small business

The myth of passive income streams for small businesses

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I regularly cover Amazon scams on my Lean Media blog (see “AI gives new life to Amazon low content book scams“) and create videos detailing some of the specific lures and schemes that dominate YouTube and social media. Sometimes, I get responses from people who have fallen for the tricks … or are desperate to learn about passive income streams that will translate to easy money.

passive income streams amazon KDPA recent viewer of one of my passive income videos reached out to tell me she was at her wit’s end. In her 50s, she was tired of her career and was hoping passive income streams could lead to real income to support her financially. It had dawned on her that the get-rich-quick Amazon schemes, whether using Amazon KDP, Audible, or Amazon FBA were the modern equivalent of fool’s gold. What were her options?

My first piece of advice: Don’t despair.

Howard Anderson, one of my business school professors at MIT Sloan (he later went to Harvard Business School and now teaches at Dartmouth) once told our Entrepreneurship class, “it’s always darkest before the dawn.”

There’s real truth to this simple saying. My first small business, a software startup, failed. My cofounder flaked after getting some equity in the company and cold feet, and left me swinging in the wind.

usps shipment at our Newton small business
An outbound holiday shipment at our Newton small business.

However, that failure led to the creation of the second completely different business which is still going strong 10+ years later. It took a while to scale it up, but this is now a small business based in Newton that provides a salary and other benefits.

My second piece of advice about starting a new venture: Find something that people like and are willing to pay for.

Not just something they say they like. Rather, it needs to be a real product (it can be a prototype or soft launch or demo version) that is resounds so much customers or audiences are willing to take out cash or a credit card and pay for on the spot.

It can be a product, a service, a piece of media, or something else. Effort then should go into trying to scale it up (finding more customers, lowering marketing costs, etc.)

My third piece of advice: It’s also possible to do a venture on the side or support it with activities like consulting. Take advantage of new trends and technology platforms. For instance, if someone has expertise in something related to mortgages, maybe this person can find a bank or finance company that needs remote customer service agents (taking advantage of the work-from-home trend) while the new product or venture is developed on nights and weekends.

Bottom line: Passive income streams promoted on the Internet are bogus. Stay away from “passive income” traps, especially on Amazon. Most are scams to get people to sign up for expensive masterclasses, and provide terrible advice that will lead to wasted time, lost money, and possible account bans. It’s possible to create a legitimate online business, but it takes work, creativity, and patience … not easy money fantasies.

Newton zoning reform: 2 factors that will make or break Newton’s small businesses

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I am a small business owner who resides in Newton and currently rents commercial space on Commonwealth Avenue. I recently posted about my business on this blog. In the discussion of Newton zoning reform, two issues related to zoning for Newton’s village centers (West Newton, Newton Highlands, Auburndale, Nonantum, Waban, etc.) that will have the biggest impact on the ability of small businesses to flourish are customer access and costs.

Regarding access: No one likes parking lots, but if parking is eliminated many types of small businesses will be unable to function in the absence of realistic substitutes. The MBTA’s Commuter Rail system is not a realistic substitute for customer access. Nor are bicycles (see West Newton traffic is a disaster).

My parents live within walking distance of one of the Newton villages. They walk there when the weather is good. But there’s no way they’re walking during the cold and dark winter months to pick up a prescription or get a bite to eat.

Small businesses like mine also depend on deliveries and pickups, which take place throughout the day during the peak season. This requires parking (I often use my personal car to drive to the main post office and UPS store in Newtonville) as well as vehicle access for UPS and USPS trucks. Here’s what my office looked like a month ago:

Newton small business shpping

Bottom line: Bicycling and public transportation are not realistic options for most residents to access Newton’s small businesses, particularly on the north side of Newton.

Luxury apartments vs. Newton’s small businesses

I listened to the West Newton zoning feedback session. The comments from the business owners on Border Street were very telling regarding the impact on their blue-collar businesses and the prospect of conflict with new tenants who discover their expensive new apartments are next to working businesses with deliveries, noise, and employees seeking parking.

Restrictive and expensive commercial rents will be the other issue that kills off small businesses. One only needs to look at Kenmore Square, a thriving commercial center 25 years ago, which has turned into a corporate dead zone once a dominant corporate landlord took over and rebuilt Kenmore Square for luxury hotels, condos, and commercial space.

