three pictures all show the Irving Nature Park, which is the second largest park in the province. It is located approximately 10 km from our property, and is easily accessible by car in about 5 minutes.

We believe that New Brunswick is one of Canada's best kept secrets, and we are confident that once you experience it for yourself, you will agree. The temperatures here during the summer months are always between about 20 and 25 degrees Celsius, which is ideal.

If you want to check out our website, and learn more, you can get there by clicking the following link:

Of course, if you don't collect stamps, we offer regular bed and breakfast packages as well.

We are accepting our first bookings in mid-May 2017.

Sunday, April 2, 2017

March 2017 Ends With Sales of Over $6,600 And Total Revenue of Over $8,100! We Did The Impossible!

After last week's post, the sales continued virtually unabated until March 29, when they slowed down to $20-$50 a day. I spent most of last week completing a file that I was working on for a local accounting firm here in Saint John, which I was able to bill at the end of the week, bringing the total revenue for the month to an unbelievable $8,100 - almost three months of revenue only a year earlier.

What does this mean for Steph and I? Well several things:

  • It means that as of today, we have enough cash coming in from various sources that we can fund our mortgage and pay off all our credit card balances this month if all we sell in April is $800. So far as of today, we have sold close to $700. So it seems fairly certain that we will cover all our bills. Normally we enter a month with a significant amount of credit card debt. The expenses normally get paid with the cards, which then get paid the following month. This is the first month where we can cover our balances plus expenses with what we have earned as of today.
  • This means that we can begin saving the funds required to pay a return to our investors this month. We are helped along by the fact that the warmer weather will mean little to no money spent on heat, which was costing us $600-$900 for each month since we arrived here.
  • We made it through the toughest period of the year: winter, without taking on additional debt, with the sales level that the business had when we arrived. After four months, we have grown the sales to a point where we were able to re-invest in more inventory, which we were not expecting to start doing until we got all our material listed. 
  • If the sales continue to exhibit this growth and stabilize out at these higher levels then soon, i.e. within the next six months, we will be able to start looking at hiring a part time or full time employee, to help free me up to post and source more material. 
  • While all of this has been going on, Steph has been working tirelessly to prepare our home to operate as a Bed and Breakfast, and this weekend, she got the website up and running and has set up the booking system. The only thing she has to figure out is how to link the online booking system with Paypal. So it would seem that we will have added a third stream of income to our sources, which lowers our risk even further.  

But why am I writing all of this to all of you folks who have been clicking on my posts? Am I merely gloating, or showing off? No. At least that is not my intent.

I started writing this blog almost two years ago because I wasn't sure if my journey would end in failure or success. But I wanted to give something back. I figured that if I did succeed, it would be easier for others to follow my path if I charted out my day to day progress, complete with a description of all my successes and setbacks.  I want others to succeed in following their dreams and reaching their potential too, and I believe that the social and economic changes in our society actually make it far more realistically attainable for most of you than you may realize. To be honest, I am still not 100% sure that it will lead to long term success. At this point I am about 90% sure.  However, what I am 100% sure of is that for at least a period of time, Steph and I have accomplished the seemingly impossible: we have fashioned a lifestyle that is self-supporting, in which neither one of us has to "go to work". We are getting very strong indications with each passing month, that we will not ultimately fail, because with each passing month, we are taking actions that serve to solidify the gains we made from earlier opportunities, while identifying new opportunities and pursuing those opportunities. 

Those of you who have read my posts from the very beginning will hopefully see the completely incremental nature of what Steph and I have done. You will recall those first posts when selling $100 a week was a major accomplishment, to eventually aiming for $100 per day. If you go back and read my earlier posts, I talk about how my blog posts, which I put hours of research into writing, were only getting 20 hits a day, and how excited I was going to be when we got 100 visits per day. You will see comments from my naysayers - those people who were quick to question the viability of my business plan and who were quick to point out that I was working for only pennies and hour, and why didn't I just stay in my job and make six figures and continue living in Toronto? Just yesterday I saw the traffic to my Canadian blog soar to over 500 visits. 500! More than 25 times as much traffic as I was getting just a year and half ago. Sure, it is not a million Youtube followers like Pewdiepie gets, or any of these other social media sensations gets. But I have to remember that I am serving an extremely small niche: I am writing detailed posts about the postage stamps of one single world country - Canada. A blog doesn't get much more focused than that. So to think that 200 people or more are visiting two to three times a day, or maybe its 500 people visiting once is pretty damm good I think. We just hit a sustainable level of revenue for the second month in a row, and we have solidified one alternative revenue source (part time accounting) while getting ready to create another source (the B&B). 

If Steph and I had stayed in our jobs, we would be trading the potential to achieve this independence in for the feeling of security. Notice that I said the "feeling of security", rather than actual security. I say that because when you commit the remainder of your adult life to a specific career, while you may be one of the lucky few to have a skill that is not likely to become obsolete, and thus enjoy relative job security, this security comes with a lot of other hidden risks and costs:

