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An affordable investment – 5

Strategies to maximize your investment.

This is not a sales pitch for Harmoney or P2P lending and I’m no investment adviser nor registered finance consultant. I will not receive any rewards from anyone for writing and publishing this information. I just found something that’s working well for me, that could do likewise for you too and unlike investment advisers, who charge a fat fee and get commissions, I personally have invested my money in Harmoney – you could say, I have put my money where my mouth is. There will be an equivalent organization like Harmoney in your country.

I love the idea I can make money from home, on line by using the Internet. There’s also a few things you can do to maximise your investment too:

Be consistent – the biggest killer for any investment scheme is not being consistent. Set an achievable amount you can deposit into your investment each pay. Remember – the beauty of this investment is the small amounts you can deposit to build it up. It doesn’t require a lump sum, so make the most of it by depositing each pay day. People tend to focus on the amount rather than the frequency they deposit into their investment account. Down the track, if something comes up and you can’t make the full amount, you tend to think it’s not worth depositing a smaller amount – wrong!

One of the nicest things about P2P lending investment is you can deposit anything, it doesn’t have to be $25 or more. It goes into a bank account and when there is $25 or more, you can buy a note with it. If you can’t spare $25, depositing less this pay, is better than nothing. When you see it grow and get to say $22.00, you’ll be motivated to put an extra $3 in to afford to buy another note.

Make a rule at the very start, to deposit every pay, regardless of the amount, then select a manageable amount to deposit. Because my wages were up and down like a yoyo, I decided to put in only $25 a week. There were a few weeks where I couldn’t spare that, so I put in only $5.00 (2016 had some wild ups and downs for me – redundancy, workplace injury etc, in hindsight, a crap year but I still put something away every week).

Make a plan and stick to it – As your investment grows your attitude will change. Many people start taking more and more risks as they see the returns growing their investment. It’s the greed syndrome. What they forget is they are raising their risks of failure. Each loan has a credit risk from A1 being the lowest risk, to F5 being the highest risk of default. When you see a B3 rated loan at 15.16% and compare it to an F3 loan at 39.61%, it’s tempting to take the F3 loan but there is a significant difference in the chance of a default. Set out with a plan on day one and stick to it. My plan was to distribute my notes over all the categories evenly. This way I spread the risk of any defaults. Today I still use that same strategy.

If you feel this is a high risk investment strategy, then plan to have most of your notes in A and B loans.

Diversify – this is something Harmoney also stresses heavily but it applies to any investment.. Invest a single note in each loan rather than many notes in one loan. You will reduce the risk of losses from any defaults. Defaults are not common but they can happen so we have to factor them into our planning.

The way I look at it is: Murphy’s Law says that if only one person will default, the chances are it will be the one I have invested in. By investing in many people, The chances of all of them defaulting is much less than just one person. If I make 20% each on 5 notes and if the 6th one defaults, I haven’t lost any money (I haven’t gained either). The returns on the 5 will make up the loss on the 6th.

But it gets better – this only applies if the 6th person defaults on the very first payment. That’s rare. Most defaults occur down the track, when part of the loan is already paid off. In this case, you are not even losing the full value of your note, part of it will have been repaid already. In my portfolio, I would have to have every third note default before I would lose money. That’s highly unlikely.

An affordable investment – 4

Starting off in P2P lending investment

This is not a sales pitch for Harmoney or P2P lending and I’m no investment adviser nor registered finance consultant. I will not receive any rewards from anyone for writing and publishing this information. I just found something that’s working well for me, that could do likewise for you too and unlike investment advisers, who charge a fat fee and get commissions, I personally have invested my money in Harmoney – you could say, I have put my money where my mouth is. There will be an equivalent organization like Harmoney in your country.

The key factors to look for are:
1. No lump sum minimum to start up.
2. They have a credit worthiness assessment system for their borrowers.
3. They have a collection process for loans in arrears to prevent defaults.
4. They respond to your questions and not just divert you to a FAQ.
5. They withhold funds for taxation.

Most high yielding investments require a large amount of money and a high level of risk. Bank interest is below inflation, so investment has become beyond the reach of the average person who wants to get ahead. P2P lending could be a solution. It does have risks but I believe when you compare it to other investments, you have more control over your risk. It requires no lump sum to start it off, returns very good interest and locks the money away so we can’t spend it until it’s grown. Unlike fixed term investments the funds trickle back into your account so you can accumulate them and re-invest them.