Planning officials say that they don’t have any ability to control ownership of property, but there certainly can and should be incentives to avoid monopoly situations, including elimination of “by right” developments, which will drive up costs for renters, whether they are “luxury” residential units or Newton small businesses.

When it comes to understanding the needs of small businesses and Newton zoning reform, the city council should consider the small business impact just as they look at environmental impact, traffic, and diversity.

Small businesses struggle against big box stores, Amazon, and luxury developers … and adapt

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As the owner of a small business specializing in genealogy supplies, and someone who is passionate about local history, I follow several historical Facebook groups focused on neighborhoods in Newton Massachusetts and northern New York. It’s a lot of fun looking at the old photos and reminiscing about people or activities or buildings from decades ago. The photo at the top of this page is from near where I grew up – the line of shops on Washington Street in West Newton, near the former location for the West Newton branch of the Newton Free Library.

I’ve noticed people are particularly delighted by the pictures of main streets commercial districts and the small shops that lined the street (sample comments edited and anonymized):

“That was a great place to grow up … we would walk up town go to the drug store and get a soda that they mixed at the counter.”

“When I was 6 years old I would go the corner market with a note and they would pick the goods off of the shelves and put them in the bag along with any change.”

“I remember there was a second hand store that helped my mom when we had no money … the owner gave my mom winter boots, toys, decorations, so much love … My mom went back every year to buy things to help her business keep going and we became like family.”

“My Dad would drop me and Mom off near Main Street. We’d stroll to the shoe shop and Mom would get me my Hush Puppy shoes for school. Then off to Woolworth’s for a chocolate milkshake … it was our tradition!

“Next to Dad’s barbershop, the apple pie a la mode at the Lounge could not be beat!”

People clearly appreciated the personal touch. They loved the genuine concern the owners and staff showed for their customers. And there was mutual trust.

Broken cycle of small business renewal

Many of those little shops and eateries and small department stores are long gone. Furthermore, on main streets and crossroads across North America, the cycle of small businesses closing and new ones taking their place has been broken.

st lawrence county 1970s

Over the summer when I visited northern New York, I drove down the street shown in the photo above, and there were boarded-up windows everywhere. It turns out that the remaining local shops were dealt a fatal blow in the early 2000s after Walmart came to town, building a giant superstore a few miles away along the state highway. Business evaporated, and the local businesses shut down. It’s a typical pattern, the so-called “Walmart effect,” particularly when Walmart builds new stores in rural areas:

walmart effect small businessIn my own hometown near Boston, a larger population base gives local small businesses a better chance of survival against the big box retailers. But there are other threats, from Amazon to COVID. Here in Newton, a looming crisis for small businesses is the appearance of luxury apartment developers, who buy out local property owners, and redevelop the land into giant complexes that favor high-end retail tenants and national franchises over family-owned businesses and shops.

There is one bright spot for small businesses like ours: Online stores and tools that help us find new customers and stay connected with old ones, no matter where they happen to live.

As you complete your holiday shopping, please give extra consideration to small businesses, whether it’s a local gift shop in Auburndale or a trusted specialty retailer. We strive to provide that personal touch, mutual trust, and special products that you won’t find elsewhere.

Best printer in Newton or Waltham

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Best printer in Waltham or Newton is Red Spot Printing I’ve used a lot of printers in Newton and Waltham, from small shops to the big national chains. I even had my graduate thesis at the Harvard Extension School bound by a book bindery located on a Waltham back street. Currently, I print hundreds of thousands of sheets every year for my business including consumer stationery, ISBN reference sheets, and direct mailings. The best service and quality comes from the smaller printers, and among that select group, one company stands out: Red Spot Printing at 182 Newton Street in Waltham.

I first got to know Red Spot Printing in 2015, when we needed a new local printer to work with. Julie and the Red Spot team not only provided wonderful service, but were also willing to work with us on all kinds of new genealogy sheets requiring special paper, ink, or printing techniques. Some of these designs, including the large print genealogy sheets and the Genealogy Kit for Kids shown above, are printed nowhere else. All are printed on acid-free paper on Red Spot’s array of offset and digital printers.

