Working Online is Risky Business
Posted: February 14, 2013 by Alex Chan
Working online is risky business. From the surface we see the low-cost, exciting start-ups with massive earning potential. Just the idea of working with no restrictions brings a feeling of control over a work week. No boss, no hours, a real life "choose your own adventure". You're already excited aren't you? Well, I'm afraid to say it, but the path to Internet famedom is riddled with booby traps. Short of taking a life insurance policy, there are a few things everyone should do to minimize risk. A few precautionary measures can turn a professionally fatal mistake into a minor speed bump.
The High Risk Living
This isn't about jumping out of a plane, or something as exciting as learning a death defying sport. The everyday classification for "high-risk" is far less interesting. If you run a business, work freelance jobs, or have even making money selling things on eBay, you're "high-risk"! I'll admit that the life of a start-up Internet entrepreneur can be unstable in the beginning. Like any small business, the first 2-3 years are tough times. The search for a niche, daily traffic, or a home for an online shop can be big undertaking. There is some good news, everyone I've met and worked with online has found very stable, and comfortable niches for themselves. Unfortunately, an official institution such as banks, governments, creditors, or even border guards will not see it this way. To them, we're walking powder kegs ready to explode leaving a fiery mess that will threaten to take them down. That might also work in our favor; there's enough competition online.
How do we reduce personal risk?
Being labeled high risk in the everyday market just makes building an online business even harder. Reducing our real world risk level gives us access to better rates with the bank, an easier mortgage application, and an easier time at the border. In a sense, you want to improve your credit.
Since we're not known for offering financial tips here, I suggest you follow a few personal finance blogs.
There are a couple things I can recommend. Pay yourself salary, its proof of income and your only protection against the people behind the desks at the banks. Even if it's something small like $500 a month, the income will prove a history of earnings that can be very powerful when negotiating with creditors.
Gather local support. This is a great way to establish increase your real world value. Studies show people value online businesses that have a real world presence much more highly. I can't count how many times I've been saved by friends in the local community. You'll not only gather more business through referrals, but also more traffic – since everyone is curious about what happens online.
The Hidden Risks of Receiving Money Online
Receiving money is quite possibly the riskiest thing anyone can do through the Internet. Money is digitized and turned into an easily transferable medium. That opens the door to for the uninvited, hackers, phishers, and many more 3rd party bots to track your finances. In addition to security threats, even unfamiliar banks can't be trusted. Any 3rd party bank, processing company, or financial institution will not hesitate to suspend your account and withhold your online earnings at their discretion. When possible, keep your money in your own corporate bank account at a local branch to ensure you can easily withdraw your earnings at any time.
Understanding Online Money Transfer Risks
If available, always take a wire. Wires are very hard to reverse and the money will take no more than 5 business days to arrive. If it takes longer, they didn't send it. Advertisers, affiliate programs, and merchants are notorious for not sending money on time. I can't count how many forum threads I've been involved with where members chimed in to whether they received their money or not. Do not hesitate to pull a new client's ads, halt development, or withhold your property until it has been paid in full. People can be scandalous and the ease of avoiding personal contact creates a deadly combination.
Finally, avoid using 3rd party money transfers such as PayPal, credit card processors such as CCBill, or independent merchants such as Payvision, Google Checkout, Amazon Payments, or something with a funny name like Zamboia Payments. If you need these services to accept payments or handle credit card processing, minimize the risk; which happens to be our article title.
Use multiple processors. Putting all your eggs in one basket is dangerous in any aspect of life so why risk your entire business? I've personally had PayPal freeze my account for receiving irregular payments, watched trusted money transfer services tank, and had credit card payments without for no legitimate reason. For the most part, it's possible to recover the held funds but occasionally you hit a wall, and that's never a good experience.
Demand on time payments. Since you're using multiple processors and money transfer solutions, you have some leverage with the companies you work with. You can negotiate for better rates, bid them against each other. The online merchant industry happens to be very competitive so you can use that to your advantage. Don't bother trying to reduce NET pay and ask for a discount somewhere else. Rarely do advertisers or anyone shift their NET because it can mess up their own internal accounting. Unless you're a major client, this is rarely given.
- When processors hold your money – PayPal withhold funds for sellers for up to 21 days
- When a trusted company tanks – ePassporte Shuts Down After Visa Withdraws. Very few people received their ePassporte payments once things closed down.
- When things go sour with a bank, no one gets paid. Discount Bank Gets Massively Fined. I was there first hand consulting for companies that were affected by the massive fines issued to the bank. The fine turned into an immediate crackdown; that lead to the suspension of almost every merchant account. Hundreds of companies lost anywhere from $1000 to $1,000,000+ regardless of size, operations, or their standing with the bank. Only a percentage of the companies were able to negotiate for their money while others were lead in circles.
The Business Partner Trap
The Internet is a place where in a few short moments we can find support for our projects, developers willing to help, or companies looking to partner up. Having a business partner is great. A good partner can help shoulder the weight of a project and provide some much needed support. It's simple amazing, and also hazardous.
The most important part about taking on affiliates and new partners is to avoid over extended ourselves. There are literally thousands of advertising companies searching for publishers, credit card processors offering better rates, or developers looking to piggyback a project. While working with an affiliate program is fairly low maintenance, taking on a business partner is a big deal. Besides sharing work load, your partner will own a portion of your project, take a percentage of the earnings, and most importantly, you need to trust them. Take the time to sift through the duds and create a good personal network.
SEO Risk Management
You can count on SEO to slowly climb up, hold steady, or drift down. Controlling it is like trying to stop water. If your primary source of traffic is SEO, it is essential that your website keeps up with the latest SEO requirements. Any Google Update has the potential to alter the amount of SEO traffic coming to your site drastically. Will it be good or bad? We won't know until it happens so be ready all the time. Learn to read SEO signs yourself, or find someone who has experience reacting to Google updates.
Maintain Dignity in the Face of Overwhelming Opposition
Regardless of how many steps we take to lower our overall risk, there's no way to avoid the occasional road block. If a money transfer service or payment processor decides to hold your money, contact them daily for an update. If an advertiser doesn't pay on time, pull their ads. And if your SEO traffic takes a hit, rework your website. The point is to never hold all your eggs in any web based basket and be prepared to deal with the occasional impossible scenario.