  • The desire for upward mobility in a career ties you down to a geographic location for an extended period of time and in the major urban centres, an inordinately high proportion of what you earn just gets pissed away every month on your cost of living. If you try to get around this by working in a smaller city, your employer will usually just pay you less, so either way you wind up living from paycheck to paycheck. The fact that everyone around you is doing the same thing normalizes it and gives you the false sense that you will be fine since everybody else has the same lifestyle, and they seem to be doing OK. Indeed, as long as you stay on the treadmill that this lifestyle represents everything is fine. But what if you discover one day that you have to step off the treadmill? Then what? How can this happen? What if you get sick for an extended period? What if your partner wakes up one day and decides to divorce you and take half of what is yours, so that you lose your motivation because you chose your career to make money to meet their needs primarily?
  • When you work at a job, the whole concept of saving for retirement comes into play because you can't simply decide as an employee to work for life. Most organizations have mandatory retirement, so that even if you are the most valuable member of the team, and the best employee that the organization has ever had, you will ultimately get the boot. This is a huge concern for most people because few know what to do with themselves in retirement, thinking of it as one very long vacation, which is fine if you manage to save enough and earn enough on your investments to fund that retirement. 
  • The sad reality is that most Canadians are not "richer than they think" and will not have saved enough to have the retirement that the banks love to portray in their commercials. It's not that they don't have a lot of money - they do. But the cost of the lifestyle that the retirement commercials portray is astronomical. Remember your last vacation where you went away for a week and dropped $5,000? Well, imagine that for 30 years! How many people do you know that have enough money to sustain that life for 25-30 years? People are living into their 90's now. So if they retire at 65, guess what? That's at least 25 years. What makes this even sadder is that by staying in the comfortable role they have carved out for themselves, most employees have allowed their skill sets to atrophy, and have not developed new skills that will allow them to develop their own sources of income. Indeed, many will simply not have the confidence or the knowledge of where to start. 
So perhaps the greatest thing Steph and I have gained in exchange for losing the six figure income yuppie lifestyle that we had in Toronto is the freedom of knowing that we can very likely survive on our own without a job and we can continue to grow our income potential, eventually winding up with more income than we had before. 

That was why I started this blog. I had a hunch that it was possible to create this freedom just as so much of the success literature out there says. But the problem that I saw with the success literature that I have read is that it does not do a good job of showing people how simple the rules of long-term success are, and how long it can take to achieve your goals. Hence, a lot of people give up way too easily because the prevailing success culture leads you to believe that success is just a matter of:

  • Knowing the right people.
  • Being in the right place at the right time.
  • Riding the next big technological wave and being the "first" to ride it. 
  • Having a one-in-a-million talent that no one else has.
Don't get me wrong: these things are all helpful and you will be able to reach far greater heights than you otherwise would if they are true. But our winner-takes-all celebrity worship culture places far too much importance on the above things. Indeed, it is my belief that they give too many people a built in excuse not to try. Too many people can look at the above list, see that none of the above apply to them and then resign themselves to the life they have. 

In contrast, I believe success is a long, incremental process. For me, it goes back much longer than the 2 years I have been writing this blog. Indeed, if I think hard, I realize that it goes back over 40 years:

  • For 40 years I have been studying, playing with and enjoying stamps. For most of that time, I was just pursuing a hobby with a passion. But what I was also doing was building a vast store of knowledge quietly as the years went on. This would place me in a perfect position to become a recognized expert all these years later, by enabling me to publish articles, that while not perfect, are better than a lot of philatelists would write. What's more, my experience with the subject matter enables me to write far more detailed posts faster, and more frequently than other philatelists. So even if a competitor decided to go head to head with me and start a rival blog, I am already 175 posts and two years ahead of them. The only way they would ever catch up is if I stop writing every week, which I won't dare do. 
  • When I started working in public accounting over 20 years ago, I developed a very strong work ethic, doing whatever I could to help the clients, whether or not it got me a raise. I worked hard whether or not it got me promoted. My ex-wife never understood why I did this, resenting the fact that I was spending less time with her than working hard for "nothing". Of course it was not for nothing at all. Because of my work ethic, several of my clients and former employers stepped forward and helped me finance the business. That would likely never have happened if I had not tried to go above and beyond the call of duty on a regular basis. I also would not have been able to handle the 70+ hour weeks that I am currently working now. 
  • I spent almost a year working a program called LMI Canada. LMI was all about teaching you how to succeed: how to identify your strengths and weaknesses; how to be scrupulously honest with yourself; how to set goals and hold yourself accountable to them and so on. I didn't know it at the time, but much of what I learned there has been critical to my success in establishing this business. 
My point in telling you this is that if you look at your life objectively, you will be able to identify areas where you have been developing skills, and passions that can, with the right amount of effort, be converted into opportunities that you can pursue. What it really takes is the realization that it is a long process, and then to be able to identify the steps in that process and have the courage ad determination to follow them.  

The first step in that process is to identify what it is that you are passionate about. To do that, look at where you spend your available money and time. The second step is to identify your superpower. My belief is that everybody has at least one. It could be your eye for detail; it could be your reflexes; it could be your charm; it could be your focus, and so on. Once you have identified these two things, the question becomes: "How can I use my superpower to provide value to other people, working at something I care passionately about, in a way that is consistent with my values?" To do this, look at what you spend more of your time on and ask yourself "What do I find myself constantly wishing existed that would make doing this thing so much better/easier/cheaper/faster/more enjoyable?" Write down your ideas. Then for each idea look at whether your superpower will allow you to successfully execute the idea. 

At this point you will have one or more ideas that you feel confident that you can pursue. You will not have made any lists of the obstacles you face, or the things you will need to accomplish. That is the next step. Make a list of the resources you will need to successfully achieve your goal. Don't worry if it seems impossible to secure those resources now. Just spend some time identifying what they are and write them down. Then for everything on the list, make a list of the various things you will need to do to to get to where you want to be. You will find yourself making savings goals, possibly changing jobs, and being much more discriminating about how you spend your free time. That's good. That means you are making the mental adjustments that will eventually solidify into habits. Once you have developed habits that are consistent with getting you where you want to be, then you will start to visualize yourself reaching your goals, and that becomes a very powerful source of motivation that will propel you through the uncertainty. This is important, because some of the steps in this process may take years. For example, if you determine that having a high value skill would be important, so that you can do part time work while developing your business, you may have to go to school to acquire your credentials. That may take months or years and tens of thousands in investment. To be able to make that kind of commitment and follow through on it consistently, it will be critical for you to be able to see clearly how what you are doing today contributes to what you want to be doing tomorrow. 

