I’ve been working on a lengthy article about networking for quite some time. I finally got around to finishing it up and published it to LinkedIn here.
Here’s the gist: networking shouldn’t be a thing. The best networking isn’t networking at all. It’s all net and no work.
Whether you are an introvert, extrovert or ambivert, networking can often seem like more work than it’s worth. It feels forced. It feels unnatural. The reality is, networking is not natural for most people because they view networking as a “thing.” Those who are truly great at networking have a secret: they aren’t networking.
In order to figure out how to net without work, you’ve got to stop believing that it’s something that it’s not. Stop fantasizing that you need to be an extrovert to be a natural networker. Stop thinking you need to read a book or learn a special skill to be good at networking. That just creates more pressure, which in turn, makes it even more work. In the end, this approach makes networking daunting, and will prevent you from ever actually doing the real thing.
What’s the real thing? Start with this question: what do you really want to do with your time and relationships? You probably want to create true, organic relationships with people. That’s what I want. And, when it comes to networking, you’ll fare better if you stick with what you really want! The real deal is human connection. If you want to be good at “networking” all you really need is empathy. Everything else grows from that.
I developed a matrix to explain the difference between good networking (or genuine networking), and bad networking. There are two axes:
Y: Who is networking about, you or the other person?
X: Is the means of connection direct or indirect?
The “Less Work – More Net” Matrix
Check out the article on LinkedIn and let me know what you think!
There’s basically two kinds of startups in the world today. Those started by a founder or founders that raised money from investors and those that are started by one or more founders that use their own money. I’ve worked with both. I’ve been on founding teams where both approaches are taken. My preference is to avoid using investors. If you are a first-time entrepreneur, I’d like to recommend that you try this path, before you try to hunt down investors.
Let me walk you through the typical funded startup process.
A company is conceived of by a person. Often, that person then gathers a small team of smart people to rally around the idea. In the world of Internet based businesses, it seems like most startups are launching a software application or a service provided through software on the Internet (“software as a service” or “SaaS”). The team puts together a plan for how to execute on the idea, and agrees on how they will each be compensated, including how much equity each will get for their involvement in the business. While they are planning, they might build prototypes, mock up websites, write story-boards, and create explainers and slides. They’ll write a business plan, file for some intellectual property protection, and then approach investors.
In the beginning, the team might take a bit of cash from friends and family. There might be a rich uncle who drops $50K as a loan or for equity, or for a loan that converts to equity. There might be 5 friends or family members who each put in $20K. This type of funding is often referred to as a “friends and family” round (round is a term used to describe the phases of investment). Some startups skip the friends and family round and go straight to a seed round that might include a couple of dozen people who invest a total of $500,000 or even $1 million in some jurisdictions (there are securities laws that restrict how much you can raise depending on your state). With this seed money, the team launches the company, or takes it through some phase of early growth. But, this is not the end of the investment cycle, it is only the beginning. In a fully funded startup, the company will use much of its cash to hire a team of experts, programmers, a CFO, and sometimes even a president who was not one of the founders. Each month the company will be using more cash than it makes from operations. This is called the “burn rate.” The founders or the CEO will generally go out to the professional investment community from there and seek additional investment. In many cases, the second round of investment will come from what we call angel investors. Angels are wealthy individuals who take some of their investment capital and put it into high risk startups. An angel or a group of angels might put $250-500,000 into a startup. They will also typically have a seat on the board of directors and they will get involved in the management of the company to some extent.
But, even with a good seed round, and a good angel round, most startups will have a burn rate that requires more capital. If the company is doing well, it might need to expand, and begin to invest in marketing, sales and customer acquisition. If you’ve read my store of how LegalZoom kicked my startup’s ass, you can imagine how much venture capital LegalZoom must have required in order to run its marketing campaign and overpay for ad clicks.
So, at this stage, a startup will have burned through its seed money and be burning its angel capital and will be actively courting venture capital. Venture capital (or “VC”) is a word we use for a company that invests in ventures professionally. Most venture capitalists aren’t people (although we refer to these types of bankers as venture capitalists, or affectionately as vulture capitalists). Venture capital firms are staffed by partners, and associates who are generally MBA’s or smart entrepreneurs themselves. They evaluate startups for whether the company fits their investment criteria. They typically specialize in particular types of investments, so that they have a cohesive portfolio of investments. They might invest $2 million or $5 million or in some cases $20 million, into a startup that has passed the seed and angel stages. VC investment is a big deal. When the VC invests they typically control the terms of the investment. In many cases, they’ll take a controlling interesting in the company. They might take 50%, or they might take 90%! But, company founders often take the VC money and accept massive dilution of their own stake in order to have access to the capital of the VC, as well as the expertise that the VC brings.
