Looking for a specialized organic tincture today, I had my daughter with me and knew I couldn’t spend the day meandering from place to place on the off chance somebody had it. First I used google’s local search to compile a shortlist of herbalists and natural health-food stores in my area, then I started calling them.

I had about a 90% failure rate. Most of them went into voicemail after about 20 rings, and the voicemail greeting didn’t answer any basic questions: hours of operation, location, common directions, type of business carried out.

The rest didn’t even go into voicemail.

The one person who answered the phone, told me they had what I wanted in stock. Guess what? They got the sale, along with a few other items I wanted after I made the trip directly to their location.

All of these places struck me as mom-and-pop’s or owner-operated shops. They all serve as a good example of what we talk about here: growing your business through common sense approaches and using web tools to extend any business.

So our takeaways from today’s odyssey could be:

• A ringing phone is a surgically optimized lead screaming CLOSE ME, so maybe pick up the phone and close that sale.
• If you can’t answer the phone within a short number of rings, have it go into voicemail with an informative message: store hours, locations and if you have a website, your URL.
• Then on your website, have an easy-to-use search function, hopefully with some degree of search-engine-optimization that lists everything you carry, or if you’re a service, every type of service you provide. So when people like me type “organic echoberry tincture, etobicoke” your page would likely be on the first page

It isn’t rocket science, yet we find time and again, the few businesses that succeed above their peers take these basic common sense mechanisms and automate them, optimize them and have them operating 24/7.

With the economy cratering and unemployment soaring, we’ve remarked here before that the climate is ripe for a spike in “self-employment”. With this come the inevitable scams that prey on the desperate. We’ll start a channel here to point them out.

Our first “Beware” outfit is a Bait-and-Switch operation called EarnCashFastWithGoogle.com. If you have a facebook account you’ve probably seen these ads, or maybe you’ve clicked through a link to some blog.

The short version is this: A single mother or some guy who has just lost their job, in danger of losing their home, desperate, aware that most work-from-home programs are scams, but decided to try this one out because, hey, it only cost $1 and it was Google, big, publicly traded, above board, etc. And lo-and-behold, no experience required, no selling, not multi-level-marketing, just posting short links to the web (whatever that means) and WOW $5,000 a month without even thinking about it. SALVATION!

There is no program with Google that pays you for posting web links. The closest thing to it is Google Adsense, which you may recognize because you’re reading a page with a couple of Google Adsense blocks in it right now. Yes, if anybody clicks on them, I get paid. And yes, if a LOT of people click on them I stand to make out well. But this is very different from the “program” being offered here.

The sales pitch is being framed in a way that there is some simple program “out there” (in this case Google) where all you have to do is sign-up, follow the instructions and boom: 5 grand a month, easy.

Remember this always: If any path to wealth was truly easy, everybody would be doing it and we’d all be rich.

The ability to make money from Google can pretty well only happen via Adsense and it relies completely on the ability to create a website that attracts targeted visitors in enough numbers that a realistic click rate adds up to a significant amount of money. It is not a matter of paying EarnCashFastWithGoogle the $1 they are asking for and having a check from Google in the mail to you within 48-72 hours. That’s a pipe-dream.

Even if you were to sign up with Google Adsense and create a website that earns anything, you’re about 8 weeks away from your first payout, and that’s if you clear the minimum payout level. If you’re new to this, you probably won’t.

To give you an idea on what it takes to earn money via Adsense (although it varies wildly based on what segment the website is in), I own a hobby website that earns a steady $500/month and gets 4,000 visitors per day. The website is nearly 8 years old and took about 4 years to organically build up the traffic to get to that point.

The folks at EarnCashFastWithGoogle.com want you to believe that if you send them $1 you will be 30 days away from earning $5,000/month from some mysterious Google link-posting program that doesn’t actually exist.

Seems like a lot of trouble to go through for a buck. doesn’t it? Well it gets worse, because what this actually is is called “bait and switch”. There are numerous reports from disgruntled buyers that after signing up they are actually subscribed to several “bonus” programs that cost between $4.99 and $29.99 per month.

This is the scam. To get you to give them your credit card info so that they can sign up you up for several programs “as a bonus” that can easily add up to significant monthly charges to your credit card.

So be careful out there. If you’re suffering through hard times and things look bleak, these “too good to be true” programs aren’t going to deliver you from all your cares: they’ll just add to your problems.

That seems to be the indication from this Financial Post poll that found:

“About 900,000 Canadians who plan to start a business by the end of 2008 are among 3.3 million who are looking to be their own boss within the next five years. The biggest growth in desired self-employment was in Internet and online services, while interest had fallen in arts and crafts, retail sales, business services and management consulting.“

Which is interesting to me because ironically, now that I’ve been fortunate enough to enjoy some success in building an internet business, I have spent the last couple years diligently looking for offline investments.

