Category Archives: Pete’s Book

The Value Of Trade Exchanges

Taken from my book ‘How To Turn Your Million-Dollar Idea Into A Reality’ – Chapter 17

Any business can barter their goods or services. For example, if you are looking at opening a florist you could approach a local restaurant and offer to supply them with fresh table flowers each week, in exchange for a $100 meal every Sunday. The cost to supply $100 worth of flowers to the restaurant would not actually be $100; maybe the wholesale price is only $30. Thus as the florist you get to eat out each week, have a $100 meal, and save $70.

Today there are organised third-party record keepers called trade exchanges that have thousands of members in almost every industry that help facilitate these types of contra transactions. It’s a small but rapidly expanding segment of the economy. The member directories of these exchanges are the size of a large Yellow Pages, and they have members all over the world. The exchange acts as a conduit. It’s like a bank, and a lot of people lose sight of this fact. The exchange simply acts as a conduit in the transaction.

Basically you are going to get the best benefit from your trade exchange if you use it only in your down time or when you have excess stock it’s not designed to replace cash business, only compliment it. There are a few costs involved , but basically during your quieter periods you can offer your products or services for barter dollars which you keep in your bank until you have the need for a product or service offered in the exchange.

To explain how this work let’s use a typical example. Let’s say you are a florist again, wishing to get some printing done for your business so you can attract extra sales. In the cash economy the printer might charge $10,000 for the flyers, brochures and business cards that you need. If you approached the printer to try to work out a direct contra (like the one with the restaurant above), it’s fairly unlikely the transaction would occur as the printer would have no use for, say 1000, $10 bunches of flowers to cover the cost of $10,000 for the printing.

However, with the use of a trade exchange this contra deal is possible as trade exchanges offer members an interest-free line of credit to initiate and support trading. If the florist and the printer are members of the same trade exchange, the florist can use their interest free line of credit to pay for the $10,000 worth of printing, in what are referred to as trade dollars (T$). Instead of being in debt or owing the printer directly, the florist now owes the exchanges T$10,000. To pay off this debt of T$10,000, the florist over the next 12 months might sell T$2000 worth of roses to the printer, T$500 worth to an accountant, and T$6000 to a reception centre, and so on, all of whom are members of the trade exchange. So you can now see how this contra transaction could work and be facilitated using an exchange.

Let’s look at it from a dollars and cents perspective:

For a florist to sell 1000 T$10 bunches flowers and pay off the T$10,000 debt, they would obviously incur out-of-pocket costs to purchase the flowers at wholesale. I am not a florist, but for this example let’s use the same costs as above and say the average wholesale cost of a bunch of flowers (which they sell for $10) is $3. They will incur a total cash  cost of $3000 to supply 1000 bunches to the exchange members.

Being a member of a trade exchange is not free. There are fees involved for the exchange to act as the record keeper. These fees are described and explained below, but for the sake of making this explanation easier let’s say the fees for selling T$10,000 worth of flowers is $1000 in cash. Therefore the total cash cost to the florist to pay back the T$10,000 in flowers is only $4000 ($3000 for the flowers and $1000 in fees) that’s a $6000 SAVING in CASH!

In other words, at the end of the day they have received $10,000 worth of printing for the cost of only $4000. They are only having to pay 40 cents on the dollar for every purchase they make using the trade exchange now that’s power! But it gets better. These 1000 bunches of flowers are generally going to be sales they would not have otherwise made. That’s new business to the florist, and they have saved the 1000 bunches they may have had to otherwise throw out and write off.

Looking at it from the printer’s point of view, they have received $10,000 worth of new business they would have otherwise had to forfeit, which they can now spend on accounting services, holidays, phone bills, graphic design, and whatever else they need, which they would have otherwise had to pay cash for. Again, to provide the T$10,000 in printing the printer mayonly have had raw costs of $4500.

What about overheads and wages, you may be asking; they were not included on the calculations. Exactly right! As the idea for activity in a trade exchange is to bring news sales and/or take up downtime or idle stock, there are going to be no extra overheads to provide the additional services. It’s only the incremental costs that need to be considered. The rent is already being covered by your cash customers, as are the wages and electricity, and all the other overheads. A trade exchange is designed to help milk every spare moment of downtime (printer) or idle inventory (florist).

