Joining me is a founder who sold a single domain, Business.com, for $7.5 million in 1999 which he had bought for $150,000. He is Marc Ostrofsky and today he teaches business skills online and in his book Get Rich Click! He’s here to talk about how to make it, and more importantly, how to keep it.
Andrew: Before we get started, tell me if you’ve got this problem. You’ve got a great product, but you’re not getting people to even try it, let alone buy it. Well, the problem is probably that you’ve got too much text on your site.
Check out what these start-ups have done. Here’s SnapEngage; they’ve got a video explaining their product right underneath the Free Trial button. Here is SendGrid; right next to the get started button is a video explaining the product.
Video, much more than text, helps people understand what you’ve created and convinces them to try it and buy it. The company I recommend that you turn to for this, it’s Revolution Productions. Same company that did both those start-ups’ and many others’ videos. Revolution-Productions.
When you go to their site, Revolutions-Productions.com and contact them, I want you to talk directly to the founder, Anish Patel. Tell him I sent you; he’ll take great care of you and make sure you have a good video that convinces people to try your product.
Next sponsor is Grasshopper.com. I want you to think of them as adding superpowers to your phone. Want extensions? You can add it. Want a phone number that catches you anywhere you are? You’ve got it. Want to take your voicemail messages, maybe, and convert them into text? You’ve got it.
Anything that can be done with a phone, pretty much anything, I can’t imagine what you can’t do, Grasshopper.com will do it. In a very user-friendly environment, so you can keep adding features and adjusting them yourself. Grasshopper.com.
Finally, Scott Edward Walker is the lawyer I’ve been recommending long before he even paid me for a sponsorship. I don’t even know, Scott, why you even bother paying me. I’ve been telling people for years to try you. But you do, so I’ll tell my audience right now.
If you need a lawyer, if you’re an entrepreneur, especially if you’re a tech start-up entrepreneur, go to a lawyer that I recommend and, as you can see on this website, Jason Calacanis, Neil Patel and many other entrepreneurs recommend. Scott Edward Walker of Walker Corporate Law.
I’ve talked too fast and for too long. Let’s get right into the program.
Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart, the place of course where entrepreneurs come to tell the stories behind their businesses.
How much is a good dotcom domain name worth? Joining me today is a founder who sold a single domain, Business.com, for $7.5 million in 1999. He is Marc Ostrofsky, and today he teaches business skills online and in the book that you see over his head behind him, Get Rich Click. Marc, welcome.
Marc: Hi. I forgot it was there.
Andrew: It’s useful actually to have it over there. Gives you a lot of credibility, I’m sure, when you do video Skype calls with business people.
Marc: It’s fun. The book business is not a good business. It’s a fun business, but not a good money-maker.
Andrew: I hear that good business is from getting readers of the book to come to your website and then sign up for online education. That’s where the real revenue comes from, from the reputation you built through the book. Tell me about that.
Marc: That’s true, but the funny thing is, I am not out selling consulting services and other up-sells at this point. I did the book because I wanted to do the book, because we’ve learned a lot of [??] on how people make money online from the various companies I own and am invested in and companies I’ve built up and sold.
There’s a whole shift going on in the way businesses operate and run versus the way they used to. I’ve been playing in the game all along, from the old world publishing model and I owned magazines and tradeshows, to the new world model.
I haven’t been in the book side of the business to make money per se. I will launch other products and services around the Get Rich Click model. That is right, that is the up-sell and the down-sell and the cross-sell.
Andrew: Up-sell, down-sell, cross-sell, every-sell.
All right, we’ll get into that in a moment. I want to find out about your full history. I said a moment ago that you sold Business.com for $7.5 million. What did you buy that domain for? How much did you pay?
Marc: In ’94, I learned about the Internet from my sister, who’s a researcher. I started buying up domain names for $75.
Andrew: From Network Solutions.
Marc: Yes, from Network Solutions. It was free, then they went $75 for two years. During that time I bought a bunch of them, but I always wanted one of four names. The names that appear in every newspaper. News, weather, sports and business.
Business was my love, and I knew that’s where I liked to play, so I went after that name, and the guy was agreeing to sell it to me for $75,000. The day before the close, lawyers had papers drawn up, it was all done, he bumped the price to $150,000. When I sold it in ’99 for $7.5 million, he was the first guy I let know that I had sold it.
Andrew: You owned the whole thing outright, including at the time of the sale?
Marc: Yes. It was $150,000. My dad was the business professor and I went to him and said, ‘Should I buy it?’ He said, ‘Do you have the money?’ I said yes, my business makes a lot of money.
He said, ‘Is the money doing more in the bank, or will it do more owning that asset?’ I said, I think the asset has much more upside than the money sitting in the bank.
I bought it. I planned to do a magazine called Business.com to teach people how to use the Internet for business. I just never got around to doing it, but I still owned the name. I ended up selling it to a company that made a whole lot of money out of it.
In fact, when I sold it, I got the right to buy a percentage of the company with the money. 36 months later, I bought 3% of the company, and we sold the company for $345 million. I ended up making well over $10 million on the sale when it was all said and done.
Andrew: Ordinarily I’d be too embarrassed to ask this, but you just told us how much money you ended up making off the sale. How does life change afterwards? What happens when you have all this money in the bank?
Marc: I had already sold a company for $35 million in cash, two months before I had done this. I was actually trying to figure out, how do you buy the name and not get hit with taxes? I already had a $7 million tax bill.
The reality was, it’s kind of like going to Vegas. If you make a lot of money, do you keep spending a lot, or do you keep spending what you’ve always spent and put the rest away? I’ve pretty much done that. I’ve put most of it away, I’ve reinvested a lot of it.
I think differently. I think much, much, much bigger because I can afford bigger.
Andrew: Day to day, does life change? Do you end up buying a jet for yourself at that rate, or do you go first class everywhere? Do you end up on different vacations than before?
Marc: No. I don’t buy first class tickets.
Marc: No. I do internationally, but I try and buy a coach ticket and upgrade.
I have a nice house, I have a nice car. My family’s taken care of. I don’t go out and spend crazy money, because I never had it growing up. I put it away.