But I cannot stress this enough: I wound up self-employed in the internet sector because I was working in the business and had experience and knowledge there. The surest path to successful and sustainable self-employment is by sticking to what you know. Don’t just pick some sector because from the outside looking in it seems easy and lucrative. Nothing is once you get up close and into it. If was truly easy and lucrative, everybody would be doing it.

Some self-employed just call themselves that and are more or less working “under-the-table”, collecting their pay without income tax or CPP deductions and then instead of setting some aside, reporting their income, and remitting income tax directly, they just keep it all and hope for the best.

Is that “bogus self employment” or just plain tax evasion?

The important thing for legitimate above-board self-employed is to make sure their affairs are as ordered as the traditional employed: set money aside for taxes, probably paid in quarterly installments to Revenue Canada. Even better, incorporate and pay yourself less witholding, in other words, have your corporation deduct taxes and CPP and remit on your behalf.

I found that once I started drawing a salary from my own corporation which was making deductions “at source” other benefits followed (like having an easier time obtaining credit or applying for a mortgage).

While the rest of the article poses the question of whether these “techno outsiders” are really welcome or needed doing tech start-ups (the survey also found 43% were looking at the tech sector for their start-up), it leaves us to ponder the larger issue of hard times having a recipricol effect on self-employment numbers.

I remember during the early 90’s recession (not that I even realized there was a recession on at the time), that there were more than usual television commercials targetting the entrepreneur segment. I remember some of them angered me deeply as I was for the most part an out of work college graduate. But the mechanism was unmistakable and I seemed to know it on an intuitive level.

The shift to self-employment was not a conscious decision to become an entrepreneur as much as it was a necessary mental shift I had to make in order to think outside the box and differentiate myself from everybody else in the same boat as myself.

I wasn’t an out-of-work computer programming graduate handing out resumes. Those went into the garbage after a few futile months of job searching. In their place, I printed up some cheap business cards with the words “M Factor Consulting” on them and *presto*, I was a consultant instead. That seemed to work at least marginally better than the former, even if it was a placebo effect in my own mind. I landed more one-off jobs and managed to string them together into something resembling a fledgling career.

With a recession all but officially here (even the talking heads on TeeVee agree that a recession is a near certainty in the US in 2008 and with Canada typically lagging 10 to 12 months we’ll certainly feel the effects here), self-employment in some shape or form will likely surge.

“For Baby Boomers, self-employment may serve as the ideal transition between the 9-to-5 corporate treadmill and traditional full-stop retirement. They may continue to work, but on their own terms.”

The article also touches on succession planning, noting that there may be as many as 500,000 Canadian self-employed boomers getting ready to retire, many of them intending to hand the reigns of the family business over to children, and that those children may have other plans.

“If the plan is to pass the business to the kids, the family needs to talk about it and plan for it … Many business owners are unpleasantly surprised to find their goals for the transition of the business do not match those of their children.”"

The issues in a nutshell:

1. Were the costs personal or business in nature?

2. If the costs were for business, do they relate to the specific business in which you’re claiming the deduction?

3. Are the costs capital expenditures, or current expenses? (Capital expenditures aren’t deductible, except perhaps through capital cost allowance.)

4. Are the costs reasonable?

1. Daytrading
2. Real Estate Flipping
3. Forex
4. Blogging

Today is part II of the series, “Real Estate Flipping” and why, to paraphrase AC/DC “It’s harder than it looks…It’s a long way to the top if you wanna rock n roll…”

There has been an explosion of television shows over the past couple years centered around the phenomenon of making easy money flipping houses. This is a symptom of the largely US-led real estate bubble, where housing values were driven by artificially low interest rates and excess liquidity in the money system.

For awhile, it looked easy to buy a house with little or no money down, do some fixups, and then turn around and sell it at a grossly inflated price into a rising market.

Shows like “Flip That House” made it look so easy, even the so-called “problems” these first-time flippers encountered over the course of an episode seemed surmountable and more entertaining than detrimental. At the end of each episode the happy flipper would announce how much they bought the house for, how much they paid for it, and there listing price, gleefully punctuating it with large, impressive sounding number of their projected profit.

“Projected” is a key word here. The first few seasons of “Flip That House” they only announced the projected profits, which always makes for a happy ending. I can list my house at three times what I bought it for, giving me a projected profit in the stratosphere, but I can’t put projections in the bank. It isn’t until the house actually sells that profits, if any, become a reality.

For starters, unless you have in-depth knowledge of contracting and the various construction trades, including the various housing codes, doing any renovation work on a house is harder than it looks, much harder.