When a VC invests, everything changes. The CFO and CEO will be appointed by the VC. The VC controls the stock and therefore the company. The VC, thus, controls what the company does with the VC’s money. This can be good and bad. The VC may make financial decisions that are inconsistent with the original vision of the founders. This usually brings an upset of the founding team, and often people bail out at this point. In some cases, the entire original team bails out, and just has to hope that their original stock (now only 2 or 3% of the equity) pays out down the road if the VC is successful.
The advantage to VC funding is that those who do stick around get a salary. Founders are often pulling little or no salary when the company is funded by seed and angel money. So, when a VC comes in, the founders start getting paid like employees, often with benefits. But, the VC will still expect the founders to pour their life’s blood into the project.
Another advantage to VC funding is that the VC will typically will put the company into a bigger, better network. The VC may have other complimentary investments that bring strategic alliances between companies that helps a startup in many ways. The VC will also be ready to do follow on financing if the burn rate continues.
If you end up being VC funded, it’ll either be the biggest, best thing that’s ever happened to you, or it’ll ruin your life. If your company makes it through, then the VC will either take it public or merge it with another company, and you’ll get a big payout. In addition to your big payday, you’ll have new friends with money, and new opportunities to do it all over again. For many, it is the holy grail of the startup world.
But, there are many horror stories as well. First, step back and imagine the scenario where you were one of three founders. In the beginning, you owned 33%! You then diluted to 30% when you brought in friends and family, then with Angels, you ended up at 20%. When the VC comes in, you end up at 2%. If that company becomes a $500 million company or is sold to Facebook for $1 billion, then you still get paid really well, right? Your 2% might be worth $5 million or even $10 million. But, if it struggles along, then it could be that the VC needs to invest more and you dilute again. Or the company shuts down and the VC liquidates the company and the VC keeps whatever comes from the liquidation. There is not likely a happy-medium with VC’s. You’ll either win big, or get shafted.
VC’s bring in new people with new personalities that often upset the balance of the original team. It is not just common it is typical. Expect it.
VC’s are very hard to bring in. Thus, the battle to find VC money is difficult! This is probably the number one thing I try to impress on new entrepreneurs. You can spend full time for a year just trying to raise money. In that same year, if you had applied yourself to the business of the business, you might have launched! In the end, only a small percentage of the startups actually raise money. But, a lot of effort is required in order to try. Before you try, be sure that VC money is something you really need. Consider the bootstraper route.
Why do so many people want to take the VC route? I believe that part of it is the American “get rich quick” theme. People love stories of rags-to-riches. We dream of investing the big thing, or starting the next Facebook. We watch The Shark Tank on TV and envision Mark Cuban offering $500,000 to partner and take the next great idea to the world.
But, if you are really going to start a business as a means of gaining financial independence, then you have to shed the myths of making it big this way. The way to get out of modest American poverty is not to have a wealthy VC offer to invest in your business. The way out is a deliberate and disciplined effort that involves changes to your spending, your time, and your mind. It will require that you use your energy to buy or build a business. This is a far more sure way to achieve financial success than playing the lottery of fundraising. Launch your company on your boostraps if you can.
Creating a New Market is Rarely Successful
I had a client in my office describing his new business.
“Its an in-room music listening service for hotels,” he said.
“Ok, so its like pay per view but with music?” I replied.
(By the way, this was back in the early 2000’s before everyone had music in their pocket.)
“Yes!” he said, “this is like pay-per-view, but it can be a paid service, or it can be supported by ads and a hotel can offer it for free.”
“Okay, and do you have any experience in this industry?” I asked.
“Oh. No. But, this idea is huge. No one has ever done it before.”
I was trying to think of a way to be diplomatic.
“Well, here’s the thing,” I said to the client. “Most new entrepreneurs don’t succeed at creating an entirely new market from scratch. In fact, even if you had worked in music or in pay-per-view for years, you might have a hard time getting investors to back you because even seasoned investors are wary about doing something where there is no existing market. The cost to create a market is massive.”
He thought for a minute and replied, “well, there are no competitors. If I can just get this product into a couple of hotel chains, I will be killing it. No competitors! That’s golden, right?”
“No,” I said. “Its a common mistake for people to think that their idea is better because there are no competitors. You want competitors. It is proof of the business that others are already doing it. Doing it better, that’s golden. Doing it in a new vertical. Doing it in a new way. But, if no one is doing it, then it is typically evidence that either there is no market or that the barriers to entry are too high, even for those with the financial resources. If the big pay-per-view and in-room entertainment companies are not doing this, then it should tell you something about the market. Either there isn’t one or they see it as too costly to enter. Therefore, it is not a wise use of your time and money or your investors money to try to create a new market.”