It’s hard to maintain. The CPA says you work your whole life to make it. Once you make it, you work the rest of your life to keep it. It’s really true. Keeping it in days like today, when the market is down 3 or 400 points, it’s all relative, and you’ve got to maintain it.
I’ve invested a lot. Probably 80% of the money is re-invested in other deals, almost exclusive Internet. A lot of it’s come in great, some of it has been lost. It all depends on how you spread it.
It’s really not changed a lot, other than the quality of things as opposed to the quantity of things.
Andrew: To admit, also, your losses humanize the story and make it a lot more relate-able. What’s the biggest loss? We’ve talked about the big wins. What’s the biggest hit?
Marc: We haven’t talked about the big wins. We’ve talked about a couple companies I’ve sold.
Andrew: We’ve touched on them, and I will dig into them, because I’ve got a whole hour with you and I want to learn about how you got a company to sell for over $30 million in cash and why you thought [??] was going to do so well.
Tell me about a big loss.
Marc: I started a trade show called the Home and Family Computing Super show. It was a consumer electronics show for the masses.
Everyone always talked about, ‘I wish I could go to the CES show,’ which I usually go to. So I created a CES-type show, but it was in every city. I launched it in four cities and it did great for the week of the show. I made a lot of money.
Anyone could come in the door for $20 or $10, and we sent out lots of free tickets to corporations, and play with all this new stuff. But after the show, the next Monday morning, we looked and we had 11 months before the next event. That was 11 months times $25,000 in salaries, or $50,000 in salaries.
I had to shut down, quick, because by the time I’d lost half the profits and ended up losing on the deal. I hadn’t pro forma and planned correctly. Everything in business is about planning and my rule of thumb, after learning from the hard-knocks is you [??] high, you plan for worse, worse, worse case, and you’ll probably come in somewhere in the middle. So, I have three numbers on every pro forma best, worst, and expected. Everything I do is planned with three levels.
Andrew: I see.
Marc: So, that I know in worse, worse, worse case I can still make it, hence the reason you asked, what has the money done? I didn’t need to create new products; to sell webinars, and seminars, and teleconferences, and all around the book. Whereas, I should, I didn’t because it’s not like I have to. We’re working on them now, but there’s so many opportunities to make money, whether it’s an infomercial, which would be the first true, real, I’m going to tell you the truth infomercial, which the infomercial industry doesn’t like, I found that out. So, it’s a question of what do we want to next.
Andrew: OK. Before we go to what you want to do next, your right, I didn’t talk enough about what you did before. The company that did really well for you, is it Information Publishing Corporation?
Andrew: When did you launch that company?
Marc: I had two publishing companies. I founded the prepaid phone card industry and I was one of the founders of the payphone industry, the deregulated operator services industry. At the beginning of any new market, a lot of people jump in and figure out what’s going on, where’s the money being made, who are they buyers, who are the sellers, and how can I find my way into this game, because there’s a lot to be made.
In any shift there’s people that win and people that lose. Right now, the losers are people who make newspapers and books. The winners are people doing electronic, right? You can relate to that. But in deregulation, there were pay telephones and when payphones deregulated there was a lot of opportunity to go in, replace a phone, and watch it collect money all day long. So, I got into the deregulated telecommunications industry and tried to figure out all the ways to make money. It turned out that I learned that the information was worth a fortune to other people.
Andrew: The information about what?
Marc: Information about the industry, about how big it was, about sellers wanting to know about buyers, and about buyers wanting to know about sellers. About the technology, about route management, about coin counting. How do you count millions of quarters a month? So, there’s a whole industry that needed teaching because deregulation allowed you to own a payphone as opposed to the Bell system.
Well, in any new market, buyers need information, and sellers need information, and the world needs information about the technology and I became the information provider. These days it’s as simple as putting up a website, but in the old days there was no website, so there was a magazine, a trade magazine as opposed to a consumer magazine, a trade show.
Andrew: So, you published a trade magazine on the deregulated payphone industry?
Andrew: How do you get your first customers for that kind of magazine?
Marc: Well, I went to a trade show where the payphone manufacturers were exhibiting. There was the coin-operated industry, coin-operated machines, and the payphone industry was there. Half-a-dozen companies trying to sell payphones to people who already did routes, and ran pinball machines, and cigarette machines. They were going to add payphones, so they thought.
Turned out it wasn’t that simple of an industry and there was a lot of information that people needed to learn. My sister’s a professor, my dad is a professor, I was, kind of, a professor in the private world and that’s where I’ve made my living and done very well, teaching other people system — step-by-step how to make money. That’s how everything I’ve done has made money because I get in there and I really learn how to do it and then I explain it in a way people understand it.
Andrew: OK. So you’re walking through this conference, through this event and you’re starting to sell people one-on-one? You’re saying, ‘Hey, I’ve got this new trade publication, why don’t you sign up for a subscription,’ is that how you did it?
Marc: No, no, no. I put out a newsletter of eight pages and it was, there’s a new industry, it was called, Private Payphone News. I should have a copy of that here.
Andrew: It would be nice to have it framed, yeah, it can happen.
Marc: I actually have it but it’s in a book, but it’s the first issue and it’s a newsletter called Private Payphone News. It explained deregulation, payphone opportunity, how much money they make, how to get going, who are the manufacturers, and then I sold subscriptions. I went and gave thousands of these out and the following Monday morning in my mailbox was money and I couldn’t believe it. There was, like a $1,000 worth of cash or checks, in envelopes, sent to this mailbox and I had money coming everyday for the next five years on subscriptions.
Andrew: I see.
Marc: Then I put out a newsletter, which quickly became a magazine, because advertisers wanted to reach those readers.
Andrew: I see.
Marc: Then that became a trade show because buyers wanted to see, feel, and touch the products, and the sellers wanted to meet these buyers, and I became the guy who put everyone together.
Andrew: What was making more money, the magazine, I mean the news, actually, I should say the newsletter, the magazine or the trade show?
Marc: Well, it’s interesting, I came in one day and I said to my staff of at the time, maybe 15 – 16 people, what business are we in? And the reality was we were not in the magazine business, although that was 90% of our time. We were in the trade show business, because the trade show had 83% net profits. So, out of every $1 million, I take home $830,000 cash, versus a magazine for every $1 million, I took home $50,000, but the magazine was required because of the database. I learned you build a database and then you can sell to people.