Research – do your research first. Check their web site and also search for complaints with them. If the P2P organization is called XYZ, then do a search for “complaints about XYZ” , “Is XYZ a scam”, “Problems for lenders with XYZ” and “Borrower problems with XYZ”. Often you’ll get some moaners who broke the rules, so read the results with an open mind.

If they appear good, open an account and deposit a small amount, say enough for one “note” only. This should be money you can afford to lose. The idea is to see how the system runs. How long does it take between depositing to actually owning a note. This is important because as P2P lending becomes more popular, there will be a scrum for buying notes, you need to know the processing time. Watch their site once a day for a week or more. They will usually have one day where they release a lot of loans – day where you have far more choices.

Look at their borrowers. Who are their customers? Are they borrowing for home improvement, debt consolidation, holiday expenses or are they all businesses that could fold tomorrow and vanish into thin air. Ideally you want an assortment, not all “Ebay Power Sellers looking for investment funds to grow their business”.

Are they trading in fiat currency or crypto-currency (e.g. Bitcoin). Crypto-currency means you can trade internationally but you’ll need extra security to secure your digital funds (e.g. a cold store digital wallet) and there will be an extra delay in lodging funds to purchase notes.

In the next installment, we’ll look at some ways to maximize your returns and reduce the risks:

An affordable investment – 3

Creating personal wealth through Local P2P Investment
After looking at a few options for P2P investment, I chose Harmoney. I can make money from home and on line, using the Internet. By depositing small amounts I can afford, on an intermittent basis, I can build up a substantial investment I could not afford otherwise.

This is not a sales pitch for Harmoney or P2P lending and I’m no investment adviser nor registered finance consultant. I will not receive any rewards from anyone for writing and publishing this information. I just found something that’s working well for me, that could do likewise for you too and unlike investment advisers, who charge a fat fee and get commissions, I personally have invested in Harmoney – you could say, I have put my money where my mouth is.

The interest rates with Harmoney P2P loans range from 9.99% to over 39%. The risks rise accordingly in relation to the interest rate. The higher the rate, the higher their assessment of the risk of default but there are some ways to reduce the effects a default would have on your total portfolio:

Screenshot of Harnoney's Lender's page
A screenshot of some Harmoney loans on offer, showing the risk rating and the interest rates.

Only buy one note in each loan. If you want to buy 5 notes, buy one note in 5 different loans, as opposed to 5 notes in a single loan. The chances of a default wiping out your investment are reduced through diversification. If one person defaults you will only lose $25, not $125. At 20% interest rate, you can lose one in 5 loans and still break even (actually due to the compounding effect, this is possible with just 2 loans at a high interest rate). It’s now January, 10 months since I started investing in Harmony. I have 74 notes and only two have defaulted. Even then, they didn’t default on day one, so I still got some money back. I didn’t lose the whole $25 outlaid for each loan. The proceeds from all the other loans will still yield me a return of 23% on my investment portfolio and that’s with those defaulted loans factored into the calculations.

Your greatest risk is at the very beginning when you have the least number of notes to diversify with. One default when you only have one or two notes, is devastating. One default when you have 50 notes is not a tragedy.

Accept the fact that there will be some defaults and they can occur in any assessment score category. Just because the person is scored A1, doesn’t mean the loan is bullet proof either. It does mean that statistically there is less risk of a default than an F5 loan.

To reduce the risks, invest in many notes right across the risk range. Reign in the greed impulse to invest only in the high interest notes. It’s easy to see the A1 notes at 9.99% as low returns, compared to those at 39.99% but even at 9.99% you are investing at a rate far higher than any bank will offer you and you are able to invest small amounts. Try that with a bank!

I started with 10 notes in March this year. They were spread across each score category. To date none of them have defaulted, all have been making payments on time. Today (December 2016), I have 49 notes, one has been fully repaid, four are late with one payment and none have defaulted (so far!). Even if all four default the total return after tax, on my Harmoney protfolio will be 16.47%. Try getting that from any institution and in only $25 investment increments!

In the next installment we’ll look at some strategies to maximize your return, supplement your portfolio and reduce your risks as you create a P2P investment portfolio.

An affordable investment – 2

The risks – International P2P lending

I also looked at some International P2P finance organisations. The one that appealed most to me was Bitbond, run from Germany. It transacts in Bitcoin and doesn’t require a huge investment startup deposit, however the part I was wary of, was the Bitcoin itself. The value of Bitcoin is extremely volatile, especially lately with hackers stealing from exchanges. Also they favored European accounts, making it a bit messy for anyone starting up outside the European community. Lately, thinking about security (as opposed to being user friendly) they asked for video identification as an extra security measure. That sounded fine at first, until I discovered they wanted me to hold up my passport to my face, in the video. Imagine if their security was preached, what would that be worth to an identity thief?