The entire secret, as far as I can see after this is being able to doggedly follow your plan, day after day, week after week, month after month, and finally, year after year. Of course, at the same time you have to be adaptable and know when the time has come to alter course slightly, or change it completely. Knowing that becomes much easier when you know the people you are trying to help, and what they need. For instance, I know that there are many stamp collectors who don't like to buy at auction, who only have a limited amount of money and time to spend with their stamps, who specialize and who like to collect Canada. Knowing that means that I have tailored my approach to allow them to buy only what they want, at a fair price, when they want it. I don't have to get too distracted by what I see my competitors doing, as long as my business model is working and yielding results, which it is. By not getting caught up in reacting to what my competitors are doing or not doing, I can stay focused on meeting the needs of the customer group that I am serving. The key to being able to do this successfully is to differentiate yourself so well from your competitors that you are not vulnerable because of what they do or don't do. Of course you have to have done enough market research or have had enough experience with your market to know that your business model is viable. But once you do know that it is, it is essential to stay focused on developing that model and perfecting it rather than reacting to what your competitors are doing. For one thing, what makes you think that your competitors have put more thought and insight into what they are doing than you have? That might make sense if you have never tested your business model, but not if you have and you have solid proof that it works. 

My point is that my passion lies in an area that most of you would think is so damm obscure I'll bet you would have a hard time visualizing how it could yield enough profit to make a living, and yet it does. The wonderful thing about the diversity in the world and the ease with which the internet allows you to reach people is that there is a market for nearly everything you can imagine. The only real question is whether the market is large enough and accessible enough to make a living serving. I believe that in most cases it is. If I can create a business from something as obscure as selling Canadian postage stamps, I am very confident that most of you can find a way to make a living pursuing your passions. You just have to find a way to use it to serve others. 

Saturday, March 25, 2017

Sales Pass $5,700 With A Week to Go In March, Keeping The Momentum Going & Effective Use of Credit

March 2017 is set to become our best month yet, with sales just passing $5,700 with a week to go in the month. Also, the business will have earned $1,200 from part time accounting work, bringing total revenue for the month so far to $6,900! In Toronto, that would not have been enough yet for the business to be self-sustaining, but here in Saint John, that is enough revenue to pay all the bills and re-invest $1,000 a month in inventory to keep the momentum going. I don't want to jinx things, but I predict that we may just hit $7,500 in total revenue for the month.

The local accounting firm that I work with here has just informed me that one of their senior managers is leaving for industry and they want me to take on more work. I eagerly agreed, but I have to watch that I don't take so much on that it cuts into my efforts in building the business. At the moment, I am burning the candle at both ends, working from 9 or 10 am to about 2 or 3 am every weekday. On weekends I kick back and relax with my fun stamp collection, or my writing or just hanging out with Steph.

So with things going well now, it is apparent that we have to keep the momentum going. We have customers that are engaging with us almost weekly, so the question becomes how do we do this? Well, we could simply list more material. But we don't know if the customers buying from us regularly now will be interested in the material we haven't listed yet. We do know right now that Newfoundland is selling amazingly well, particularly between about 1921 and 1949. Therefore, it would seem logical to reinvest some of our profit in keeping this area well stocked, at least until sales drop to a level consistent with our other store categories. This is true even though we have a 2 year backlog of inventory. However, it is critical not to add to the backlog, and to continue to whittle away at the backlog. Thus, my challenge is to juggle:
  • The extra accounting work that I am being asked to take on.
  • Listing the recently purchased Newfoundland material as soon as it comes in.
  • Continuing to list the other material.
  • Maintaining both the Nigerian and Canadian stamp blogs.
Fortunately now that I have published over 200 blog posts, I can always add to my earlier posts and re-publish them as updated posts if I run into a situation where I just don't have a full day to research and write two entirely fresh blog posts. In fact, I am thinking of doing just this in a few weeks. After realizing that I needed to buy more Newfoundland, I decided to focus on the 1937 Long Coronation set, which looks like this:

I had noticed as I was listing these, that I was finding differences in the sizes of the perforations around the edges that were not listed in any of the well known publications. I listed them on a lark, and found that my customers were buying them within minutes or hours of listing them. So it seemed to me that the logical thing to do now was to see how many of these sets I could purchase from other dealers with a view to going through them and looking for the different varieties, so that I could sell more of them to my customers who I know are interested in them. So with that in mind, I went through E-bay and Hipstamp and spent about $850 on 35-40 sets, or about 350 stamps in all. I fully expect that I will find more perforation varieties, paper varieties, interesting shades and so on. I had published a detailed post on this issue last month in the Canadian blog before I had found these other varieties that I am talking about. So what I can do now, once this material comes in and I have gone through it all, is to update the post that I published last month with details of the new varieties I have found, along with a list of all the varieties that are in my stock, with a link to the store. This is a perfect way to build on the interest I have already created with my customer base, without having to invest the time I had spent before. 

This actually applies to the business in general, in the sense that the toughest part about getting it established is listing the inventory and writing blog articles for each issue that I carry. Once I have completed this process once, I can use my old listings as templates to write new listings, which means that I will be able to list material in about 40-50% of the time it took me before, but it also means that I can start hiring other people to work on my listings with a minimum of training, since they already have something to work with that I built. Also, as I buy more material, and learn more things about each issue, I can keep updating my earlier posts, which will continue to build interest in my material. 