Why we like local Waltham and Newton businesses

Red Spot, like our own company, is a family-run business. We like that, and value the face-to-face contact. Julie’s father founded the print shop in 1974, and some of the employees have been there for decades. When we are doing pickups, family members and other staff will often help us load up the car. When Julie’s kids are old enough, I expect they will pitch in with the family business, just as our son for our own does from time to time.

While we could search for cheap printers services overseas, switch to a national chain, or opt for less-expensive paper, Nicole and I wouldn’t dream of doing so. For our core partners, trust, quality, and personal service are paramount, and Red Spot checks all the boxes. We think when you handle our high-quality genealogy charts or technology cheat sheets in person, they will check all of your boxes, too!

Redesigning our Genealogy Kit for Kids to include fillable PDFs

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Last month, my company redesigned the PDF edition of our popular Genealogy Kit for Kids using fillable PDF fields. This means kids and grandkids can type into the PDFs using the free Adobe Acrobat Reader app on a PC, Mac, or iPad, and print out the results.

Many family historians, ourselves included, were bitten by the genealogy bug when we were young. It often starts with simple questions:

  • Why do we have this last name?
  • Where was grandma born?
  • Why do we celebrate certain events?
  • Why do we eat special foods in our family?
  • How is this cousin related to us?

The Kids Genealogy Kit taps into this natural curiosity with interview sheets, simple ancestry charts, and maps to trace global origins. It really encourages children to talk with their parents, cousins, aunts, uncles, and grandparents in order to better understand family history, origins, and cultural traditions. For instance, it includes maps covering every inhabited country that kids can mark up with ancestors’ home regions, and includes interview sheets that children can use to talk with cousins, siblings, parents, aunts, uncles, and other relatives about family history and traditions.

These conversations is where some of the best learning experiences can take place, revealing stories and clues that can become the foundation of family history in the years to come. It also helps to build family bonds through personal conversations.Genealogy for Kids

When we officially unveiled the Genealogy Kit for Kids at the RootsTech conference in Salt Lake City a few years ago, we got a LOT of positive feedback. Some attendees liked the fact that it wasn’t yet another screen-based activity for children. A few educators were excited about the possibilities of including the kit in classroom activities.

Last year, the following review really touched us:

I bought this for my 12-year-old niece, who has recently begun asking questions about her heritage and family history. It has made a wonderful introduction to Genealogy, and a great guide to asking the important questions of their older relatives. This Kit has passed the time at family gatherings and on car trips. It has gotten everyone involved in collecting and recording a gold mine of family information, stories, and anecdotes.

However, this same reviewer also had a request: Would it be possible to make fillable PDFs so her daughter could type the information using her iPad on long car trips? It took some time, but the fillable PDF set is finally here. You can learn more about kids’ genealogy PDFs on the EasyGenie website.

Should diaries and other private papers be left to descendants?

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We had a conversation recently about a book on Swedish Death Cleaning. It sounds morbid, but it got us talking about the types of papers we want to hand down to the next generation, which might be important to family historians and genealogists of the future. This ties into our family business, which designs and sells high-quality genealogy charts. for recording ancestry and family stories.

While we do not advocate saving papers of limited value (business records, financial statements, school reports) what about other types of documents, that may be considered core genealogy, like a diary?

1918 pandemic diary

Such documents could include personal letters, journals, or writings that reveal something of a person’s life or perspective. We had conflicting ideas about this:

Me:

What I wouldn’t give for a copy of my great-grandmother’s diary!

Spouse:

A journal is a very personal place for expressing random, rambling, and sometimes unsettled thoughts. It’s therapeutic – once you put it on paper, it makes you feel better. But I wouldn’t feel comfortable for people to look at my private thoughts.

She makes a great point. Privacy concerns extend to other types of documents, too. Would you want an old letter to an ex, written when you were 20 years old, preserved and shared with descendants? What about an angry letter, or a document detailing painful medical issues?

Famous authors sometimes request the executor to destroy private papers. Franz Kafka, Edward Albee, and others had specific instructions governing letters, manuscripts, and other documents.