That’s what I learned and in the new market, in the old market you say there are three things: there’s people, postage, and printing. Those are our three expenses. On the Internet; there’s no postage, there’s no printing, and the people is minimized so the opportunity is incredible. The problem is everyone figured that out and now there just throwing data at people everyday. And the most successful marketers unfortunately, are the ones that bombard their clients with information to buy. And they hit you every single day . . .
Andrew: Sorry, so from a practical point-of-view if I want to make more money, I should just bombard my people with more stuff?
Marc: I don’t think that’s a long-term win.
Andrew: I don’t think so, either, right.
Marc: I don’t either. I think that’s a short-term win because people will drop you. I think once a week or twice a week is plenty.
Andrew: OK. I want to continue because there’s so much I want to hear and learn from you Marc, that I’m going to just keep pushing and pushing here. So, you got the first magazine and trade show going, what’s the next thing you do? How do you go from doing that to having this publishing business that’s bigger, and bigger, and constantly growing?
Marc: It’s what I told you before we started. There’s people that create businesses around income and there’s those of us who figured it out, which is you don’t create the income, you want to maximize the dollars to create equity. I knew that if I built this publication, if I met with enough consultants to say, ‘How do I sell this thing to someone else?’ That if you create a long-term, recurring, revenue stream, you can sell it to someone else, even if it makes no money. Because other people can incorporate it into their business, and have the same fixed expenses, and put out the same product, they don’t need another receptionist. They don’t need another writer. They don’t need another editor. They can throw it on to their current list of ten magazines and put out an 11th magazine.
Marc: So, I figured out over the years of doing this, how to maximize the bottom line and positioned it for sale. We weren’t continually investing to grow; we said we were going to sell it in a year. We’re going to stop reinvesting the big dollars and manage the cash flow, so that it has a good cash flow, at a good recurring revenue stream for the buyer. So the buyer has some upside. You don’t want to sell it at the top, they’d just get mad and they could sue you. You want to leave it so it’s a good long-term recurring revenue and they have some ways to make it even better and build it.
Andrew: I see.
Marc: So, we did just that. We put it on the market through an investment banker, found the smartest investment bankers I could in New York and said, ‘Here’s the product.’ They came in for six months, they put together a package, like a book, they put together a book of all the information about buying this company and it said, here’s the income, here are the clients, here’s what they sell, here’s what they buy, here’s where the revenue comes from and it’s a diversified revenue stream. It’s magazines, it’s subscription, it’s trade shows, it’s sponsorships and I had five potential buyers and ultimately one buyer. I already sold one company for $8 million and I learned how to do it better the second time.
Andrew: What was the first company that you sold for $8 million?
Marc: First company was the assets of information publishing. A lot of companies don’t want to buy your company because they have to take the liabilities that they may not know exist, right? So, they can buy just the asset.
Andrew: They want to do an assets buy instead of . . .
Marc: They did an asset purchase, leaving me with the company and I had no hidden debt that they didn’t know about, but they didn’t know that, right, they don’t know, what they don’t know.
Marc: And if one of my key things to teach people, you got to know what you don’t know. They didn’t know if I had liabilities, even though I said I didn’t, they didn’t know it, other than my word. So they bought the asset, I still rate, maintain the [??] …
Andrew: What were the assets, what was the business there? Essentially it is a sale without taking on the debt. What was the company that you sold?
Mark: The asset in Information Publishing Corporation was the magazine. And I sold…
Andrew: Oh, this is the phone magazine, for private pay phone use.
Mark: Yeah, I [??] the second magazine in the voice mail industry…
Mark: … and a second trade show in the voice mail industry…
Andrew: I see.
Mark: … it was called Voice Processing, and the Voice Processing magazine and trade show had like a seven or, I don’t remember but, seven or eight million dollar EBIDA.
Mark: I also sold one company that … No, that’s not true. That’s wrong. The first company had a … I don’t remember the EBIDA, we sold it for seven or seven and a half million. It’s hard to believe I can’t remember that. And then the second company, five or six years later, we had figured out how to make, instead of creating one magazine and a trade show with a different name, and a conference with a different name, and a company with a different name, I figured, let us put everything into one concept. So we created a magazine and a trade show called Telecom Business. It was for all the opportunities that come out of deregulation. That became a behemoth and I sold that for 35 million.
Andrew: What was your best source of customers, of readers I should say, not the advertisers?
Mark: You know it’s funny. You think in the trade if someone saw a magazine and a trade show, they would say you are making your money from ads, or you are making your money from exhibitors. The answer is partially right, usually the advertisers and the exhibitors, but it is the sponsorship money that is the big money. When you go to CES or another major trade show, the biggest money on the floor is on the ceiling. It’s the banners hanging from the ceiling that make you the real money.
Andrew: I see.
Mark: So people think it is the exhibitors. They have good income, but the real money is in the sponsorship because you don’t have to deliver anything other than air space.
Andrew: Mark, you told us, how the first readers who read your magazine got it essentially for free and decided that they had to sign up to get more. Beyond that how did you get more? After that what was your biggest source of new readers?
Mark: If the industry is growing, people want to learn and if people see you doing well and they see the opportunity they find out fairly quickly where you are learning, where you are getting your information from, and how can I get a piece of this Nirvana.
Mark: And so whatever market you are in, affiliate marketing is a good example. Everyone that learns that you are making money by selling a product that you don’t own wants to know, ‘How do I do that’, and it, one teaches two, teaches four, teaches eight, [??].
Andrew: So you are saying it was word of mouth?
Andrew: It was just word of mouth. Somebody in the business would learn about the phone business and decide that they should tell their friends about it and other people in the industry.
Mark: Yeah, but you have to support it, you know, you have to…
Andrew: Yeah, tell me how you support it. That’s why I…
Mark: when you do a trade show…
Mark: When you do a trade show you have to do local media, you have to do PR. I did 20/20, the ABC television show a couple of times. I did massive publicity around the industry, so I was the spokesman for a growing industry that the news can turn to for unbiased information.