My investigations uncovered some complaints about unusually high losses resulting from loan defaults with Bitbond. It seemed they did very little to follow up defaults. Their last resort was to give you the details and let you pursue yourself. Oh yeah – I’m going to chase an eBay seller in Paraguay?
At that default rate, it wouldn’t be long before they gained a reputation as a soft target and all their customers were Nigerians. (They have since partnered with a credit collection organisation and significantly reduced their default problem.)

While they gave me assurances that their system was secure, the customer I.D. number didn’t work in their software either. As a programmer for over 30 years, if you can’t get your software to work in one area, you can’t assure people your security will work in another. It’s a whole package that either works or not. Much in all as I liked the international aspect of Bitbond, I have serious doubts about supplying such sensitive personal information to any organisation with software issues. While I have researched their methods, I have not opened an account and tested them and would have strong reservations about advising anyone else to do so. Bitcoin transactions attract hackers like bees to honey so you can’t be over cautious, in my view.

The risk with any form of lending, is the person could default and not repay the loan. Harmoney use the same credit collection practices as any other lender, so the risk is no higher than if you loaned the money through a solicitor, in my view, with one huge exception: if the Harmoney customer person defaults I’d lose $25. If the solicitor customer defaults, I’d lose at least $2,000.

To summarise, International P2P lending has more risks than local P2P lending because:

  1. It uses cyber currency, requiring extra security for your currency.
  2. It is usually based in Europe or the USA and has problems, or at least extra steps to deal with a nion European or non U.S. bank.
  3. Collection problems – it’s difficult and very costly to collect debts from hundreds of different countries.
  4. Because you are dealing in a foreign currency,transaction fees can eat heavily into your returns.
  5. Higher defaults because the borrower is not local and difficult to recover funds from.
  6. Higher debt recovery costs because they are operating overseas through agents with extra exchange rates and fees between you and the borrower.

While there’s a certain romance in becoming an International Investor, come back to earth – there’s also a lot of added costs. Unless you are looking to invest a large sum, I would not suggest International P2P lending with any organisation. There’s better opportunities closer to home.

Next installment we’ll look at one.

An affordable investment

I came across an article for peer to peer lending, purely by accident and decided to do a bit more research. I found several sites that managed P2P Funding. Most wanted over $1,000 to start but to my surprise I found one here, right on my doorstep in little ol’ New Zealand that ticked all my boxes.

I suppose, like me, when someone says the word “High Yield Investment”, you immediately imagine you’re about to see some great idea that you can’t afford, probably run from Queensland. An idea that will need a thousand (or usually many thousands) of dollars to start off and as a result makes the rich, richer. When they start talking returns on your investment, with percentiles well into the double digits after tax, when the banks can’t offer you 5%, well you start to think it’s a fairy story.

When I discovered this P2P lending investment back in March 2016, that even I could afford, I decided I’d test it. I have to say at the time, it sounded too good to be true but I couldn’t see any reason it wouldn’t work. Writing consumer articles, I set out to research this apparent scam from the inside, by investing $25.00 in it.

I had a few questions so I rang their help line and spoke to a human (with no Indian or Filipino accent) who in addition to answering all my questions, went to great lengths to explain the risks, explaining that having only one note invested, did mean a single default could wipe out my entire investment portfolio. If on the other hand I had ten notes, one going bad would be more than offset by the returns on the other nine. Expecting a sales pitch to come, I was disappointed when he simply said that his advice was to get a few more notes ($25 investments) happening as soon as I could afford them. By the end of March I had invested another nine lots of $25.00. After all, to be fair in my review, I needed to give them a fair go right?.

Just for the record, I’m not a financial consultant or involved in the financial industry in any way. I am not in any affiliate program or any other arrangement to receive a commission or any form of reward for the information that follows. If you copy what I did, I will receive no benefit at all.

I have some shares in a “blue chip” company that has done better than a lot of other “blue chip” companies but they are currently yielding only 3% ROI (given the performance of the ASX that’s not doing too bad). You don’t hear stories of fortunes made on the stock market any more, do you?

If I was going to retire on anything except abject poverty (because my superannuation was used up when I was retrenched) I had to work some kind of investment magic. High interest bank savings accounts were so bad that even the banks didn’t call them that any more! Experience had taught me that unless you had thousands to invest, the only people who come out better off are the investment advisers.

