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Feedback 03/05

March 1, 2005
URL: http://www.entrepreneur.com/article/76202

Another eBay Convert

I am researching drop-shipping as a way to break into an eBay business to help finance my new company. However, my research was showing that most of the wholesalers were making the money, not the sellers. Most sample items I researched were selling for less than a dollar profit, not even enough to cover the cost of placing the item on eBay.

Thanks to "How to Find a Drop-Shipper," I will begin contacting the manufacturers and putting together some new strategies. I wonder how many people contact the manufacturers every day with this same idea?

Anyway, thanks for the time you took to research this for your readers. I will be visiting your site often.

Richard Allen
Cottonwood, California

Climbing the Ladder

I enjoy reading Entrepreneur and save every issue. The magazine is often filled with great advice. However, I found an exception in the September 2004 issue.

In "Personal Finance," Scott Bernard Nelson recommended CD investors not buy long-term CDs. He recommended against building a CD ladder if you did not already have one. He is advising people to fall into a common trap, trying to predict the future and manage return. An investor who puts his or her money into six-month CDs and rolls it over every six months will have less money long term than an investor who puts all of his or her money into five-year CDs. The reason is that the short-term investor has to make up for the lower interest rate in future years. However, interest rates rarely rise fast enough for this to happen.

Smart investors manage risk, not return. A CD ladder is created to guard against reinvestment risk. A CD investor should always build a ladder, regardless of the current rate. A CD ladder is set up by investing 20 percent of your money in each of one-, two-, three-, four- and five-year CDs. Then each year, when your CDs come due, you buy five-year CDs. If interest rates fall, only 20 percent of your money is being invested at lower rates. If interest rates rise, you get to take advantage of the higher rates. Laddering is always a smart thing to do.

William D. Barrett
Barrett Web Services
Cocoa Beach, Florida

Scott Bernard Nelson replies: I'd quibble with the statement that "a CD investor should always build a ladder." There simply isn't a "one size fits all" answer to most money management questions-this one included. On the other hand, I agree that laddering is a smart strategy, and that it's all about not trying to divine the direction of interest rates. That's why I suggested that anyone who has a ladder in place should stick with the plan, regardless of the skimpy rollover rates available.

The question is what to do if you don't have a ladder but might consider one in the future. It's a simple observation that now is not the best of times, with low and rising rates. Going long, then, locks in paltry interest for years to come. A legitimate approach would be to stay short for another six to 12 months while deciding on the ladder option, figuring that longer-term rates are likely to improve by then anyway.

Spin Factor

I read with interest the title of November's issue ("Young Millionaires"). As I delved into the profiles, the content struck me as political spin. I related it to the debate regarding the election: Should every vote count? Or should every "legal" vote count? There is a difference.

As one who has created several successful ventures, I know there is a big difference between a company producing a million in revenue, and the owner being worth a million dollars. With overhead; salaries; and in many circumstances, high-cost items such as retail locations, partners and products; just producing a million in revenue does not magically make the owner a "millionaire."

The title therefore begs the question, Was it really "millionaire revenue businesses" or "millionaire business owners"?

With that said, success to all regardless. A million-dollar business is an achievement.

Stephen Meade
Chicago


Corrections:

December's "Buyer's Guide" should have stated that a special DL disc holds up to 8.5GB of data, up from the 4.7GB of a standard DVD.

The author biography for February's "Tactics" should have read: "Contact marketing expert Kim T. Gordon, author of Bringing Home the Business, at www.smallbusinessnow.com."