 

HEY, did you know i’m running a contest while I am away…


Building On Other People’s Ideas

Taken from my book ‘How To Turn Your Million-Dollar Idea Into A Reality’ – Chapter 3

the Always sexy Bill GatesStarting a business does not necessarily mean creating a new technology, or coming up with something radical that has never been done before, or inventing a new product or service from scratch. This is a common misconception. Many would-be entrepreneurs spend years trying to come up with an earth-shattering idea, when there are really opportunities all around them, every day. Many of the most successful business people all over the world have simply adapted an existing idea, implemented an existing product or service in their own way, or improved on somebody else’s creation.

Perhaps one of the greatest examples ever of leveraging an existing idea is always sexy Bill Gates and Microsoft. Gates has become one of the richest people in the world (his personal fortune is measured in the billions) based on somebody else’s idea. That’s right, the product that started it all for Bill called DOS, which stands for disk operating system was not an invention of Bill’s.

In 1980, IBM was building the first commercially viable personal computer, and they needed an operating system to run it. They approached Microsoft, who agreed to supply the software the design for which they bought from Seattle Computer Products for around $50,000. There were several different computer companies and operating systems in the early days, but Microsoft and IBM went on to dominate the industry worldwide, thanks in a large part to DOS. Years later, Bill gates borrowed another idea from Apple computers. Microsoft brought out a new operating system called Windows, which used an icon-based system and a mouse instead of text commands to run a computer. Apple had been doing this for years, but it was a revolution for Microsoft users.

Coca-Cola started in the same way. Coke was invented by Dr John Pemberton in Atlanta in 1886. He made efforts to promote the drink, but it did not take off. During the first year, he sold an average of just nine drinks per day. He later sold the rights to the drink to businessman Asa Candler. By 1892, Candler’s flair for marketing had boosted sales nearly tenfold. Today Coca Cola operates in over 200 countries and has nearly 400 brands.

While travelling, Janine Allis saw that there was a hole in the Australian market for a healthy fast-food alternative. She often had trouble finding something healthy to eat or drink when she was in a hurry. She thought the American juice bar trend could be brought to Australia. When she came home, she developed a business plan and raised $250,000 through friends investing in her idea. She consulted nutritionists and naturopaths to come up with natural, healthy juice recipes. The first Boost store opened in Adelaide in 2000, and over the following six years more than 170 stores have opened throughout Australia and New Zealand. Janine found a great idea overseas, and successfully implemented it in Australia.

Richard Branson never invented anything in his business career. He has run a record label and an airline, opened music stores, released a brand of cola, and now offers financial services. None of these are new ideas. So why has he been so successful? Perhaps more than any other business person, Branson demonstrates what can be done with a bit of imagination, a lot of marketing, and putting your own personality into your business. His company name Virgin attracts attention instantly, and he is a shameless promoter, using sometimes outrageous publicity stunts to attract attention to his brand. He appeared in a wedding dress to open his bridal store, and he drove a tank down Fifth Avenue in New York to introduce Virgin Cola in America. Across all his products, the thing he is selling most is his brand, Virgin.

In 1948, brothers Richard and Maurice McDonald opened their hamburger restaurant in San Bernardino, California. Its success was based on its limited menu and rapid service. But are the McDonald brothers responsible for McDonald’s dominating the fast food market around the world? No, that honour goes to Ray Kroc, who sold milkshake mixers. Ray heard about the McDonald’s hamburger store, and how it ran eight milkshake mixers at a time. He jumped in his car and went to investigate. When he arrived, the store was doing a roaring trade, and Ray had never seen customers served so quickly. He immediately saw the potential of the store’s unique methods, and suggested to the brothers that they should open up more restaurants. When they asked him who could do that for them, he replied, “What about me?”

Ray opened the second McDonald’s restaurant in Illinois in 1955. There are now more than 30,000 McDonald’s restaurants in 119 countries around the world all thanks to Ray! McDonald’s later added another innovation to the fast food world the drive thru. This was an idea that had first been used by banks throughout the USA, with drive thru access to ATMs

Some of the largest and most successful companies in the world were started either by buying somebody else’s idea or simply creating a better way of doing something. There is nothing wrong with this it is a common approach to business, and as you can see from these examples, it can be an extremely profitable one.

HEY, did you know i’m running a contest while I am away…


Want Profitable Ideas? Become A Fisherman.

Taken from my book ‘How To Turn Your Million-Dollar Idea Into A Reality’ – Chapter 3

In his book The Boron Letters, Gary Halbert writes about one of the lessons he teaches on selling. He asks his students, “If you and I both owned a hamburger stand and we were in a contest to sell the most hamburgers, what advantages would you most like to have on your side?”

The answers are predictable – the best meat, the best location, the lowest prices. Gary tells his students they can have all these advantages, but the advantage he wants will ensure that he whips the pants off them. What does he want? A starving crowd.