Why Amazon’s “Buy Box” policy attracts counterfeit books and cheaters

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If you follow publishing news like I do (I own a small publishing company that specializes in how-to guides and technology cheat sheets) you have probably heard about Amazon’s misguided policy change from a few years ago that allowed third-party sellers of books to “own the buy box” on publishers’ book listings. I predicted at that time that it would attract a wave of counterfeit books, which has proven to be true. But I didn’t anticipate another kind of cheater: Third-party book sellers passing off used books as new.

Amazon opened the buy box to booksellers in 2017. It said that it was following the same policy that was used in other parts of its marketplace, which allows third-party sellers to control the buy box on product listings if they offer the product at a lower price than the official source, which is usually the manufacturer or distributor.

Publishers immediately cried foul. This statement from the Independent Book Publishers Association outlines the concerns of independent publishers (disclosure: I was an IBPA board member at the time and gave feedback on early drafts).

The types of books most likely to be pirated

As an Amazon FBA seller of other types of goods (namely, genealogy charts and forms) I knew very well the threat posed by counterfeits. It’s a long-standing problem that has attracted lots of negative press (“Amazon May Have a Counterfeit Problem“, “Leveeing a Flood of Counterfeits on Amazon“, “How counterfeits benefit Amazon“) and impacted my company, which was forced to invest in Amazon’s anti-counterfeit service Transparency.

For an example, one publisher, Bill Pollock of No Starch Press, reported repeated incidents of counterfeit books being sold by Amazon. The first reports surfaced in 2017, and earlier this month it happened again.

I have been impacted by another problem that IBPA predicted: Third-party sellers flogging used books as new. It’s actually a far bigger problem for me than counterfeit books, and I now pay an independent contractor to help me monitor my own listings.

Here’s what I think is happening:

Publishers or Amazon sellers who have products that are easy or cheap to copy and have high list prices have the most to lose with the Amazon buy box policy. There is a real risk of pirates taking over listings with counterfeit, low-quality copies. Potentially, they will have to deal with third-party sellers passing off used goods as new.

My company publishes IN 30 MINUTE guides and cheat sheets. They are relatively low-margin and have a low retail price – $11.99 to $12.99 for most books, $6.99-$7.99 for the cheat sheets. Yes, they could copy the books, and do some cheap digital short runs to get bogus inventory into the system, but because my list prices are already so low I don’t think they could make much. The pirates know this, and tend to go for higher-priced titles (including textbooks) from other publishers. No Starch Press was a repeat victim of this, and I have heard of other cases, too.

Third-party sellers flogging used books as new

As mentioned earlier, I do have issues with other sellers listing used items as new. They are almost always third-party sellers concentrating on the book market, and offer the books as “new” with amazingly low prices to win the buy box or push my listing out of it. They have not purchased the book new through wholesale channels in which I operate (such as Baker & Taylor or Ingram), because the discount is below my wholesale prices — in some cases, below the cost of printing and shipping the book from the printer!

In all cases in which I have ordered one of these “new” books to determine the source, they have turned out to be used. This seller even sent a copy of our shrink-wrapped book about LinkedIn with a USED sticker on it:

Amazon Buy Box used book sold as new

This book was sold as “new” on Amazon, winning the buy box, yet was a used copy by the seller’s own admission!

Third-party book sellers playing games with shipping prices

Here’s another trick third-party sellers use to take publishers out of the buy box: Offering a new book for a ridiculously low price and then charging a ridiculously high shipping fee.

Check out the example below for C. Diff In 30 Minutes. The paperback retails for $14.99, but my listing is no longer am shown in the buy box because a third-party seller from Missouri is offering the book for $3.99. Sounds like a great deal, right?

C Diff Bogus Buy Box 3-99 sample croppedBut clicking “4 new from $3.99” takes people to a page that shows the seller charging an additional $27.99 for non-expedited shipping from Missouri to the Boston area, even though USPS Media Mail costs $2.75 for book that size, USPS First Class around $5, and a two-day Priority Mail flat-rate envelope $7.95.

C Diff Bogus Buy Box 3-99 plus shipping 640pxIt’s also not clear if the book being sold is actually new. At least one customer of the third-party seller reported that a book sold as new was actually used and “looks stolen”:

Amazon stolen book report

When I notified Amazon of this problem, they restored my publisher’s listing to the Buy Box … but the “3.99” version is still listed for sale, even though the actual cost to the customer is more than $30.