He was crestfallen.
“Look,” I said. “You also have one major flaw in your idea. Your connections are almost entirely with executives at hotels in Las Vegas. Right?”
“Yes,” he said.
“Well, I have it from reliable sources that casinos do not want their patrons to stay in their rooms. They have limited television channels for a reason. The aren’t making money at gaming tables if their patrons are sitting in their rooms listening to music. Even if they get a few dollars from music revenue, they make a lot more when that patron is at a restaurant or at a slot machine.”
He left in disappointment. I felt bad for shooting him down. It is not always my role as an attorney to judge a business idea. But, he had some for more than just a single project. He wanted full counsel, and I gave it to him.
He had high hopes because his idea was so novel. Many Americans have the same misconception. They feel that having the “stroke of genius” is about thinking of an idea that has never been done. Even if the idea is patentable, this is no guarantee of success or value. There have been over 8 million patents issued since the inception of the US Patent Office. Of those only a small percent have lead to landslide success. Merely having a patent is not enough. The thing you patent still has to be in demand. People must need it or really want it.
I don’t think my client gave up merely because of my advice. I seem to recall that he sought investors (unsuccessfully), used a lot of his own cash, and made presentations to several hotels and even to the in-room entertainment companies. It never took off.
You are probably happy for him in one sense, right? Something else happened a few years later that may have ruined his entire business. By 2005, we all had iPods and hotels were changing their alarm clocks for iHome units that would hold an iPod and eventually an iPhone. Why pay for music on a television in your hotel room when you could just drop your device on a dock and press play? Nowadays, we have many music streaming services to choose from, and our mobile phones are loaded with our own music plus apps for iTunes, Pandora, Spotify, and maybe if you are a Jay Z fan, Tidal.
His business would have taken millions of dollars to launch, and faced numerous challenges, only to be brought down by changes in technology that were only a few years away.
What can we take-away from this? First, don’t try to create a new market. If you are super rich and backed by others who want to try to create a new market, then don’t listen to me. Go for it. You have the money to lose and if, against all odds, you create a new market, you’ll get even richer. But, for my tribe, we are regular people trying to dig our way out of modest American poverty, and gain financial independence. And, for us, trying to create a market would just be stupid.
The second lesson: whatever you choose to do must have an inexpensive MVP path that you can take, which diminishes your risks. Check out my article on bootstrapping to see a great example of how one of my ventures got clobbered by a big change in the competitive scene.
The Candy Store
What can we learn from Holly Golightly? You remember her? The beauty from Breakfast at Tiffany’s.
Here’s a conversation between Holly (Audrey Hepburn) and Paul Varjic (George Peppard). They were talking about a very rich woman.
Holly: WELL, LET ME TELL YOU SOMETHING. IF I HAD HER MONEY, I’D BE RICHER THAN SHE IS.
Paul: HOW DO YOU FIGURE THAT?
Holly: BECAUSE I’D KEEP THE CANDY STORE. OLD SALLY TOMATO–THAT’S MY CANDY STORE. I’D ALWAYS KEEP SALLY. –
What was the “candy store”? Holly says she’d be richer than some rich lady, even if she had all the same money because she has a secret income stream that she’d keep doing, even if she was rich.
In the movie Holly would deliver the “weather report” for Old Sally Tomato at Sing Sing prison once a week. For that, he’d give her $50 for the cab and $50 for the powder room. That was her Candy Store. A weekly task that made her $100/week.
Paul asks her, “and what do you mean, ‘the weather report?'” to which Holly replies, “just a message I give Mr. O’Shaughnessy so he knows I’ve really been up there. Sally tells me things to say like, Uh…Oh, there’s a hurricane in Cuba…cloudy over Palermo, things like that.”
Holly’s Candy Store is something that she’d keep, even if she had a million dollars. In her mind, it would make her “richer” than someone else with the same million dollars. Even with $1 million, Holly would still be making $400/month for taking a visit with Old Sally Tomato at Sing Sing prison.
Holly’s “Candy Store” is a side gig. It’s something that brings a steady stream of cash coming in every month. One of my principles of financial independence is that you ought to have a Candy Store. I think of the Candy Store as a side job or business that doesn’t require a lot of effort, but makes a regular amount of money on top of your day job or other business. It’s not a business, per se. You don’t lose sleep over it. You don’t have to work a lot of hours. You don’t have to invest a lot of capital. There’s relatively low risk. If you have some “side money” from something that has these elements, you have a Candy Store.