Andrew: I see. How do you learn how to do that? How do you learn, how to get attention and get on TV? I saw you for example with your latest book, ‘Get Rich Click’, I saw just before we got on here, I saw on the view and they looked at you as the expert and they look to you for information, not just about your book and your past, but about internet business in general. And I thought there were so many other people that they could have talked to. How does Mark get to be the person? In fact go back in history before you…
[Laughs] Yeah, they could have done a lot better; you are saying that they could have done a lot better than me.
Andrew: No, saying they could have done so many other people in our, like, I am sure someone in my audience is thinking, how do I get to do it too? It is great for Mark, but how did Mark do it, so that I can do it too. Take me back to before you were Mark, the guy who sold Business.com and how did you get on 20/20?
Mark: OK. Let us look where I came from. I owned a magazine or a newsletter …
Mark: … people came to me and pitched me on putting them in. I learned very quickly, what does it take to pitch correctly to get put into the book from the other side.
Andrew: I see.
Mark: So when I would go to pitch, I knew what they wanted.
Andrew: What did they want? What is some of the things [??] …
Mark: It’s really simple. Tell me why I should put you on. Tell me what you are offering that’s different than everyone else. Tell me how it will affect my audience. The way you are putting me on, you know, people pitch you to put them on your show. You know what it takes to get a pitch that you go, ‘yeah, that works. I could put you on my show.’ So if you were going out to pitch yourself, you would know how to pitch it, right? So it’s exactly what you and I are doing in reverse. The more you get in, the more you learn, the more you understand, the more you will benefit.
It’s like that in any market, whether it’s information, whether it’s being the best cook, or the best gardener, or the best superintendent of a school, the more you see other people, the more you read, the more you learn, you’ll have a trademark saying. And if you put a T.M. next to it, cause we use it throughout our company. It applies to you and it applies to me, and it applies to everyone in your audience. It’s four words. Learn more, earn more. The more you learn, the more you’re going to earn, especially in the internet business. Learn more, earn more. It’s a trademark I use in my book, and I’ll use in all of my books.
Andrew: How’d you learn early on? Where did your learning come from?
Marc: Hands on? My dad’s a business professor. My sister is the brain who got an MBA at Stanford, and a PhD at Harvard. My dad said, “No, don’t do that. Go into the real world. You’ll figure it out, really quick.” And I went in, in the real world, and I made sure to do something most people (________) never do. I never took on any debt. I did not. If I didn’t have the cash, I didn’t buy it. So while my friends are getting married, having kids, taking trips, working for someone else, I’m working for myself and putting money away and saving it until I have the cash to spend it. Well, their market’s going like this, and my market’s slowly going like that, and the two market’s, over time, I’m pretty much ahead of the same people if I was comparing where they are when they would be working for someone else. So over 30 years, it’s a pretty big difference.
Andrew: Beyond personal experience, how do you take in information? How do you learn from other people, in order to earn more and in order to do more with your life?
Marc: I listen to webinars. I go to seminars. I pay people lots of money to teach me how. If I want to learn how to use Photoshop, I can screw with it for six years and never learn Photoshop, or I can pay someone and go to a class once a week for six months, and I’ll be an expert. So it’s got the time value of money. You can spend your money now, and learn how to do it fast, because the opportunity is there, or you can wait and figure it out over time and the opportunity will be gone. And by the time you learn how to do it today, the opportunity’s gone. You’ll have to learn something else.
I’d rather pay someone now, pay out five or ten grand, and learn it now, and play in the market now, rather than take five years and spend no money because in five years I’ll learn how to buy a domain name which no longer exists.
Andrew: I love that advice. That’s great advice. Let’s continue with this story. So you told us how you sold the first company. What was the second business?
Marc: Well they were both publishing companies. The first one was the same thing. Magazines and trade shows. The second one was magazines and trade shows, but I kept sticking with it. Payphone magazines became Private Payphone news, then it became Payphone magazine, and then I had voice-processing magazine, which I built up and I sold. I still had Payphone. It became Private Payphone news, then it became Payphone Magazine, and then I had to think about it. Right? Then it became Public Communications because the real money wasn’t in the phone, in the quarters. The real money was in the operator’s services.
So the telephone companies called the division, Public Communications Division of Southwestern Bell or A.T. and D. So I called it Public Communications Magazine so I would mirror their market. It kind of coasted along. I didn’t even pay attention to it for three years. I gave it to someone else. Then I started watching the opportunities grow with voice-over IP, and internet telephony, and I said, you know, let’s take the magazine and rename it Telecom Business, launch a tradeshow called Telecom Business, and that newsletter that I had going, I started with no money, we sold essentially for the 35 million later on, because I kept sticking with it until I figured it out.
Andrew: I see. Kept sticking with it until you figured out what part? What was the trickiest part of figuring it out?
Marc: Listening to clients. You’ve got to listen to the client. You’ve got to listen to the clients. Say, “What are you experiencing? What’s working? What isn’t working? Is there anything you need? Is there information you’re looking for?”
Andrew: What is one thing that you’ve learned through those kinds of questions about your client that might seem obvious in retrospect but at the time you just weren’t aware of and didn’t know until you talked to clients and had them tell you?
Marc: Well if you go to a tradeshow, and you watch the conferences, you can walk into a conference session with a pen and paper and say, “How to blank.” There’s ten people in there. You go to the next session in the next room and it’s overflowing and it says how to blank. And there’s 5,000 people in that session. You figure out really quickly which ones got the money and which one is a loser. You don’t even need to know what the conference is. They all do that way. So, I would take 30 sessions, I would eliminate all the ones that have under 50 people, I would double up on the ones that had the 500 people, and I would continue to have those sessions.
Here was a good one. We had one session going every hour. The next year I said we’re going to have four sessions every hour. And my partner said why would you do that? It was my CPA who I made my partner. He said, I said because they’re going to have to bring four people. They can’t just bring one. If I have more sessions they’re going to bring more people to cover the sessions. And it worked! And then one year, the price, we weren’t selling enough subscriptions, enough attendance. I raised the price of the conference and said to the industry it’s so popular I got to raise it $200 bucks because we can’t have this many people, and we tripled the number of attendees.
Andrew: By saying it’s so popular I need to raise prices you end up getting more customers.
Marc: Right. Create, what is the terms, create scarcity. It’s the same on the Internet, you have five minutes, you know HSN shows a clock ticking down. You’re creating speed, you’re creating scarcity. If I don’t do it now I’ll never have the opportunity to do it again. That’s the, everyone works like that, and the better salesmen figure it out and incorporate that into their pitch.