Used sales are an important option

Don’t get me wrong — it’s fine for sellers who resell used copies listed as used for a profit, and think it’s a good option for students and others who can’t afford a new copy. I also have no issue with a customer or library which received a copy of one our new books not wanting or needing it, and turning around to sell it as new (or returning it).

That said, every time a third-party seller lists a used book as new on Amazon and underprices the publisher, it’s taking money that the real publisher would otherwise get from the sale of an actual new book. It deceives buyers, and it cheats authors and publishers out of revenue and royalties.

What they are doing violates Amazon TOS, too. Despite repeatedly reporting the bogus “new” cases to Amazon, I have not received any indication that Amazon took any action. The seller of the shrink-wrapped example with the “USED” sticker mentioned earlier is still selling books as a third party seller, and has lots of negative reviews:

Amazon seller negative reviews

After observing the mess caused by the Buy Box policy, and the apparent inaction on the part of Amazon to proactively stop the cheaters or punish wrongdoers, it’s clear that publishers are on the losing end of this fight. Pirates and sellers know it, too. Amazon’s message to them:

Win the buy box however you can. We don’t care if the original publisher/creator gets nothing. We won’t police your listings. We probably won’t punish you if you get caught, or we will only give you a light slap on the wrist. Even if many of Amazon’s customers are complaining, you can still stay in business on Amazon.

In terms of sellers of other types of goods winning or losing the buy box, Amazon makes available special services to brand owners (trademark owners with items in the Amazon Brand Registry) to fight counterfeits, including expedited take-down requests and access to paid services such as Amazon Transparency. The number-one point on the Amazon Transparency “learn more” page is “Proactive counterfeit protection.”

Sounds great in theory, but brands have to pay for it! For me, it works out to about 15 cents per item to use this service, not including additional manufacturing and design fees.

In other words, I’m paying for Amazon’s failure to police their own marketplace and prevent pirates and cheats. I’ve told them I won’t be proactively signing up brand SKUs for this service unless Amazon greatly reduces or eliminates the cost.

What has your experience been with Amazon counterfeit books or other goods?

The Supreme Court shifts and businesses suffer

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For more than 25 years, Internet businesses in the United States have enjoyed a big break: If a customer in another state buys something online, the company doesn’t need to collect state sales tax or file taxes in that state unless they have operations in that state such as a warehouse or branch office.

That is about to change, thanks to the recent South Dakota v. Wayfair ruling from the Supreme Court. This essay by a tax expert explains the situation and the impact pretty clearly. I draw your attention to the concluding paragraph (note: nexus is the ability of a state to require businesses to be responsible for taxes):

Many states have enacted economic nexus rules for income taxes that create a filing responsibility based on the amount of sales in a state. These amounts have generally been set at $500,000 and above. Now, states may seek to lower those thresholds to impact more sellers, and states that have not sought income tax nexus may move forward with new legislation.

I own a small business and use the Internet to sell goods to customers all over the country. The Supreme Court ruling is going to be a big headache. I don’t have a problem with paying taxes, but I do have a problem with dealing with 50+ entities (including states and territories) that have different filing requirements that will likely entail a lot of red tape. I don’t have a full-time accountant or staff that can deal with this stuff, so it falls on me to implement systems and processes to handle state taxes outside of Massachusetts.

I blogged my thoughts on this topic in As a small business owner, this is what I fear post-South Dakota vs. Wayfair, but the end result may mean not selling to customers in states whose red tape is too much of a pain … which hands even more power to big Internet businesses like Amazon.

Amazon Advertising has a metrics problem

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Over on the Lean Media blog, I’ve written a post titled Why you can’t trust ACoS metrics in Amazon Advertising (and two alternatives). Amazon Advertising (formerly Amazon Marketing Services) is the powerful self-serve advertising platform that vendors can use to advertise their wares next to Amazon search results, on Amazon product pages, and even on the lock screens for Kindle e-readers. Because Amazon Advertising is so important for publishers, it’s a major part of my Amazon Deep Dive for Publishers video course.