If you plan on outsourcing all or most of the work, you need to find and retain honest, competent, reliable and affordable contractors and laborers, which in itself is an art. Horror stories about contractors and renovations are not cliches for no reason. They are ubiquitous because finding key personnel who fit these criterion are exceptions, not the norm. Especially during a screaming white hot housing boom, the good labour is booked solid. Finding a “contractor” in this climate who is actually available is almost a red flag in itself (if they’re any good, why aren’t they booked solid?)

There is also a rule of thumb from the IT industry which applies to all areas of life and it is this: all projects take longer than planned and go over budget. There are scant few exceptions to this rule. Read it again: all projects take longer and go over budget.

A more realistic “flipping show” is “Property Ladder” which follows newbie flippers who probably watched a few too many episodes of “Flip That House”. On this show you get a more realistic depiction of the stress and they follow it to the logical conclusion: what the house actually sells for, if it sells at all. In many instances the house is still sitting on the market months later at a reduced price. Even the always bullish Flip That House has done some follow-up shows and many of them ended without a sale at all, the flipper ended up moving into it himself or ended up trying to rent it out.

The mistake many people make trying to flip real estate is they count on an ever increasing housing market, despite that this year with its subprime woes and credit crunch has all but signalled the end of the housing boom.

Professionals in any field amass wealth by buying below market and then selling at market or even having enough margin to profitably undercut the market slightly.

Amateurs rush in and buy at market, hoping for a rising market, and planning to sell into a higher market.

What makes the latter method attractive is that during bubble booms in any sector, it tends to work for awhile, at least on TV. In reality it doesn’t always work that way and after the bubble starts to unwind it’s a recipe for disaster.

Another unforeseen “gotcha” specific to flipping real estate are the tax consequences of selling property that is not your principal residence. Most people are used to selling the house they actually live in and moving to another. For the most part, your profits on selling your principal residence are exempt from capital gains taxes. This is not the case for other properties which are not your principal residence. If you do manage to eek out a profit on that first flip, you’re going to have taxable income or capital gains, it’s yet another aspect you need to plan for in advance.

Those four fasttracks to financial ruin for the prospective self-employed are

1. Daytrading
2. Flipping Real Estate
3. Forex
4. Blogging

Self-employment seems an attractive concept to many people. Unfortunately some people enter the self-employment world with either unrealistic expectations or on a flawed premise. To the prospective solo worker, self-emloyment, if not properly thought-through and planned, may amount
to little more than a get-rich-quick scheme, or perhaps, get-rich-leisurely.

To those wanting to make the jump, there are pitfalls to be wary of, and here are 4 paths that are often billed as can’t fail, make money, no effort required fast tracks to be-your-own boss financial independence which are in reality potential expressways to financial ruin.

Part 1: Daytrading

The lure of the seemingly glamorous lifestyle of lounging around in one’s bathrobe, making millions daytrading can seem irresistable. How hard can it be? There are numerous “black-box” products aimed at neophyte daytraders:

no skill required, just buy when the box says buy and sell when the box says sell.

If it really worked like that, everybody would own one of the black boxes and we’d all be rich.

The fact is, becoming a professional daytrader is difficult. Very difficult. Unless you already have direct, hands-on experience in the equities markets, you should not even attempt it. Common mistakes non-financial professionals aspiring to become daytraders make include being under-capitalized and having unrealistic expectations.

Newbies expect 20%+ returns and start out with stakes less than 100K. They would be wiser to do some math. So you wanna become a professional daytrader?

Ok, how much money do you need to live on in a year? Include everything, food, shelter, clothes, car payments, etc. Let’s say it all adds up to $35K.

How big of a stake do you have to start? 100K? Where is the money coming from? Your savings? Or if you’re completely insane, borrowing?

What do you need to do to maintain your standard of living on your stake?

Well let’s say after mortgaging your house (yikes) and cleaning out your bank accounts you’ve come up with $100K and you need 35K a year to live on.

So you need to generate a return of 35% a year to maintain your standard of living, excluding inflation.

The best fund managers in the world, the ones who are paid millions of dollars to trade the equities markets, are absolutely thrilled if they can beat the major indices. Last year the DOW did 16%. A
hedge fund manager who did 16.5% probably got a million dollar Christmas bonus and a Ferarri for a stocking stuffer.

Warren Buffet, the second richest man in the world and regarded by many as the world’s most successful investor has managed an average of 29% compounded annually.

So if you want to daytrade your way to financial freedom, unless as I’ve noted, you already have oodles of real world experience, already designed and tested your own trading methodology, and are properly capitalized to the point where you could live off savings separate from your stake for awhile and subsist on less than steller returns: 3%, 5%, -10%, you should probably not walk this path.

Next part: Real Estate Flipping