In addition to stamps, Steph and I have decided that we want to operate the house as a Bed and Breakfast again, which it was before we bought it. So Steph has been very busy acquiring items for each of our 2 guest rooms and the rest of the house in preparation to open for the Digby Ferry crowd, which comes in the summer and fall. This will be a nice added source of income as well, even if we get one booking a week for the six months that we are planning on operating. She has done an amazing job so far, and I will post new pictures when the house is ready. We are considering offering a special deluxe getaway package to stamp collectors where they can come for a week or two, bring their favourite stamps and work on them in quiet solitude, while they have their every need looked after. I think it is a fantastic idea that will attract guests from around the globe, as I do not know of any B&B that caters specifically to stamp collectors. Finally, I am also considering offering seminars in the dining room on Sundays, where I will give a presentation about one topic and serve tea and biscuits to my guests. That is a few months off, but we are both excited about all the possibilities. 

The last thing I want to talk about is the importance of establishing good credit facilities, and making effective use of them. One of the challenges that you will face when you start a business is fluctuating cash flow. Your lines of credit, and credit cards are your friend in this regard, as long as you do not carry balances for long periods of time. Our goal is to not carry balances at all, but we recognize that it may be necessary to carry a partial balance for a month or two if business is slower than normal, or if I have had to make an especially lucrative purchase. 

As you may be aware, credit cards give you a grace period for payment within which you pay no interest at all. The trick is to know your statement date, your due date, and to make sure that you pay at least the minimum and preferably the entire amount by the due date. For example, my Visa card has a statement date that generally falls between the 15th and 18th of each month. I get almost another month to pay this balance, which I have done in full, every month so far. Now, I have three credit cards, all of which have different statement dates. Because of this, I am able to increase our financial leverage by choosing to use different cards to pay for items depending on which time of the month the expenditure falls. Now I have to emphasize that I'm not robbing Peter to pay Paul here, as each and every card is always paid in full every single month. However, if it was necessary to carry a partial balance on one card in a month, the balances are small enough that it really isn't the end of the world. To illustrate what I am talking about, I will give you an example from this month:

1. Our oil deliveries for heat were on March 3, and there will be another one probably next week, and these are about $400-$500 a pop. The oil company gives us trade credit for 30 days from the delivery date, so I can pay for the March 3 delivery, with my Visa in early April, knowing that it will appear on my April statement, which won't be due until early May. The late March delivery next week will fall due in late April. As long as I make the payment for this after April 20, it won't appear on my Visa until the May statement, which won't be due until June. By the time I pay this, the weather will have warmed up to the point where we don't have to buy oil anymore, so there won't be any more charges of this nature until the fall. 

2. Our internet bill is usually due at the end of the month, so using the Visa to pay it gives us another month to pay it off. 

3. We use a different credit card for our groceries, which has a payment date that falls around the 20-25th of each month. 

All of these cards earn reward points as well, which we can eventually redeem for vacations when the time comes that we can actually afford to travel. It's a nice little quiet bonus ticking away in the background. We don't give it much thought, but it will be very nice when we are actually able to pay for airline tickets entirely with points that we got for doing nothing more than effectively managing our cash flow. 

The upshot of all this is that I usually make three payments a month: one at the beginning of the month for one card, one between the 10th and the 15th of the month for the second card, and one at the end of the month for the third card. The business generates cash in between each of those dates that is generally sufficient to fund the mortgage, the insurance and the required payments on the cards. As long as the cash flows are at least $3,000 a month, the cards give me leverage to handle about $4,500 worth of expenses without having to pay any interest, since the extra $1,500 can be paid with part of next month's cash flow. This would only be a problem if the cash flows suddenly stop altogether. However, between the business, the accounting work and the Bed and Breakfast, this is unlikely to happen. So while you DO NOT want to rely on credit to the point of getting heavily into debt, using it effectively to manage your cash flow, can really make a difference in your business. I used credit to buy the Newfoundland material I discussed above because I know that I can receive, sort, list and sell at least half of it before the payment date comes due. But understand that I wouldn't dare do that for any material that I wasn't absolutely certain I could process and at least partially sell by the time the payment came due. 

 I have to point out that I haven't mentioned taxes on this money. The reason is that I have a large shareholder loan, of about $60,000, which represents money that I lent to my company while I was working. Of course all that money was money I had already paid a substantial amount of tax on. Under the Canadian tax rules, I am allowed to take that money back out of the company tax free. So for at least the next year and a half, I can live on the money the business generates almost tax free. I may have to pay some tax at the corporate level, but it will be minimal. Then once the business is at the point where the inventory is all listed and cash flow is consistently over $6,000-$8,000 a month, I can draw a salary. 

So I hope you all find this tip to be helpful. You will find that your access to new credit will all but dry up the minute you become self-employed. So the trick is to apply for and establish your solid credit while you are working. As long as you are making your payments and the banks are making money from you, they aren't going to take your credit away. It is therefore critical that you use it very wisely, because if you don't, you will wind up destroying your credit rating. But if you use it well, you will be able to weather the storms that will hit you in the early years of your business, and you will emerge from them with a better credit rating than you had before. 

Saturday, March 11, 2017

Sales Pass $2,100 Ten Days Into March And More On The Self-Employed Lifestyle In Saint John

My posts have grown less frequent, largely because I have been very, very busy with the business, as it grows, and what was formerly our routine gives way, and a new routine takes hold. I expect that every business goes through this transformation several times as it grows. However, I wanted to talk a little more today about our new life in Saint John, New Brunswick and about why Steph and I believe that it is the smartest move we could have made. We are both convinced, despite the fact that it is stressful, that a lot of people would find the self-employed lifestyle to be better suited to them. I will explain why in a minute, but first I wanted to share an important update about the business.