One problem with Amazon Advertising is the metrics have some big gaps. In the blog post I specifically noted the problem with “ACoS” (Average Cost of Sales) and even made a video that demonstrates how a seemingly innocuous ACoS rate may be hiding a money losing campaign. Other problems include poor reporting capabilities, including no easy way to compare a campaign’s performance from one period to the next. By comparison, Google AdWords certainly has its own problems with misleading small businesses about the locations of people clicking ads and click fraud, but at least it’s possible to do a deep-dive into AdWords metrics to compare campaigns and time periods.

What’s the solution to misleading ACoS metrics? As described on the Lean Media blog, I created two other indicators, ACoN (Average Cost of Net) and ACoP (Average Cost of Profit). The problem with these metrics, however, is they have to be manually created. Here’s a sample from the actual Google Sheets page that I use for the task:

AMS Tracker for ACoN and ACoP screenshot
The spreadsheet I use to create alternate Amazon Advertising metrics (ACoN and ACoP)

Amazon could actually create one of the metrics with the data that it has. Average Cost of Net refers to net revenue remitted to vendors, so if the company swapped out “Sales” (gross sales on Amazon) with projected net revenues to the vendor, that would give a much better idea of performance.

Learn more about Amazon Advertising in my Amazon Deep Dive for Publishers video course.

Pros and cons of traditional book distributors

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Getting books onto bookshelves with traditional book distributors

Amazon has been disrupting the book industry for more than two decades. Sometimes the public hears the complaints as disputes boil into the open, but much of the restructuring of the industry is taking place quietly, without much public angst. In the post, I will discuss one of the casualties of the new world order for publishing, book distributors.

Distributors are an unseen force in many industries. They are responsible for bringing products to retailers. In the grocery and liquor industries, distributors are the companies whose trucks pull up to the loading dock in the back early in the morning to drop off a wide variety of goods that shop managers have ordered. In the book industry, distributors are the companies that arrange for certain titles to be available in Barnes & Noble, airport bookstores, and independent bookstores. Other services are available, too – there’s a good overview from the Independent Book Publishers Association (IBPA) titled “Working with Distributors.”

It’s important to note that distributors don’t represent everybody. They choose which producers they want to include in their catalogs, and take a cut from any sales that occur. They also demand exclusivity – if you sign a deal with a distributor, that’s the only outlet for your product in a particular geographic area. Obviously, if you have a distributor, you can get onto shelves in retail outlets, which increases your chance for retail sales. If you don’t have traditional distribution, you’re probably out of luck, unless you can work out a deal on your own with a shop or chain of stores.

In the book industry, distributors used to wield a great amount of power. Nearly every publisher had a book traditional distribution deal, or had a sales force to sell directly to the big book retailers. Amazon pulled the rug out from under that model, allowing publishers to offer books for sale directly to consumers. Retailers were hurt, and distributors were decimated. The book distributors who are left are now far more picky about the publishers they work with.

Do you need a distributor for your books?

At one time, I thought I needed a traditional book distribution deal for my company. This was not only to get access to new retail markets, it also seemed like a mark of industry respectability, which is important to growing companies. I did the dance with several distributors, but they didn’t work out. One bailed when it decided it didn’t like the way I managed ebook ISBNs. I pulled out of another offer when I realized the terms wouldn’t work out unless each title sold thousands of copies (many do, but some don’t). A third company completely ignored some of my requests for information, and just shoved a contract in front of my face to sign.

Ultimately, as I thought things through, it became clear to me that I didn’t need book distributors as much as I thought. It wasn’t just the cut they demanded, or the less-than-ideal business relationship. Other factors included:

  1. Once I went with a distributor, I would no longer consider readers to be my customers — it would be the distributor and their clients, the bookstore managers and buying teams.
  2. Distributors demanded a cut of ebook sales, even though they added no value to working with Amazon or other channels.
  3. There were also changes I would be forced to make to accommodate book distributors. My IBPA board colleague Leslie Browning outlines some of them here, including the necessity to have ARCs (advance review copies) ready at least six months before the publication date.

I don’t have a distributor now, and I don’t see it as holding back my business. In fact, I had the best year ever for my company last year, thanks to strong sales via Amazon and other online channels.

It would certainly be great to have my company’s books show up in big-box retailers or airport gift shops or B&N, but the sacrifices I would have to make dealing with book distributors — not to mention dealing with retailers returns — lessen the attraction of traditional book distribution.