This is a guest post by reader, Frank Giovinazzi.  Frank is a published author and is definitely a go-getter when it comes to his online book business.  If you’d like more information about Frank please visit his Amazon author page.

One of the greatest benefits of self-employment – not having to answer to anyone but yourself – can also be one of its deadliest drawbacks.

I’m writing about the limits you set on yourself, what you are capable of, and the goals you either fail to set or achieve because you think you can’t do it.

As far as your book business is concerned, how many “can’ts” have you racked up over time to ensure your business is producing the same meager results month after month?  Are you racking your brain trying to figure out why you can’t break 3, 5 or $10,000/month in sales but are silently sabotaging daily?  A good reason may be because no one else is calling attention to these self-imposed limits.  They fade into the background and become unquestioned governors on your behavior.

Think of it this way – have you ever seen a confused football player zig and zag in circles when the path to the end zone was wide open? Also, who hasn’t yelled at the screen when they see the poor fellow squandering a golden opportunity?

Back to the book business; What are four or five of the biggest, absolute “can’ts” that you have placed in your own way? The ones that have come up for me recently include:

• I can’t afford the $1,500 to upgrade to Monsoon.
• I can’t process more than 2,000 books per month.
• I can’t get a $10,000 line of credit for inventory.
• I can’t create the partnerships necessary to establish a steady stream of inventory.

I’ve found that I am preventing myself from making the full effort to achieve these goals whether or not these specific goals are correct for me at the moment which leads me to an observation. It’s pretty common wisdom that small businesses are a reflection of their founder’s personality. You can look at the person and predict what kind of business they run just as easily as you can look at the business and describe the person who runs it.

As far as our topic here, consider this corollary:

The only obstacles to success in your small business are the ones you create.

You can whine all day long about government regulations, the economy, competition, forces real and imagined lined up against you, but scratch a little deeper and you will find at the core of your failure is your invisible list of “can’ts” that you have created yourself.

Because you only answer to yourself, you’re going to have to do is start asking some harder questions if you want to break through your own limits and really create the success you vaguely describe in conversation.

Start with the most reliable technology for the task – a clean sheet of paper and a pen. At the top of the sheet, write something like, “What are the things I think I can’t do in my book business?” Try to make a list of at least ten items, and just consider them. Are they accurate? Some of them might be, while most are going to be excuses, or at least areas where another solution or workaround is possible. And because running a small business, at least profitably, is about overcoming your own limitations, the next step is to create another list, with a title such as, “How can I do the things necessary to make my book business a success?”

In other words, you have to recant your entire list of “can’ts.” It may help to show your first list to a business advisor, close friend or colleague after explaining why you’re performing the Lose Weight Exercise and ask for feedback before and during the making the second list. If you don’t have someone on your side in this arena, get one. It’s always helpful to get a second pair of eyes on a problem especially with issues that are ultimately emotional ones.  Because these issues are so close to our sense of self that they are harder nuts to crack than simple decisions over what kind of packing tape to buy.

Finally, I’ve written this post while keeping the best business advice I’ve heard in a couple years in mind. I recently had the pleasure of taking a delivery from a man named Odell Odom who has provided trucking service to booksellers in the New York area for over 20 years. He’s seen them start small and get big and he’s seen them be big and get dead and this is what he told me: “Guys are making millions and going broke every day in this business. And the only difference between the two is what’s going on in the six inches between their ears.”

Overcoming the Odds to Make Your Book Business a Huge Success [ 6:13 ] Play Now | Play in Popup | Download (126)

I’m going to stray away a little from a specific bookselling topic this week and concentrate on some key issues that can be applied to any business; large or small with a concentration on bookselling, in particular.

If I would talk to 10 different booksellers I would probably get 10 different answers as to why they started selling books.  Some would argue that they simply love books and wanted a little extra money to buy more books, a few may have been suddenly jobless and thought of selling books on a whim to make ends meet while others may be financially healthy but desire to do something else with their lives and want to build a successful business that hits that $1M/year sales mark.  They all have one trait in common though; they want to make money.  What they do with this money may be completely different but the end goal of bookselling and any business is to simply make more money than you spend.  It sounds simple, right?  If it’s so simple why is it so damn hard to calculate and how do we do it anyway?