Today, we have surpassed $2,100 in sales, after a mere 10 days into March 2017. In addition, we had very little in sales for the first three days of this month, so that in reality, that $2,100 was made over a period of 7 days. That's an average of almost $300 per day - almost triple our average when we were in Toronto, in November 2016. What is particularly encouraging about this is the way in which those sales have steadily built up. We didn't just have one customer make a single $1,000 purchase, though we have had one $400 purchase and one $200 purchase. No, we have had a mixture of large and small orders, including many from first time customers that are in the $100-$200 range. This means that our reputation is beginning to precede us. The way things are going, it looks like we could easily have a $4,500-$5,000 month. It won't be the first time we have done this well, but we are beginning to notice a pattern of increasing customer engagement and more months that are consistently better than our benchmark of $3,000 in monthly sales.

Before I get into talking about the stress of being self employed, I want to talk a little about the life that Steph and I have been able to build since we moved here to a little neighbourhood on the west side of Saint-John, in New Brunswick. I am convinced that most Canadians outside of New Brunswick know very little about this province, and as a result it suffers from a lot of bad press about the lack of employment and the weather. However, life in Saint-John is not at all like the rest of the maritimes, as I will soon illustrate, though it shares some similarities.

The first thing I will start with is where we actually live. We bought a 2,400 square foot home on a double corner lot of a tree-lined street for $132,000. The neighbourhood is not that much different from how neighbourhoods in East Vancouver, or Toronto used to look. However, it is far, far more affordable. The house itself was built 145 years ago, and has most of the original charm associated with homes of the 1870's: the 12-inch high baseboards, and trim around the doors; the solid wood doors; the wainscotting on the walls, the elaborate banisters, the plaster walls and decorative plaster accents around the light fixtures; the old fixtures, and so much more. There is a beautiful garden on this double lot, that we can't wait to landscape when the rest of the snow finally melts, which it should do in a few more weeks. It has a fully working fireplace in the living room, and there are three fully furnished bedrooms that we do not use, two of which have their own bathroom, so that should we decide to, we can go back to operating a Bed and Breakfast here. But for the moment, we can host all our friends in style.

That is the house. The neighbourhood itself is very friendly. We had met all our neighbours within days of moving here. We are having one of our neighbours over for wine and appetizers tomorrow at 4pm. Steph is actually in the kitchen baking as I write this, getting a spread ready for our guests. We are planning to invite all our neighbours over eventually, and we are confident that we can actually become part of the local community. I have already found the local stamp and coin shop, and have gotten to know the local dealers. They have invited me to the join the local stamp club, and already I have been to 3 meetings. Because we work from home, we are able to get all our chores done during the week, which means that we have ample time on the weekends to have guests over, and can really work on building relationships with our neighbours. We are located approximately 2 minutes from the main highway, but despite this, you could hear a pin drop in the house at night. Being so close to the highway though, and the way that the city is laid out, means that we can be practically anywhere in the city that we need to be in less than 10 minutes. This in turn means less wear and tear on the car, and a tank of gas lasts us a month now, compared to a week in Toronto. Insurance is lower too. We pay just over $78 a month for our car insurance.

So we are very comfortable in our home. Our cats, Viktor and Meeko are much, much happier here too, as they have lots and lots of room to explore, as well as their own space. Saint John itself though is a very beautiful city, with a spectacular harbour that has wonderful views; a nature park that the Irvings constructed for the local residents; a beautiful old downtown with lots of restaurants and pubs, though Steph and I have yet to try most of them, and beautiful parks. There is always parking available here, and the vast majority of the time, it is completely free of charge. When you do have to pay downtown, it is $2 a hour rather than a daily $20 rate that kicks in after an hour like in Toronto.

You might be thinking, "What about the weather though, don't you get a ton of snow? Well we do get snow, and yes the weather from December to March is cold. Most days are between the low positives and -15 to -20 degrees Celsius.  This means that for a home as old as ours, we have to pay about $800 a month in the winter months for heat. But that is a small price to pay compared to our mortgage, which is just under $800 per month. All told, the cost of carrying our house, which is also our primary business premises, is less than $1,300 a month - less than 50% of what rent in Toronto was. The difference is that we own this house. "Yes, but I read that Saint John is shrinking, so doesn't that mean that the real estate values will continue to drop?", I can hear you saying to yourselves. The answer is maybe, but we don't really care. Why? Well because we are saving so much over renting in a large city, that it doesn't really matter to us what our house is ultimately worth, since we are not planning to leave any time soon. Of course, there is always a very strong possibility with the rising prices in Vancouver and Toronto, and the pressure that this is placing on wages, that some industries may eventually choose to locate here. If that happens, which I actually think it will, then the house prices have nowhere to go but up.

But the very best aspect of our lifestyle is that we can wake up when we want. We actually get up most days around 9 am or 10 am. Now, we work very late - usually for me until 2 am or 3 am, which is why we are up so late. But the wonderful thing is we no longer have to get up at 6:30 or 7 am to commute to an office. We get to decide to spend our day on work that matters to us, tackling our "to do" lists in the order that we want, without having to worry about obtaining approval, and without having to worry about optics, or inadvertently stepping on someone's toes. We get to decide whether or not we did a good job that week, not someone else.