Andrew: I see, HSN, home shopping network.
Marc: That’s why these daily deals do so great. Great deal but you’ve got to act now.
Marc: So the question is, do I do an infomercial and go, but wait, there’s more. You know, how much, I don’t know how far I want to get into that world because there’s a lot of sliminess attracted to it, but there could be some real information just given to people that say this is real. Most infomercials don’t tell you how to do it. I want one that actually tells you how to do it, and it proves it works and then you come back for more. So I teach, one of the things I love to teach people and I’ll give it to you now. It’s in the book. It’s called reverse E-commerce. And it’s what I do at one of our companies today.
Andrew: What’s reverse e-commerce?
Marc: I’ll explain. Blinds.com is one of our companies. Now no matter how many of your readers buy blinds from us it won’t make any difference. The company does 80 million this year in 2011. We’ll clear 80 million. We have no blinds, we have no inventory, we have no warehouse. We have no product, physical product, zero. Yet we sold 80, we’re going to sell 80 million this year. How can that be? So, if you look at the company, the way we do it, and we started out this way, never had a product. The blinds industry, you take an order, you send it to the manufacturer, they make it and send it to the client.
So you’ve got four things in play. A great website, knowing the customer, as much automation as you can put into the stream, and then two words, outsource, drop shift. So it taught me you don’t need to won the product to sell the product. Let’s take that down to everyone watching this video. There is not a product, nothing, I can grab anything off my desk. Nothing you can’t sell and then buy. So the reverse e-commerce is a chapter in the book, this is my book, Get Rich Quick. And the way it’s written is, you sell it, you collect the money, and then you buy it.
So the first question everyone says to me is well how do you know they’ll have it available? You don’t go buy something there’s one of. There are companies that have lots of pens. You take the pen, you sell the pen, you collect the money, you bump and ship it. Doesn’t matter, if it’s a whole seller they usually have plenty in stocks. So reverse e-commerce is sell, collect the money and then buy it.
Andrew: We lost connection for just a moment so I’ll say it, it’s sell, promote it then buy it.
Marc: Sell it is part of promoting it, collect the money, then go buy it with their money and keep the difference. And you can do that with anything, with anything, as long as they have stock available. So it doesn’t matter. It’s cell phones, you’ve just got to be able to sell it better than the next guy. That’s not the same as affiliate marketing. Affiliate marketing is, you just get a code, you send the code out, someone buys it from the third party and you get a commission. I’m teaching you can do affiliate marketing, which I love because you don’t do anything, you just take the code and send it to your Facebook account and you get a check for everyone who buy’s it. I’m teaching where you make the bigger dollars, instead of 15% you can make 50%, 5-0 by doing the same concept, taking a picture off the Internet.
We have people that could sell our products, we own a Cufflinks.com, cuff-links, it’s a niche for a product right, there are people that take pictures off of our site, go sell it to their database, and collect the revenue that we send them because we’re affiliating it. So, we’re fulfilling the cuff links and they’re selling them, and everybody wins. They get a commission check. It’s an affiliate relationship.
Andrew: So, where do your customers come from for Cufflinks.com and Blinds.com? It sounds like it’s affiliate traffic and click traffic [??]?
Marc: Every business, if you’re looking at it the right way, comes from various sources. Number one, you really want to make a lot of money and get really rich? Be the expert at one thing and make damn sure you’re the expert. We’re the experts in the blinds industry on how to buy traffic. We know we can spend $2.13 a click, which costs me $213, per hundred clicks, but per hundred clicks, on the average, I’m going to make $300. So, I’m spending $213, I’m making $300. You become the expert at what is the value, short-term and long-term, of that client and you can just keep ramping it up, as long as you know what is the value of the client, and you keep buying traffic.
We’re buying blinds traffic left and right, whether it’s on Google, or Yahoo, or YouTube, if possible, or a niche site that might be interior designers and somewhere on that site they talk about blinds. So anyone that’s typing in the words blinds, I want to be the name they see, and on the average we know how much to spend, and how much it makes, and when you get to be that good at your metrics, the sky’s the limit.
Andrew: So, there are two levels, essentially, I guess there are multiple levels, but two of the levels that you have control over are, what gets more clicks, per text and what gets more conversions on your page. Let’s talk about the conversions on your site. What have you learned about increasing the conversions, since you’re paying so much for them, you want to get as many as possible to become buyers.
Marc: Let’s talk about, as opposed to the specific site, let’s talk about the concept of what I learned in the early days about direct mail, it relates back.
Marc: In direct mail you send a 100 pieces, or a 1,000, or 10,000 and you get X response. You change a few words and you send it out again and you get a Y response. You change it again, you get a Z response, per 1,000, per 10,000 the metrics are pretty much the same. So, what you figure out is you have constant and you have a variable. The constant is the best one that’s performing. The variable is I’m tying to beat the constant. As soon as I beat the constant that’s my new constant.
Andrew: I see.
Marc: In direct marketing, it’s the same thing, it’s identical, that’s what direct mail is, or was, still is. On your Internet site it’s the same thing. Your variables are colors, text box, videos, size of type, words it’s a combination puzzle of all the different variables. There are companies out there that will take your website and they’ll put up 20 versions, they usually do three, but let’s play games and say 20. Everyone will sell the same products, but one will out perform all the rest. That becomes the one you go with.
Then they’ll come back and they’ll test it again, different size, different type, different boxes, different videos, different audios, different click boxes, different colors. It’s metrics. It isn’t emotion. It’s metrics. And you figure out what is the best metric that works for you that makes the most money and I always get it wrong. If I had to guess, I can’t, and I know my stuff, I never get it right. You have to have the right combination of all of those things to maximize your income.
No matter what you do, there’s something that will be better but you have to figure it out over time. So if combination number 14 out the 20 is the one that gets you a 5% response when accommodation one, two, and three only got you a 3% response. Go with your 5% response until you find one that gets a 5.5 or 6. And always play against to try and get better. I mean even the time of day matters.
Andrew: Marc, this is candy to me and my audience. What do you mean? How does time and day influence?
