While discussing with other Slopers our business experiences, it occurred to me that perhaps the community might benefit from a topic not directly related to markets and "trading." The purpose of this post is to perhaps help you make some significant amounts of money in a relatively short period of time. You can also become very wealthy by looking at this very hard and closely and implementing the concepts.
This will require some "out side the box" thinking on your part. The concepts presented here do NOT require capital outlay on your part! They do require a lot of creative thinking, ability to perceive and solve problems as well as the ability to get in front of decision makers and present a plan or plans of action.
The basic concept is to find businesses with dormant or grossly under utilized assets. I have found around 30 different categories in which you can find these under utilized assets in the typical business. I am sure there are many more. What is important here is you get your creative juices flowing. What you will be doing is to find ways your "client" can make more money and/or save money. This works anywhere and in any part of the business/economic cycle. In fact, during times of economic distress, you will find that business owners are even more open to what you can offer them. When times are good, some narrow minded business owners are in the "don't rock the boat" mindset.
Here is the basic proposition you will present to business owners and decision makers: "IF I can, at absolutely no cost to you, increase your net cash flow, would you be willing to pay me 15% of that net positive cash flow that I create for you?" And/or "IF I can save you a significant amount on your operating costs, at no cost to you, would you be willing to pay me 15% of what I save you?" If I cannot help you, you are under no obligation and we will part as friends……now think about that. What business owner in his right mind would say NO to such a proposition? If he/she does, you would not want to do business with them anyway! As an aside, that 15% is somewhat arbitrary. You can make it any percentage you wish. I have found that 15% is a good rough guideline. Do not ask for too much and do not discount the service you will be providing either. Depending on the type of deal, you can set yourself up as a toll booth operator. You can create substantial monthly cash flow from your deals. Often, that is not possible and you can receive decent lump sum payouts. The more deals you do, the more deals you will be able to do! I call this "Business Combinations." Perhaps the best way to get you thinking along these lines is by illustration of some of the deals I have done and am doing.
Call Center Operation. Call centers are expensive to set up and not cheap to operate. I found a rather large call center that was dealing strictly with businesses. It is on the West Coast and its hours of operation were Monday through Friday, 6 am local time until 5 pm local time. I went to the owner and asked him: "IF I could increase your cash flow, at no cost to you, would you give me 15% of that new cash flow I bring you?" His answer was: "Of course I would!" I then found another, smaller, operation that was marginal and the owner was thinking about shutting it down. It dealt with consumers and was running him $25,000 a month to operate. His hours of operation was 5 pm to 9 pm Monday through Friday and on weekends. My question to him was: "If I could find a way to save you a substantial amount of money in your operation, would you be willing to pay me 15% of what I save you?" His answer was: "Of course I would!" So here was the deal: The call center selling to consumers was moved to the other call center dealing with businesses who was paid $10,000 per month for that use. I recieve $1,500 per month from him. I saved the other owner $15,000 per month and every month he cuts me a check for $2,250. This is a good example of a toll booth operation.
Non-competitive Manufacturing And Delivery: I found two manufacturers in the City Of industry, CA. They were non-competitors. That is very important. They manufactured and then delivered to the Western United States. As business conditions worsened, both were sending out trucks half full. So, for a fee, Manufacturer A agreed to also deliver for manufacturer B. Then, manufacturer B was able to dispose of its delivery fleet. This type of deal cannot be monitored. My fee for putting this deal together was 25% of the total fleet sale from manufacturer B. The check came to $178,600. This is an example of a lump sum payment type deal.
Exchange of Services and Adding New Business Lines: I have a good friend who is a young MD type doctor. He was loaded down with student loans and he operates his own office in Encino, CA, a fairly wealthy area. It costs him $225 per hour to keep his office doors open. He had to do hospital rounds at night to survive. Radio time is now going begging. So, I worked a deal for him with a local radio station. He gets advertising air time and even has his own medical "show" on that station. He is also now the personal doctor for the station owner and the few employees. This was an exchange of services. I did not charge for putting this deal together but it lead to a new business line for him that I proposed and share in that revenue. He is located in a wealthy area. There are a lot of wealthy older people in the area who do not like going to see the doctor but from time to time, need medical help and attention. So we set up a medical concierge service that also gets advertised on that radio station. We make house calls and the fee is not cheap. We now have eight doctors on call and business is brisk.