That brings me to the issue of stress. There are days, when sales are low, and I see the bills that we do not yet have the funds to pay and I start thinking "wouldn't it just be easier to go work for someone else and get a salary?". I used to find myself thinking that quite often when my savings ran out several months ago. But what I have noticed, is that we always make enough money to pay all the bills, and now we are even making enough to start reinvesting in the business. Yes, it is stressful when you first face that uncertainty. But it is a different kind of stress. It is a stress that you can manage, because as a self-employed person, you ultimately have control. One way that I mitigated the uncertainty is that I started doing some part time contract work for a local accounting firm, which is a definite win-win because the local firm gets my skills for $40 an hour, which is dirt cheap for them, without having to make any kind of commitment to me. All I have to do is 10 hours a week of outside work to make $400 a week or $1,600 a month - all without any source deductions of any kind being taken for the taxman.

This brings me to another aspect of self-employment that is vastly different from working for a salary: the tax aspect. When you work for someone else, between 30% and 40% of your money goes to the government. When you factor in your required contributions to the benefit plans that your employer offers, the actual amount is higher. When you work for yourself and you start your business from tax-paid savings, all that money that you have invested in your business is a loan that you have made to your company. You are allowed to take that money back over time on a tax free basis, since the money that you originally invested was already tax-paid money. If you invested enough money and can keep your cost of living low, this means that you can live for the first few years on your shareholder loans. You can only do this if you incorporate your business into a company. With a company, you will have to pay tax on the company profit, but the rate of tax is much lower - only 15%. You can decide to pay minimal salaries when the business becomes profitable enough, or you can pay up to $30,000 of dividends every year, without having to pay any personal tax. Thus with our cost of living being as low as it is here, we can eventually take only dividends from the company, and pay only about $6,000 of tax every year instead of both having to work for a salary in Toronto, and having to make $150,000  a year between us to fund the same lifestyle, while paying $25,000-$35,000 in taxes.

Why does the government let you do this? The answer is simple: because you are not benefiting from the system in any way. When you work for yourself there is no EI. You pay as you go for things like dental care and drugs. You are paying your own way and you are building a business that has the potential to create jobs for other people. The government has an incentive to reward this kind of behavior, and so they do, with tax incentives. The interesting thing though is that as an employee, you are generally not benefiting from the system most of the time either. Unless you get sick, you generally put much more into your employee benefit plans than you take out. You generally are working harder and harder, in order to avoid having to go on EI, usually because EI is not sufficient to allow you to pay your monthly expenses, but you are still paying in - for years and years, maybe even decades. The feeling of security that you have, that you will always have income every month is really little more than an illusion. The reality is that you can lose your job anytime for reasons that have nothing to do with your performance or competence. If you work for a public company, all it takes for that to happen is a decision by management to downsize, phase-out a product, close an office, or merge with another company. If you work for a private company, where you are treated like family, all it takes is for the owners to sell the business and retire. There is no guarantee that the new owners won't have their own people that they would rather have in your role. Then you're gone. I have seen this happen all the time with my former client's businesses. So I know what I am talking about.

Another reason why the stress of self employment is different from office stress, is that after a while you begin to see that success in business is incremental in a way that it is not when you work in a company. What I mean by this is that for your business to succeed, you have to have a good business model, but beyond that, you have to execute it over time, by doing the right things consistently, over a very long period. Even if you have the best idea or the best product, you still have to put yourself out there and convince people to buy your product or service. You have to build business connections and nurture your relationships with your customers. You have to recognize that the sales cycle is often, much, much longer than you think it should be.  Reality TV shows like Shark Tank and Dragon's Den give off the false impression that business success should be instant if you have a great business idea. But the reality is that rather than eschewing the "tire-kickers" and ignoring them, you have to recognize that they are "customers under development". Think about it. We live in an age of information overload and overhwhelm. Most people nowadays do not want to be sold to, and just want to be left alone. So when someone expresses an interest in your product or service, it behooves you to engage with that prospect and work to turn that initial expression of interest into an eventual decision to purchase, and from there into an ongoing relationship. Sure, not everyone that you engage with will become a good customer. But the thing is, you have no easy way of knowing, in advance, who will, and who will not become a good customer. So you have to focus on perfecting your business model and providing value to all your potential customers.

Most of the activities that will yield the best results over time will be those things that yield no immediate benefit. This is why building your business requires so much focus and discipline: because there are no immediate, external rewards. Instead you have to have a long term vision that will kick in and reward your efforts with a vivid mental picture of your eventual success. One good example of an activity that requires consistency, yields no immediate benefits and is immensely valuable over the longer term is blogging. Our blog is over 150 articles long now and gets over 6,000 visits a month. It is now one of the drivers of sales in our business. It is the best evidence that we can provide potential customers that we know our Canadian and Nigerian stamps, and that we are trustworthy. Because we are providing interested collectors with free, in-depth information, we are building rapport with them long before they make the decision to buy from us. It wasn't always this way though. The first posts I wrote barely got any visitors at all. I remember 10 visits being a big deal. But as I wrote more posts, my posts got better, with the information being more in-depth. Eventually our readership began to steadily grow, and I believe that we still have a long way to go before we maximize our readership.

The good news though, is that if you do things like this consistently you will start to develop a loyal following of customers who will come to you because they like what you do and are willing to pay you to do it. We aren't the cheapest stamp dealers out there by any means. Most of our competitors can and do sell individual stamps much, much cheaper than we do. But most of these competitors are completely unfocused in the sense that they sell stamps from all over the world. This means that there is often a very high chance of them not having a particular stamp that a specialist collector is looking for. Because they are competing on price, and they generally do not have the time to describe their stamps to a level of detail that would suit most specialist collectors, they are not well positioned to serve this market. They are not able to develop the type of relationship with specialists that enables them to pre-sell rare pieces or charge robust prices because the specialists can see that they can't possibly be experts on anything, and are just jacks of all trades. So yes, we lose business from generalist collectors, but we gain business from specialists. Business from specialists in the end is much more profitable than business from generalists.