If you are looking for a new idea to start a business, ask yourself this simple question:what product or service will give me a starving crowd? Your aim as an entrepreneur should be to develop a product or service that people want. Success and profits will come much more easily if you leverage an existing demand, rather than trying to sell something that people aren’t interested in.

You must go fishing where the fish are. Develop a product for profitability. The best way to develop a venture is to find a market with money that has an unfilled need, then create a product or service that fills that needs gap. One of my favourite examples is also incredibly simple: the hammer. You wouldn’t give a hammer a second thought today, but imagine what a revolution it was when it was invented. Imagine how much easier it became to join two pieces of wood together or hang a picture on a wall. These are the specific uses that a hammer is designed for. Without these a hammer is useless, and it came about because somebody asked, “What would be an easier way to hang a picture on a wall?”

What can you come up with that fills a specific need?

 

HEY, did you know i’m running a contest while I am away…

There’s No Such Thing As Failure

Taken from my book ‘How To Turn Your Million-Dollar Idea Into A Reality’ – Chapter 2

Post It Note

To overcome a fear of failure, you must realise that there really is no such thing as failure. Success and failure are merely perceptions. Something that might look like a failure at the moment is only another step to your eventual success, or even the success itself.

Take the story of the now famous and hugely successful Post-it note. The adhesive used in Post-it notes was invented in 1968 by 3M researcher Spencer Silver. He was attempting to design a strong adhesive, but he actually ‘failed’ and the adhesive he developed was very weak. Dr Silver tried unsuccessfully for five years to find a use for his new adhesive. Arthur Fry, a new-product development researcher, attended one of Silver’s seminars, and he was intrigued by the strange adhesive. During his spare time Arthur Fry sang in a church choir, and it annoyed him that the bookmark in his hymn book would always fall out when he stood up to sing. One day he realised that he had found the perfect use for Dr Silver’s glue  it could be used to make a bookmark!

The original Post-it notes were used as bookmarks, and the remainder were shown to the 3M marketing department, but they rejected them as useless (a failure). Arthur Fry gave them to his secretary to dispose of, but she instead found what is now the classic use for them. Fry told her to distribute the remaining notes to all the executive secretaries in the 3M offices. When they ran out, she was inundated with calls for more. These calls were passed on to the marketing department, who finally got the idea. Initial prototypes were available in 1977, and by 1981, after a large sampling campaign, the product had been introduced around the world.

Everyone now knows and uses Post-it notes. This is a classic tale of a failure turned into a success. Post-it notes have been developed in a range of colours and designs for a variety of uses, and they can be found in offices, schools and homes all around the world.

HEY, did you know I’m running a contest while I am away…


March Madness… The Contest!

For those of you playing along at home, you’d know that I am off to the USA for a 3 week vacation on Wednesday. So, in an effort to ensure the blog doesn’t go unloved I have scheduled a series of posts with excerpts from my book ‘How To Turn Your Million Dollar Idea Into a Reality’ to magically appear over the next 3 or so weeks. These posts will cover: There’s No Such Thing As Failure Want Profitable Ideas? Become A Fisherman. Building On Other People’s Ideas Finding your USP Why Are You Going Into Business? Creating Systems To

about-pete
Pete Williams is an entrepreneur, author, and marketer from Melbourne, Australia.

Before being honored “Australia’s Richard Branson” in media publications all over the continent, Pete was just 21 years old when he sold Australia’s version of Yankee Stadium, The Melbourne Cricket Ground For Under $500! Don’t believe it? You will! Check out the story in the FAQ section (it really is our most asked question).

Since then, he’s done some cool stuff like write the international smash hit ‘How to Turn Your Million-Dollar Idea Into a Reality’ (+ the upcoming ‘It’s Not About the Product‘) and he’s created a bunch of companies including Infiniti Telecommunications, On Hold Advertising, Simply Headsets and Preneur Group.

Lots of other people think he’s pretty good too! He’s been announced as the Global Runner-Up in the JCI Creative Young Entrepreneur Awards for 2009, the Southern Region Finalist in the Ernst & Young 2010 Entrepreneur of the Year, and a member of SmartCompany’s Top 30 Under 30.

Download Pete’s First Book For FREE!

“Now that I've got the rights back from the publishers, if you enter your email address below, you can instantly download a free audiobook version of my first book, How to Turn Your Million-Dollar Idea Into a Reality.” - Pete
100% Secure ... We will NEVER sell or rent your details to anyone.