KPIs: Business jargon or key success metric?

I’ve been reading business and management books such as Jim Collins’ Good to Great, Jack Welch’s Winning or my latest purchase Rework for years now. I’ve loved these books as I admire the authors and always aspire to be more successful in business.  One important topic I got from these books and learned from experience is a funny acronym called KPIs or Key Performance Indicators.  KPIs are simply a fancy business term to strictly define what to measure in a business to make sure it is meeting the goals set forth by the organization.  They are hard defined numbers that can be measured on a regular basis.  For example, an organization may have calculated a specific average sale price for a product and has found that this sale price will net them x number of additional monies per year.  To achieve this sale price they could create a KPI such as “Increase average selling price for product X through all channels for a length of 12 months”.  Notice the strict, easily quantifiable numbers?  That’s the key.

Whenever I first heard of what a KPI was I thought that it was just another business mumbo-jumbo term that made highly paid executives sound smarter.  It may still be a business mumbo-jumbo term but what it signifies is something much, much more important.  If you want to run a successful business you have to know how much money you’re actually bringing in after all your fees, supply costs, subscriptions, commissions, etc.  At first I figured the one and only KPI that a business would need to succeed would be just profit (Sales minus expenses) but boy was I wrong.

The lure of pure profit is what any business strives for but this would not be a good KPI at all.  Why?  In reference to online bookselling, you can measure outright profit and it would be a piece of cake if you were a one-man shop, sold on a site like Half.com where the fees are simply a straight 15% of sale price and got all your supplies, computer and equipment for free but who has that luxury?  In reality you’re going to have much, much more sales sources and expenses to track your outright profit.

Typical sales and costs for a bookseller

Here is a quick list of my sales sources as well as typical costs that I incur on a monthly basis.

Sales: Amazon, Half.com, eBay, Alibris, Abebooks, Buy.com, offline sales to bookstores and donations (tax writeoff)

Costs: Commissions per sale on each site, monthly subscription fees for some sites, subscription fees for management software, costs for bubble mailers, printer paper, equipment depreciation tracking, Internet service, utilities, inventory and the list goes on.

I’m still just a one-man operation and it’s already getting complicated!  Imagine a Fortune 500 company!

Important KPIs to use

With this being said, here are some KPIs that an online bookseller could use to truly take a glimpse into the business to see how successful it is.

• List 100 new books every week with an average sale price of $20
• If you’re still just on Amazon, upload my inventory to be available for sale on Alibris and Abebooks by 6/1/2010
• Maintain a profit margin of 50% across all books over $10
• If you’re just starting out, get 10 positive feedbacks within your first 30 sales
• Decrease pick/pack/ship time to 5 minutes per book for all orders
• Maintain an order defect rate: < 1% of orders
• Maintain a pre-fulfillment cancel rate: < 2.5% of orders
• Maintain a late shipment rate: < 5% of orders

I took the last three examples straight from the Amazon Customer Experience Performance Newsletter emails that I receive occasionally.  Amazon does this to put these numbers in your face on a regular basis to show you how you’re doing.  Sound familiar?  Amazon knows that by sending you these emails these hard numbers will be right where you’ll look (in your inbox) so that you know what KPIs are important to them for them to have satisfied customers and for you to sell more books.

This post idea came from my most recent contact to the email list in regards to the free FBA spreadsheet that I offered that calculated needed profit per sale, all FBA sale commissions and fees per sale, etc.  If you’re not on the list, see what you’re missing!  Sign up for the list on the left hand side of this post.  It was also in regards to a brand new web application that I’m going to be releasing in beta soon that will calculate as many sales and fees automatically for you and allow you to input all other information very easily.  I’m very excited about this application for my own use as well as to share with the community.

Here’s my call out for you.  What are some KPIs that you use to define how successful your business is?  You’re not just throwing up books that you bought for a quarter at a yard sale and then being happy as a pig in mud when it sells for $10 are you?  Did you consider your box/bubble mailer, Amazon Pro Merchant fee, that quarter inventory cost, gas to get to the yard sale, commission, postage and your time?  Do you know your TRUE profit?  Let me know in the comments what kind of metrics you’re using to judge whether you’re rolling in the dough or slowly drowning in fees.

- Adam