As you develop this following of customers, you will experience the most amazing sense of satisfaction that comes from seeing your business grow. It is like getting an "Employee of the Month" award every day. Your stress level will drop as one group of customers steps forward and buys from you while another group is laying low after having bought from you the month before. Eventually you will reach the point where you realize that your business will not likely fail, unless something cataclysmic happens, and this will be the most liberating feeling you can have. We aren't there yet - not even close. But we are beginning to see signs that we will ultimately get there. This feeling of personal growth is something that everyone at a job wants, but few experience.

In contrast, when you work in an office, the emphasis is usually on what makes you look good in the short term, rather than what maximizes value over the long term.  The reason for this is that management and ownership is often separate, and management is transient. They are not necessarily focused on building the business in the same way that you are when you are your own boss. They are concerned with meeting their goals, and what they have to do to reach those goals is often at odds with the long-term best interests of the business, or it is only very loosely aligned with those best interests. Your job is usually a series of projects and you strive to do well on each project. Your value to the company is generally only as much as your last performance review.

The problem with this is that the behaviors that make you look good in the short term are often at odds with what maximizes value over the longer term. Management may not have the vision, the inclination or ability to ride out the ebbs and flows in your success, they way that you do when you are your own boss. When you do luck out and work for a smaller owner-managed company, it is possible for you to maximize your value over the long-term by choosing to work for someone whose vision matches yours. But ultimately, the greatest spoils of your success do not go to you. They go to your employer, and somewhat rightfully so, given that your employer shouldered all the risk by hiring you and training you to the point where they could profit from your work. A lot of employees do not realize this, thinking that their employer is always getting rich off them. While that might be true of employees who have fully honed their skills and are productive, there is often a period for many hires where the employer is losing money while the employee ramps up their productivity and settles into their role. Also, for every good employee, an employer has often had to suffer through many bad ones that cost them a lot of money. So from your employer's perspective, they are don't necessarily see themselves as profiting all that much from your efforts. When you own your own business and you succeed, all that success is yours because you have earned it.

Of course, none of this comes without some major sacrifices. Those sacrifices so far, have included:

  • Having to live frugally for 2 years before making the decision to leave our jobs so that we could invest almost all our extra income into the business, in our case buying stock, and saving for living expenses for the first year and a half that we were unemployed.
  • Having to borrow the rest of the money that we needed from investors, and having to devote most all of the extra income the business will make over the next few years paying them back.
  • Having to really cut out most all extras so that we could pay the bills on what little the business has made while it has been getting established. So no more annual vacations that involve flying or staying in hotels. No more eating out 2-3 times a week. No more beer in the fridge every Friday. 
  • Having to work harder than ever before. My typical week now is 70-80 hours of work. 
  • Having no sense of security, even though my sense of security as an employee was an illusion too.
However, all of these things will return to our life eventually, and when they do, we will appreciate them all the more because we haven't come to take them for granted. We don't have to save up for retirement, because we can work for the rest of our lives in our business. As I have said before, once you become used to not having most of the "extras" you will find that it really isn't a big deal. If you are spending 70-80 hours a week doing what you love and perfecting it, you will be much happier without those "extras" than someone who has all those things, but has no real freedom because their fate is tied completely to a job that they don't particularly love, and could lose at any time. 

Wednesday, March 1, 2017

February 2017 Ends On A Fantastic Note And Our Progress To Date

We have been in business now on a full time basis since July 2015, which is 20 full months. We ended February 2017 with just over $3,100 in sales, continuing a strong trend that started in January. I thought it would be appropriate to review some statistics since July 2015 to see how the business is progressing, and to illustrate the incremental nature of the process of building a business.

Too many people will judge the viability of a business far too early into the life cycle of a business and will fail to appreciate that it takes time to:

  • Reach potential customers.
  • Convince potential customers to become actual customers.
  • Develop the customer relationships to the point where repeat business is a certainty.
  • Develop and perfect your value proposition.
  • Deploy your inventory.
This last point is unique to online businesses like ours. In a bricks and mortar business, a store can lay its inventory out in its stores in a matter of days or weeks. Customers usually do all the work of browsing and asking questions about items they are interested in. However, there is no way for customers to rummage online. Every single SKU must be photographed, described and priced, so that the customers can browse and purchase conveniently. In the case of businesses with a relatively narrow range of products, this isn't too bad, but in our business, every single stamp is its own SKU. We currently have almost 6.500 SKU's in our E-bay store, with tens of thousands more to list. So it is a long process to get the business to the point where our full range of stamps is listed, and on display for our customers. 

Thus our startup period really does not end until we have reached this point. Our goal in the interim is to become self-sustaining and to develop and nurture enough customer relationships successfully that we can experience significant increases in sales once we do have everything listed. The flip side to the labour-intensive nature of listing stock is that it becomes less so over time. Less so because we are able lo make use of old listings as templates to create new listings, whereas initially, we are doing everything from scratch. 

So in evaluating the viability and progress of the business, it is important to look at trends in key indicators. There are several of these, but the three that I have had time to calculate today, and I want to share are:

  • Total sales for the 20 months, expressed as an average, with the number of months in the first 10 months that are below that average, compared to the number of months in the most recent 10 months that are below the average. If this number falls significantly, then it means that the moving average monthly sales is going up, which is a good sign. 
  • The total number of new customer relationships initiated since we began recording them in August 2015. Obviously, most of these will not become repeat customers, but many will. In addition, we can see from the date on which a customer first bought from us that there are a significant number of customers who come back to us after an absence of several months. Again, it is useful to take an average over the 19 months and to look at how many months in the first 9 months were below this average, as compared to how many months in the most recent 10 months were below the average. Again, if this number falls, then it indicates that the number of new customers is increasing over time. This is very important as new customers are essential to maintain sales, when the regular customers are not buying, and also to create opportunities to develop new regulars. 
  • Volume of items sold. Again, similar stats will give us some insight into the stability of the sales figures. 