Like 99% of people out there, I needed to find some investment with a high interest rate, that didn’t require a lump sum to start off and would accept small deposits. As a contractor, my wage was up and down like a yoyo, so I couldn’t rely on making regular deposits. That ruled out any investment in a trust fund and the ones I knew were yielding much lower returns than this promised.
It sounded too good to be true.
You be the judge:

1. A high interest return (starting at 19.99% and going upwards beyond 30%)

2. Did not require a lump sum to start up.

3. Could be fed with small deposits (a minimum of $25.00) on a drip feed basis.

4. Did not lock me in to regular payments. It would accept intermittent payments.

Realistically when it comes to any form of investment the risks are proportional to the returns. If you want high returns from a high interest rate, you have to be prepared to take a high risk. However, given what else was out there, I didn’t think the risks were that high. Spreading many tiny investments over many different contracts was a good way to reduce the risk of failure.

The organisation I discovered is Harmoney (there could be others too but I stopped looking) and here’s how they work:

  • Someone wants to borrow money, so they approach Harmoney for a loan.
  • Harmoney vets them the same way a bank does and gives them a score from A1 (lowest credit risk) to F5 for the highest chance of defaulting during the life of the contract. This determines the interest rate they will pay on the loan.
  • They then divide the loan amount into lots of $25, called “notes”. So a $5,000 loan will become 200 notes and publish the borrower’s details, enough to give you some idea, without disclosing the borrower’s identity, like age, location, marital status, owning or renting, years at their current address, monthly income, purpose of the loan, monthly repayments and of course their credit risk score and interest rate.
  • You as lender, can buy a note in that loan and when 200 notes have been bought, the loan becomes official.

Because they are not a bank with a huge administration with a parasitic management, shareholders, overpaid board members and hundreds of branches, nearly all of the interest is returned back to you.

Once you have opened an account and they have verified who you are, you can start with just one note at $25.00 if you want. They only lend for 3 or 5 years so your money is not tied up too long.
This is no get rich quick scheme and there are risks and in the next installment we’ll look at those risks.

Creating a residual income – Advertising frequency

No-one wants to look at a page full of ads. On the other hand, we want to get the most from each page. The art in all this is to use the right type of advertising media that suits your content, the least times on your page. We are after a balance where we want the reader to absorb the content and feel like they are not being assaulted with lots of advertising.

Advertisement frequency – The advertisers will tell you that lots of large video ads work the best. Don’t be fooled; there’s different types of advertisements for different situations. You won’t look at a page that is full of ads and difficult to find the content you are looking for. If I came up in a search as a top ranking food site for pet advice and you see a page full of advertising, you will backtrack and go to the next site in your search results. All that SEO work to get on page one was wasted. This is a common occurrence on the Internet and has become so bad that people are starting to flick past page one of the search results and begin looking at page two or three.

You need to place the adsvertising so that it spaces your content, not replaces it. I would limit the number of advertisements per page, to approximateley 5 with a maximim of three visable in any one screen load.

Any more and the reader feels they are in a minefield. Keep in mind that most readers will track their reading with their mouse, so are vulnerable to accidentally clicking it once in a while. Ending up on another site because they inadverdently clicked your advertisement, will leave them feeling conned.
And while we are talking about content, there’s one simple rule to remember when designing content – People avoid reading. So, break up your content into bite sized paragraphs and avoid lots of lines of text. (We’ll look at content design more on that later in a later article). A banner add every so often, between paragraphs, espacially at the end of one topic before you start another, will work well.

Getting the most out of your advertising – SEO

How to get started
You can simply open an account with Google or some other advertising provider, follow their prompts and end up with a few lines of code to create the advertisement on your web page.

You will need to choose what size block of advertising, whether it’s a vertical column, banner (wide band) to span between text or a block, like a picture on a page that text surrounds. Now insert the advertising code anywhere within theandtags on your webside code. It is actually as simple as that, however you’ll be lucky to make enough to pay for the web hosting. There’s a few refinements required to generate any form of income:

SEO or Search Engine Optimisation is an important factor. Simply put, it is the various factors in web design that make your website appeal to search engines. In other words, if your page has great SEO, it will appear within the first few pages of a web search on your topic. Since most people will only look at the first few pages of their search results, if you aren’t there, you won’t get seen by too many people. This is a highly competative field, where the criteria are constantly changeing. If you want to do some serious business on line, you would be best advised to use a search engine expert.