Marc Oh, big difference, big difference. Are men shopping for cuff links between nine and five? Or are women shopping for cuff links between nine and five? Who’s shopping for cuff links between eight and midnight? Men more than women. But if women are buying for Fathers Day you write ads for women buying for Fathers Day or kids buying for Fathers Day. You have to look at all the metrics that affect the buyer, think like the buyer.
Andrew: So you would change your presentation based on time of day?
Marc: Hold on I’m going to write that one down, think like the buyer, I like that one. You know every once and a while I come up with something that actually works in my head. You have to think like the buyer.
Andrew: Marc, I like all this stuff. This is like candy to us. I can’t wait to just like, it seems like I’m jumping in a lot it’s because I get excited about concepts like this. Here’s what I’ve found, now I’ve been doing this too. You’re saying find the baseline, test against the baseline until you find a better higher conversion that becomes your new baseline, and now test against that.
Andrew: What I found it, my imagination is only so good. I come up with a bunch of great tests to experiment with. I hit one that does really well, and then I can’t come up with any other clever tests. I’m limited with the same format the same idea and so where do you come up with new ideas to test?
Marc: You know what I do? You know what I do?
Andrew: What? What’s that?
Marc: I go on the Internet and look at my competitors. They’re smarter than me. I just learn form the best. You know, the best way to get a great website is find one that costs someone $100,000 dollars to develop, and clone it. It’s not illegal, it’s not immoral. You like the look of that site. So you say to your designer I like the look of the IBM site, I want mine to look like that. Someone paid a lot of money to create the look of that site. The smartest people in the world know what they don’t know and they know where to find what they don’t know. Go look at people who are doing the way you think it ought to be done. When you read certain companies are always selling more than you, go look at their website. Go to their trade show booth. Talk to their people. Look at the metrics that you can find about that company.
You know, there are sites that will tell you where all of the traffic is coming from. I find it amazing that people don’t know this. And if you do know it, are you looking at it? For instance, we have a site A. And there’s site B, C and D. There are places on the Internet that you can go and see where’s site B getting all its traffic, where’s site C getting its traffic, where’s site D getting its traffic? If they’re getting all of their traffic from one source you better be looking at that source to see what am I doing wrong. You never have it 100% you can always do better. And the game is to continue to strive to do better.
Andrew: What sites are these? We’re talking about Quantcast, Compete, even Alexa, those sites, those kinds of sites?
Marc: Yeah. And I don’t even remember the names half the time. I just know it can be done and we’ve now got staff and that’s their job. Look at other sites, figure out how they are doing better than we are. Let’s figure out how we can do it better. It’s a never ending stream of input so you make better decisions. You wouldn’t go outside if you knew there was a hurricane. But if you didn’t know it was a hurricane, you might walk outside. The more information you have, the better your decision making. It’s no different in any situation. Whether you’re dating, whether you’re in business, or whether you’re buying a house in good or bad neighborhood, one that has lots of theft or one that has no theft. It all matters about the information you have. And the Internet makes everyone have the same information if you know where to look. So learning how to search is just as important as anything else you can teach people.
Andrew: I think it’s 2005 you launched a company called Internet REIT. Do I have the name, the dates right?
Mark: I don’t know the dates, sounds about right.
Andrew: Sounds about right? What was Internet REIT?
Mark: I found that with a domain name, not a generic name like Blinds.com, but let’s say it was ABCblinds. You can buy a name for roughly $10, point it to Google or point it to another site that would buy the traffic and make on average $15 or $20 a year. Now $15, $20 isn’t exciting but if you can get $2 a month on a domain that costs you $10 a year. Let’s see, $10 versus $24, that’s kind of interesting. Can I scale it? Microsoft got big by creating one disc, and then scaling it to millions of people.
I said, “Why can’t we roll off, buy, hundreds of thousands of domains that make millions of dollars?” So we ended up raising many millions of dollars, including Howard Schultz, the founder of Starbucks, and Ross Perot, they were partners. My partner and I raised a lot, well over 50 million dollars. We bought 374,000 domain names. The business model, originally, the one I came up with domains, we search-engine optimized them so they get the most attention, and we make money on the traffic. My partner wanted to go and build them out, and try and build websites, which is a losing proposition with scale, you can’t build out 300,000 names.
When you get an offer to buy one of your names, if it’s well over a 10 or 15 year income stream, you might sell it. So we might have a name, ABC Blinds, and someone says “I’ll pay you $20,000 for that name.” Well that name might have only made $50 a month, right? That’s $600 a year. $20,000 to $600 a year? I’ll take the $20,000.
Marc: So the business model was sound. The mistakes that were made were internal, and what we decided over the years with the legal system, because we bought portfolios of domains: 50,000, 80,000, 100,000. We bought one portfolio of 100,000 names. Within a week we got sued. Why? Because the people who owned Verizon, these guys, had a lawyer who’d been watching those names. The minute they transferred to us, and we had a lot of money, we got sued, because the law says if you own an asset that is someone else’s asset, we can sue you. We said we’ll give you the names, and they said we don’t want the names, we want to make you an example. It cost millions of dollars to defend owning the assets that we offered to give them for free, but it didn’t matter. The minute we owned them for five minutes, we were legally liable and we ended up having to disband the company over it. One issue.
Andrew: 2008, roughly, yeah.
Marc: So we sold most of those assets. There are still assets available in the internet REIT company but the vast majority of assets have been sold off.
Andrew: How do you recover personally from something like that?
Marc: You never put all your eggs in one basket, ever. I don’t care how good you are, you don’t do it. If you put most of your eggs in one basket, you better watch that basket. I put in an investmentand I lost that investment, the majority of it, I should say, in that one investment, but I had 30 or 40 different investments. That was one that I started but didn’t operate. I gave it to someone else and they didn’t operate it well.
Andrew: And you still-
Marc: The market itself, for what was going on, you had to take it in one of three directions. If you owned massive quantities of the asset, and you didn’t know that someone owned that intellectual property in Europe, and they sue you, you didn’t even know you were going to be sued because you didn’t know it was an intellectual property problem to begin with. Meaning, let’s say, someone owned the word “ballpoint pens” in Germany. They have a trademark in Germany for the word “ballpoint pen”. If you own the ballpoint pen in the U.S., they could sue you, and you can’t defend yourself. Even if you said “I’ll give you the asset,” no, they could still sue you. It was a complicated business, to say the least.