Total Sales

Total sales for the 20 months ended February 2017 was $61,524. That averages to $3,076 per month. Looking at the individual months for the first 10 months of this period and the last 10 months reveals the following observations:

First 10 Months - July 2015 to April 2016:

  • Sales for 6 out of the 10 months were below the average.
  • For those months that were above the average, there was usually at least one or two major sales over $700 that was skewing the total.
  • The standard deviation of the sales during this period was quite high: the totals for each month are either way below the average, or they are way higher. There is only 1 month out of the first 10 months, March 2016, where it was close to the average at $3,388.  
  • Sales benefited from the 30% premium on the U.S dollar as all our prices were in US$.
Second 10 Months - May 2016 to February 2017:

  • Sales were only below the average for 3 of the 10 months. 
  • There was only one of the months above the average, November 2016, where the total sales was inflated by the inclusion of one major sale. In this month, the total of $4,145 included a $1,500 sale, which still left $2,645 - close to the monthly average. 
  • The standard deviation of sales during this period was much, much lower. 7 of the 10 months are within 15% of the monthly average, which keeps going up.
  • During this period, in June 2016, E-bay discontinued support for US$ listings, which meant that a stamp we had sold for $1 US in April 2016 was now sold for $1 CDN. So our increase in sales is actually more significant because the earlier totals were all inflated by 30% which we were no longer getting after June 2016. What this also did though, was make our listings more attractive to U.S. buyers, which has resulted in significant growth in sales to the customers in the US and other countries. 
So in general, not only have sales exhibited a steady upward trend, but the quality of the sales is better in the sense that it is coming from a larger volume as opposed to just one or two one-off, high sales. The monthly sales totals exhibit far more stability now, than they did in the first 10 months. 

Number of New Customers

The total number of new customer relationships that have been initiated, since we have started recording them in August 2015 is 775, which works out to almost 39 per month on average. Looking at the individual months for the first 10 months of this period and the last 10 months reveals the following observations:

First 10 Months - July 2015 to April 2016:

  • In 7 of the first 9 months, the number of new customers was below the average.
  • There was a high standard deviation, with only one month being close to the average. 
Second 10 Months - May 2016 to February 2017:

  • In only 2 of the last 10 months was the number of new customers below the average, and in one of these, it was only short of the average by 1. In the other case it was 10 customers lower than the average. 
  • Most of the months are well over the average with 43-45 being common up to November 2016, and 60-65 being more common in the last  4 months since November 2016. 
So the number of new customers buying from us is growing very, very significantly every month, and for the last two months it is fully double what it was for most of the first 9 months that we were tracking it from August 2015 to April 2016. What is behind this growth? Two things:

  • Our number of listings has grown steadily and by increasing amounts each month, so there is more material out there to attract buyer's interest.
  • Our blog is now receiving upwards of 300 visits per day, whereas it was only getting around 100 per day as recently as November 2016, and in the first 10 months from July 2015 to April 2016 we were lucky to get 30-50 visits per day. I don't know how many of these visitors have become customers, but I do know that there are some, because I have had customers who later contacted me through the blog to request that I sign them up for the store newsletter. I believe that this is actually where a significant amount of the growth is coming from. 
So the number of new customers is increasing, and the rate at which it is increasing, is also increasing. As I have said before in other posts, it can take 6 months to fully develop a new customer to a point where they are spending at their normal comfort level. So a significant increase in new customers now, will play a significant role in increasing sales over the next 6 months or more. 

Volume of Stamps Sold

During the 20 months, the number of items sold is 4,090. This averages out to nearly 205 per month. Looking at the individual months for the first 10 months of this period and the last 10 months reveals the following observations:

First 10 Months - July 2015 to April 2016:
  • 8 of the first 10 months had total volume of less than the average, with most of the months being significantly less. The actual 10 month average for this period is 132 items.
Second 10 Months - May 2016 to February 2017:

  • In only 1 month, was the volume lower than the average at 169 items. Despite this, the total sales was $3,596. This is because a large range of better sales compensated for the lower volume. 
  • For most of the last 10 months, the monthly volume has stayed between 220-250 items. In 2017, however, it has averaged over 400 items each month!
This explains why the quality of the sales totals is better in the last 10 months: because sales are coming from a larger volume of items. New customers usually don't spend much more than $5 or $10 the first time they buy. There are plenty of items in our store that are 99c, so what often happens is that the volume stats reflect a number of new customers that are buying 5-10 99c items, while the bulk of the monthly sales growth is now coming from the repeat customers who are regularly buying the $20-$50 items and spending $50-$200 per visit. So our expectation is that these regular customers will continue buying, but then these new customers will gradually develop into regular customers who spend that much. 

Overall Conclusion

My overall conclusion is that the business is very healthy, despite the modest level of overall sales. The growth trend indicates that the business still has a long way to go before its growth is expected to slow down. It is only at that point, where the number of new customers each month begins to decline, or where the sales growth plateaus, that we will know what the true limits are on the potential of the business. 

At the moment, we are selling enough to make a living, and we have enough inventory that has been bought and paid for, that we do not have to worry about replenishment. That being said, we have been able to replenish in areas where we have experienced the most sales, even now. So I am very optimistic that I will be able to reach our ultimate monthly sales target of $20,000 per month, within the next 2-3 years.