There is a trap here though; the search engines sell placings on almost all the first pages of any search result, by auction. In other words if you search for, say bicycles, on Google, you will get something like this:

screen shot of Google search for bicycles
Most of the first page of any search is not searches at all – it’s paid-for content

So if you look at the search page here, there’s only one real search result on it, Hub Cycles and I suspect they paid a fortune to appear number one too. But it’s probably a waste of money.

Several years ago, everyone looked at page one of their search result and might have gone to page 2. Today, because page 1 is mostly advertising or sales pages, people are looking more often at page two and flicking past the first page. Secondly people don’t pay much attention to the bottom of the page anyway.  It used to be vital to appear on page 1 of any search, today it’s not so important.

To get the volume of traffic, you are better off sharing links to (and from) other sites for several reasons:

Many searches today are done by image rather than text. Last decade people typed in what they wanted and picked from a list of web sites. With all the paid advertising, people are searching by image, rather than words. They type in the subject of their search, then select “images” from the top of the search result page (in blue in image below).

Screenshot of Google image search for bicycles
Using Image search I get 12 genuine websites rather than just one and a heap of ads.

So searching by image rather than words, gives me 12 choices of genuine web sites rather than a heap of ads and one website. More and more people are using image searches these days, to escape the advertising. The emphasis is moving away from solely being on page 1.

Even if you made it to page 1, 2 or even 3, very quickly someone will depose you. It’s an ongoing battle all the time. Conversely if you have a link from another site, it is permanent and can only be removed by that site owner. It’s like a trusted endorsement from their site that can direct traffic to yours. The added bonus, is it also makes your website more appealing to the search engines as well, so you get nearer to page one. The visitors you get through that link are already sorted as being highly interested in your topic, not just random searchers.

The important thing to remember is that the search engines are always trying to become more human like. It any one search engine can be more human than the rest, it will get the results humans are looking for and win the traffic (searchers) from the other search engines. They are constantly evolving their search bots. If you simply make your website more human friendly for your readers, you will appeal to the search engines, even as they evolve.

Mimenta’s rule is, create good content and you’ll attract good readers in good numbers.

Good readers in good numbers will create a good income

In the next intallment we’ll look at where to place your ads.

Making Money On-line – Content Advertising

We call the act of tuning a website to generate money, “monetizing. Content advertising is probably the first monetizing method you will encounter. It’s simple and requires no extra work, once the required code is placed on the web page but there’s a few points you need to know first.

What is it?

Technically speaking, it’s a small block of code that you add to a web page coding, that allows an advertiser access to a predefined space on the page, to place an advertisement. That space can be a piece of text, an area for a still image or a window for a video clip.

However it’s a bit more involved. As the publisher of the web site you get to call a few shots. You can choose:

  • The colours of the ad content (except of course with video ads), so it blends into your overall web page. Be careful here though; many sites try to make the ads appear as if they are part of the normal page content, rather than advertising. Don’t do it. It can leave your visitors feeling deceived and that will influence their overall impression of all of your website. Coordinate the colours enough so the advertising looks like it belongs on your website but is still obviously an advertisement and not mistaken for normal content.
  • The size of the advertisement (from a range of sizes supplied by the advertiser). Most sites use a panel to one side for navigation purposes. You can make the waste space under those navigation buttons pay by fitting tall column advertising there or use a wide banner advertisement to separate one section of content from another.
  • The advertisers who you don’t want to have on your website. It makes sense if I have an online auction website, not to feature advertising for eBay, my major competitor.
  • The advertising format – some sites get better results from text links, others do better with pictures and some work best with video. If your site contains lots of pictures, a picture advertisement will compete with the content or it could get lost within the page’s content. In these cases a text advertisement will yield better results. A video advertisement could be a distraction from the site’s content, in some cases or it could break up a large boring section of text into more manageable blocks.

The content of the web page influences the advertising that will be displayed on the website, so there’s some sophisticated progams (called bots) that read your page and discern the topic and how relevant it will be for certain ads.

The largest supplier of this type of advertising is Google and they call this type of product Adsense. In terms of payments, there are two systems that generate money: PPC or Pay Per Click and PPA or Par Per Action.

  • PPC or Pay Par Click works on you receiving a small commission each time someone clicks on an advertisement on your web page. It’s only a small amount each time, so don’t bank of an early retirement.
  • PPA or Pay Per Action relies on the visitor clicking on the advertisement and completing some action afterwards, like purchasing something, filling out a form (e.g. adding their details to a mailing list). Of course it pays a lot more that PPC but you get less strikes too. Again, don’t plan your early retirement around this one either.