Andrew: Yeah, it sounds like it. What I’m wondering though is, you’re still running Cufflinks.com and Blinds.com while this is going on. You’re running multiple businesses. Most people struggle with just the one business that they have; where do they get new customers, how do they deal with employees, how do they grow the business, how do they deal with competition. Here you are managing multiple businesses. How do you do that? How can you manage multiple businesses when most people struggle with one? What do you do differently?
Marc: I ran one many years. I ran one for many more years, and I ran one for many more years. I found that, in the same way that you can’t be the best at sales, marketing, customer service, database management, knowing Cision, knowing PhotoShop, knowing layout, knowing design. You have to do what you do best, and you hire your weaknesses. What I do best is I see the big picture. I see where markets grow, and I see where certain things can be tweaked to make a big upside, and I found I don’t even go into the office. There is a whole stack of people that run each of these companies. And there is a CEO of each of these companies. So, in some I own all, in some I own the majority, and some I own the minority.
But in every instance I am involved in the strategic thinking, and then the people that run it make the final decisions. I don’t tell them, ‘No, we’re going to do it this way. You have to do it this way.’ Because that is not fair for me to tell my partner, Robby [SP], who is a phenomenal operator of Cufflinks.com, ‘You have to do this.’ He knows the market better than I do, he has got to have more knowledge, so I am there to bounce ideas off of, and what I am good at, is I’m the guy you come in and bounce the ideas off of, give you 20 ideas, you go back and make better decisions.
Andrew: OK. That brings me to another item that I had here on my list to talk to you about. I want to talk to you about equity versus income, and we have talked about that. I also want to talk to you about planning, because I know you are especially good at that. You told us that you have three scenarios that you walk into any business with, and that is how you think through the future of a business. Give us a couple of other planning tips. How else do you look at planning that others can learn from?
Marc: One $50,000 person is worth a lot more than two $25,000 people. You hire the best you can get. If there is someone really good and really expensive, go see if you could work with them part time in some way. You would be amazed how many people on Guru and Elance, are experts that make hundreds of thousands, and they do that on the side. Really good people list themselves for extra income because you do not know their situation, and they may be under water with their mortgage, so they are making extra money. Work with the best people you can afford and if you can not afford them, ask them, ‘Is some way I can work with you? I just know you’re the best.’ It’s pretty hard for people to say, ‘Thank you, I’m the best, but no, I won’t help you.’ It’s pretty hard, most people will, depending on their situation.
I still do that with people, depending who they are, and I learn from them. I pay $5,000-$10,000 to go to lots of retreats, masterminds and learning from the smartest people I can, because if somebody learned how to do it right, and it took them 20 years, I can learn how to do it right in one weekend, spending time with that person.
So, do not underestimate the value of information and education. It is extremely valuable if the person you are learning from has done it, been there, failed and succeeded. They are going to tell you both, how did they fail, why, and how did they succeed. You want to ask both the same way you are asking me.
Andrew: So, here is another thing I want to learn from you; Two people walk into a retreat, you are one of them, another person walks in right along side you, is present just as long as you are, you get more out of the event than they do. What are you doing differently to absorb the information and to put it to use? We have all seen people who have gone to retreats, who have studied, who watch these videos and will not get as much out of it. What do you do differently?
Marc: Oh, that is a good question. You ask really good questions.
Andrew: I appreciate it, thank you.
Marc: The same way I do a tradeshow. When I go to a tradeshow, I work the show. I am not there to drink. I am not there to schmooze. I am not there to party. I am not there to sit in my booth. I walk around to my competitor’s booths. I walk around to my client’s booths. I talk to clients. I learn about the competition. The best place to learn is what your competition is doing. They can teach you a lot. You have to work the show the way you would be if you were a kid in a candy store. I look at tradeshows as a kid in a candy store, because all that information is free! All you have to do is ask, ‘So why did you guys put the color on that site that way?’ Or, ‘Why does your website do this?’ Or, ‘Where did you find that?’ or ‘Did you ever do that?’ They are all going to tell you. They are there to tell you. They don’t even care if you are a competitor 98% of the time, they will still tell you. Because they love to talk! You are there to ask the right questions and listen. Then you gain more knowledge by doing that, than you do sitting at your booth talking to one client that you may sell. You can hire and train someone to sell your products from the booth, your value is more walking around.
I’ll tell you a funny story. My partner at Cufflinks is Robby, and he is young, and he had never done tradeshows like I had, I have done 1000 tradeshows, literally. I mean 20 or 30 a year, for 30 years. It doesn’t quite add up to 1000 but close. He’s working the booth. I said “Why are you standing in the booth?” “To sell cufflinks.” No, no. The first time I went to the show, I said “Walk around with me.” We walked up to a booth, and it was the men’s clothing show. We had a booth for cufflinks. We’re doing millions of dollars and he thinks we’re really killing it, but there’s a lot of business we’re not getting. I only focus on the business we’re not getting, not the business we’ve already gotten. We take care of our clients, but the goal of a good CEO is to figure out how to grow the company, as well as manage what you already have. I went over to the booth for Robert Graham. You know those really cool shirts, Robert Graham, they’re different on the inside and on the cuffs?
Marc: It’s a very popular men’s line of clothing. I said to the CEO, I always go right to the CEO, and I said “I love your shirts,” and I actually did love this shirt. I wear them all the time, I had one on. I said “I got to ask: why don’t you guys put out cufflinks?” He said “Well we’ve been thinking about it, but we haven’t really found the right way to get it done.” I said, “I’ll do it for you. I’m the largest supplier of cufflinks in the world. I make them for everybody; they’re at Neiman’s, they’re at Dillard’s, we do the NFL, the NBA, Major League Baseball. Robert Graham, it’s a cinch!” He walks with me over to the booth, and today we do all of their cufflinks.
Now, that would have never happened had we sat in the booth and waited because the CEO doesn’t leave his booth, he sits in there! The salesman leaves the booth to go look for business, and then brings it back to the booth. We made more on that one lead than the rest of the show combined. I’m no different than any other guy, I just know how to get it done. I don’t deal with all the crap, I don’t deal with all the semantics. I like dealing with all the set-up and the tear-down. I’m there to find clients and to find information, and figure out how can I use that data to better my position in a very competitive market, irrespective of the market?