The Mailer: I have not personally done this but know a person who did and this is brilliant! This took some money for postage costs and he got a financial backer to put up the small sums required to do this kind of deal. He got a directory of all the independent CPA's, PA's and bookkeepers in the State of California. Around 30,000 names and addresses. He then set out a letter of inquiry to all of them. Basically: ANYBODY WANT TO SELL? He received over 1400 positive responses. He subtracted those from the list and to the rest, keeping it geographically specific, he sent out another letter of inquiry. Basically: ANYBODY WANT TO BUY? From this, he put together over 700 transactions! Many were cash transactions and he got paid. Many were non-cash transactions where the new owner pays the old owner a specific percentage of the billing on the "retired" owner's clients. He gets paid on that as well. The deals were all done over 9 years ago now. He has made over 5 million from these deals and is still getting checks. Think of the possibilities!
Taking Over A Business Using Options And The Double Escrow: This is a bit more of an advanced concept but something to keep in mind. Businesses are constantly being put up for sale. Your job is to find out the seller's motivation for selling. Given the right seller motivation, you would be very surprised the kinds of deals you can put together. Here is a deal I did two years ago. Found a well established local printer. He had inherited the business from his father 20 years before and he was burned out. His business was also in decline. He was a good printer but not a very good businessman. He was asking $200,00 for the business. I asked to see his dead customer files, which were voluminous. In the files I noticed many local businesses that were still in operation. I also found out that he was netting around $2,000 per month. Here was my proposal to him. I wanted an option to buy his business for one year for $200,000 cash. During the option year, he would turn over operational control of his business to me. For this, I would pay him what he was now getting, $2,000 a month which would NOT apply to the purchase price. In other words, go home and take a one year vacation in the worst case. In the best case, get a check for $200,000 in a year or less in addition to the $2,000 per month. The deal was struck and I brought in a young operating partner who knows the printing business. Through aggressive advertising, promotions and specials, we revived a lot of his dead customers and aggressively bid for new business. In five months, the gross revenues were increased eight fold and we put the business up for sale for $750,000. In 30 days, we had a buyer from Taiwan at $700,000 cash. Cost of the transaction (broker fees as well as bulk escrow fees, etc) was $68,000 for a net after payoff of the old owner of $200,000 was $432,000 which my operating partner and I split. Word to the wise. Make a habit out of finding good people who have various skills and abilities. You just never know when you might be able to split a buck with them!
Cookie Cutting A Successful Enterprise: This, for me, is a fairly new concept and a work in progress. A friend told me about a local produce seller who had exceptional quality and pricing. I made the trek to their store to take a look. I was especially intrigued as the owner 8 years before, had a "hole-in-the wall" operation 8 blocks away. What I found was a super market sized building with a packed parking lot across the street from a Ralph's Super Market with a near empty parking lot. My friend did not lie. I walked out with $20 worth of produce of exceptional quality. Similar amounts of produce with inferior quality of what I purchased would cost elsewhere, much more. Here was an operation making money. I got my first appointment with the owner. Come to find out, it was a boot strap operation! The man had been able to build his business through internally generated cash flow!! My proposal to him was that I help him articulate exactly the steps he had taken to do what he did. See if it could be replicated or not. Then, franchise his operation in non-geographically competitive areas! But a different type of franchise operation. We would find similar to his old "hole in the wall" operations and help them build their operations to his present level and take a piece of their operation. We are working on the outlines of that at this point. I do not know where this will lead at the present time but it is something else to think about. Look for your local, very successful enterprises. It just could lead to something spectacular!
These are just a very few ideas to get your creative thinking process kicked into gear. The possibilities are virtually limitless. You can do small deals, you can do big deals and perhaps a whale sized deal or two! Think of the possibilities. Also consider, once you have some deals under your belt, you will run into situations that can benefit "clients" you have already helped. Now, when you walk through the door, you are the man. You are their rainmaker and the deals just get easier to put together. Keep this in mind: often the journey itself is more important than the final destination.
Yours in the constant search for edges. In trading, business and in life.-The Market Sniper