Keep in mind these generate small incomes only, so you need a lot of sites with ads. To optimise the responses to your advertising, it’s important to know which areas of the web page will get the best responses. For example, we always start at ther top of a page, so this is a hot area for placing an advertisement. We rarely look at the bottom of a page that is hiddern below the screen so advertisements down there score less hits.

To give you some idea of Adsense income, a good website (2000+ unique visitors a month) can yield approximately up to $20 a month.

In the next instalment we’ll look at maximising your advertising for the best income.

Making money on line – the truth – Part 1

The Internet is awash with tales of amazing wealth, created overnight with simple work from home systems. The advertisers seem to favour one of two methods – a picture of a billion dollar yacht or some car that looks like it should have come from a Batnman movie, with the tag, “Watch this video before it’s banned”. The other favourite is a picture of a young woman or man with a pile of notes or fast car and the tag, “Melbourne Mum earns $653 a day”. Of course the district the Mum lives in will change to a town near you and the income amount will vary.

The truth is, there are no free lunches and that applies to the Internet too. While there are those who made their millions on the Internet, they did so by creating something unique that most people wanted. Simply creating a website and expecting it to sell something and make you an income, is fanciful. It’s not that simple.

The fact is, even a top performing website will net you around $15 to $20 a month. To make an income, you’ll need to run 20 websites. They don’ t tell you that.

The websites themselves have to be specially designed to appeal to search engines, more than your simple WordPress site. They have to be specifically designed for SEO (or Search Engine Optimisation). The site has to be rich in popular search words that relate to the site’s topic. Then there has to be a lot of other sites linking to it, to convince the search engines it is an authority on that subject.

It doesn’t stop there; you will need to pay for Adwords as well. These are words that people use to search with when they are looking fpor something on the Internet. They are auctioned off and the successful bidder will get traffic (searchers) directed to their site when their word is used in a search.

Then you can pay outright to have your website display on the top of a search engine page. These are “Sponsorsed pages”.

If you are thinking of deriving an income from a website on the Internet, you can but be prepared to work at it. It’s a job, just like everything else.

Over the next few instalments, we’ll look at some of the ways to make an on-line income.

Online shopping – definitions and some fine tuning

Previously, I mentioned eCommerce software and POS Systems.A few readers commented they were not familiar with these terms.

If it sounds like Geek-speak here’s some explanations

  • eCommerce software is an on-line shop. Goods are arrayed in either a matrix or a scrolling window and information about the item is displayed as a caption beneath, including price etc. The more sophisticated packages allow for extras like discounts, loyalty points, multiple purchase discounting and wholesale pricing
  • POS software basically turns a computer into a cash register with Z readings, categories etc plus inventory management and a range of other businet functions.
  • These systems are usually a major financial outlay for start-up businesses because we tend to think they require a degree to set up (not so). Usually a business will be slugged with a fee for the package and an ongoing fee for maintenance. They don’t require much maintenance once set up, usually only adding new product and removing out of stock items. They are available free as open source software packages, either as stand alone (totally independent), cloud (based on software on the Internet and you add or remove data) or Freemium (you get a simplified package free and you pay to be supported/updated/added to).

Using an escrow service

We hear horror stories of online rip-offs, especially when it comes to paying for goods that don’t arrive.

Using an escrow service like PayPal will help show customers you are genuine. The service acts as a middle-man, releasing the funds when the goods have arrived and offering a refund service for defective products.

The truth is, without an escrow service there can be rip-offs on either side. You will also need an EFTPOS facility, so people can pay directly by credit card.Later you will need a secured site (SSL) and a VPS if you are handling credit card data.

To set up an online store, I suggest you begin with a simple website first and attach the online store later. Finally a POS system if you want to take payments directly.

As I mentioned earlier, set up a landing page immediately you get a web host. This allows you to ‘age’ the site. You can put up a few pages as a teaser for what is coming. The search engines will be alerted and begin ranking your site. They use a variety of criteria to rank your website and age is an important one, so get a page or two up on day one and mention what your business will be doing on the Internet.

I have created several online store websites myself. It’s not hard once you have done it once but for the hours you will spend, that would be more productive in your business, I strongly recommend hiring a web designer.

Personally I would not recommend any new business to start off with a web store. If you want to move stock and generate an online presence, use eBay, Gumtree, Trade me or some other buy-sell-swap site in your area – it will cost a lot less.

This will give you a chance to test the market first.