Andrew: I love that. Alright, I’m going to read a quick email from a viewer and then I’m going to tell people how they can find more information from you because I know, at the end of this interview, you’ve given so much, they’re going to want to get even more. Here’s an email I got recently.
The guy says, “I know this sounds crazy, but to drive me on, I’ve been visualizing a Mixergy interview featuring our site in the future. I found it to be more fulfilling than gunning for financial targets, Andrew.” He says, “Hell, I was even thinking of cutting out a mock-up of the Mixergy front page and sticking it on my monitor to make it feel more real, so that every day it would drive me to figure out what I needed to do to be in a position where I could even comprehend being featured on Mixergy. It’s kind of a reverse engineering success, I guess. I have a long, long way to go but the interviews you get on Mixergy have driven me to succeed in a way that no other book has done. Thank you. Dillon [sp] of dataqualitypro.com.”
Dillon, I know is out there listening to us, and he’s gotten so much from you, Marc, and I know everybody who was listening has gotten so much from you. I appreciate you giving and firing my guys up like this. If they want to connect with you even further, where do they go?
Marc: Well let’s talk about Dillon for a second. One of the old tricks in the sales business is to get your salesmen to always be in debt. Take them to the Ferrari dealer, take them to the Mercedes dealer, bring in jewelry, give them great trips that they have to buy. Keep them in debt, so they’re working harder. Now, while I didn’t do that, the logic makes a lot of sense. You have to figure out what drives you. Most sales people are driven, for some reason, by money. You want to get opportunity to make a lot of money, so they sell very aggressively.
A lot of people are driven by other things. He takes a picture of your site, and he says “My goal, my inner energy, is to be featured. I’m going to put it on the wall so I can see it, just like the sales manager who put a picture of Italy, or the Ferrari, or the Rolex on the board.” That’s your goal. You always want to have a goal that you’re willing to try and reach short-term and long-term, right? You have that goal to go after. If his goal is getting on your site, and you say to him, “Look, tell me what you’re doing now,” and you’ve got all these [??] metrics, you say to him “When you get to these metrics, I’ll put you on the site.”
You could help him grow his business and obtain his goal just by questioning him about what he’s currently doing, and helping him do it better, with more focus and more attention. Instead of going out to a movie one night, he stays in and puts in an extra five hours to get that goal a little bit sooner.
Andrew: I see.
Marc: So it’s goal setting.
Marc: Now, a lot of entrepreneurs just kind of have that inner energy. I always found I loved business so it didn’t bother me, I didn’t need to put a picture on the wall, I knew what I wanted.
Andrew: What do you use to drive yourself? What’s the equivalent of the Ferrari on the wall or the [??] you print out with your face on it?
Marc: More information than the next guy.
Andrew: I see.
Marc: A magician is not the greatest person in the world, they know the trick and you don’t. Yet they can amaze you, with a very simple trick, but you don’t know how to do it so, in the room they’re the expert.
Marc: I want to have that knowledge so, I can decide whether I want to use it or not. I want to know those tricks, magicians use that little surprise to sell you, and before you’re thinking about it they’re on to the next one and then you’re wow, and they’re on to the next one, wow! By the end of the show you’re like that was amazing. You didn’t focus on any one trick, you got lots of wows. Lot of salesmen will do just that. They’ll wow you over and over and over until you go you’re right, I got to buy this product. It will help me. You want to get the person to say, I need this product. And you got to get them to understand why they need it, not why you want to sell it.
You’d be amazed, walk around and talk to salesmen, nine out of ten, me, me, me, me. My product, me, me, me. The good salesman is like you. So tell me, what can I give you in this interview that will really help you? It’s a great sales line, because it makes the person on the other end know that you care about their situation.
Andrew: You talking about one of the things I said to you in the pre-interview.
Marc: Right. It’s a sales line, and it’s a great line because it’s true and it worked. And it actually shows you care. At least it gives me the appearance that you care, whether you do or not.
Andrew: I do I care about this more than anything else.
Marc: And I do the same thing. I actually care about the client, so that they get what they’re here to get. And I don’t want to sell them something they don’t need, I want to have the knowledge to impart to them, here’s why I think this will help you. So, you asked early about getting on The View. I’m not the best guy, and I’m not the worst guy, I’m a good guy on television because I get it, and I know how to play that. But I have really good solid data that I can teach quickly. And explain it so you get lots of oh my gosh, like a magician. Wow. Wow, wow. I would show you an app that a lot of your people don’t know. I’ll show it to you right now.
Marc: I don’t know if I can show it to you but I’m going to try. OK? You’ll get a wow. And when your people go it’s in my app, I just love it. It’s called Word Lens, you ever heard of it? Word Lens, L-E-N-S.
Marc: Here’s my book, here’s if you can see this.
Andrew: Oh, yes, I have heard of it, yes.
Marc: It changes words into Spanish.
Andrew: Yup, I see it now.
Marc: It changes words into Spanish real time. You want to freak someone out? Get Word Lens, show them you can up any sheet of paper, and go from English to Spanish. When I was on The View, right before I went on-stage, I found the producer, I said I want to show you something. I showed it to him he went, holy shit that’s amazing. And he turns to the girl that’s walking me on-stage and he says, is he going to do that on-stage? And she said no sir we don’t have time for him to do that. She said have him back, and I want that demoed on camera. I got on a second time. Because I understood, that situation. And at that moment, I knew that if I could teach him something amazing, I might have a chance that he’d say come back.
And so I’m always looking to step better, and teach more, quickly, so that people get the essence of the trick, which isn’t a trick of course. Get the essence of it and go wow. And that’s what everyone should be looking to do, that wants to sell. Always learn more, earn more, automate, know your weaknesses, hire your weaknesses, and learn as much as you can about your competition, and you’ll probably succeed in your business.
Andrew: That’s a great place to leave it. Book is Get Rich Click, and the author, of course, is . . .
Marc: You’ve got to hold it up.
Andrew: Let’s hold it up I’m looking at it right over your head. Marc Ostrofsky, thanks for doing the interview.
Andrew: Thank you.