Whatever you do vocationally (i.e. your Day Job or your business), you need a “candy store” like Holly Golightly. Everyone should have a Candy Store, and do their best to not let it diminish on the one hand, nor become their primary vocation on the other. Finding a Candy Store is not the same as owning a business. It needs to be something that is not a burden, easy to maintain, not require any significant capital unless it is recouped immediately, and be something that is able to generate a consistent week after week return.
Let me make this clear. Your candy store is not a business that you should sink tons of money into, or that requires much of your time. In fact, this is extra important if you would like to eventually start a business of your own. You need a Candy Store that makes money with little effort so that when you are pouring all of your time into your new business, the Candy Store doesn’t require any attention, and it supplements your income.
Let me give you some REAL examples.
Jim’s Red Glue
Jim Johnson is a long time entrepreneur. He spent a long time in a construction business where he mounted decorative facades on the inside and outside of homes. New home tract homes often have exterior moldings to give shape and dimension to the outside of the house; these moldings are also often foam. This foam is cut and then assembled into shapes, columns, window boxes, and the like. The polystyrene components are “glued” to each other to hold their shape. The glue that adheres the foam pieces to other foam pieces isn’t the same as the mastic that is used to glue the thing to the wall of the house. The foam-to-foam gluing has to be a unique product.
Well, Jim found that product a long time ago, and it wasn’t really made for this particular purpose. He found one source for this glue, and began buying it in 50 gallon drums for about $100 each. He ran into other people in the business that needed this type of glue. Instead of just telling them to go get their own 50 gallon drum, he said that he could get it for them in 5 gallon buckets for $50 each. These other guys were ecstatic. They needed smaller volumes, and $50 for 5 gallons was cheap, considering that a 1 gallon can of construction mastic costs over $20. They were saving 50% by using Jim’s glue.
And so it began. Jim would take a monthly trip to get the big drum of glue. He would pump it into 5 gallon buckets and stick his own label on them and sell them for $50 each. $100 for the glue plus $50 in buckets and labels would yield a gross of $500 in income, and a profit of $350. Some months, Jim would sell just one drum, others three or four. His total time commitment was a once a month trip in his truck of one hour each direction, and then an hour or two to fill the buckets. Ten years after Jim sold his construction business, he has kept the Candy Store. He might use up to 1 hour each week to be sure that he filled orders, but the overall monthly commitment was no more than 8-10 hours. He could run the Candy Store in the evenings or on the weekend. He never lost sleep over the Candy Store. He didn’t lose other business because of it. He might have missed some television or golf for a day, but for $350-$1400 per month, he was able to substantially improve his life for a decade by keeping the Candy Store.
Think of how hard it is to earn this sort of cash at a “regular” job. If you take a job at a convenience store at $8/hr, your gross pay is $1280 if you work full time for a month. Your take home is likely about $950. Jim averages $700 per month for 2 hours a week, and because his glue reselling is a legal business entity, he gets a lot of tax benefits that offset the income. He writes off his home office; his mileage, his cell phone and internet connection, and more. He keeps all $700 of this money. To say it like Holly Golightly, if you have a full time job and Jim has a full time job, Jim is richer than you because he’s kept the Candy Store.
The Sunday Night Fax
My brother-in-law is an avid golfer. He golfs two or three times a week. He’s semi-retired, but he’s kept a couple of Candy Stores. One of them gets him free golf. Many years ago, he found a software program that would auto fax to a list of recipients. Someone at the golf course mentioned how they needed to tell their constituents about the weekly golf special. After some discussion, he learned that the golf course wanted to send a fax every Sunday night with the weekly specials, and other information to a list of players that had signed up for the fax. It seemed complicated and like a lot of work to the golf course folks. So, he offered to take care of this for them in exchange for free golf. For him, it would be an hour every Sunday night, but would not really cost him anything. For the golf course, they would have to buy software, or get an outside firm to do this service for a fee. Giving my brother-in-law free golf had no actual cost to the golf course. Thus, both parties have a virtually cost free transaction, but each saves hundreds of dollars every month. If the golf course paid an outside service, they might charge $100/week for the service. If my brother-in-law paid for golf twice a week at $50 each, he’d pay $100/week for his golfing. His Golf Candy Store gives him a tax free value of $400/month if he only golfs twice a week. He’s kept that Candy Store for many years and even as things transitioned from fax to email, he’s made the leap and kept the deal going forward.
I have a website that I purchased back in 1997, freelegalaid.com. Its been the subject of about 5 different “lives” over the past 12 years. My site was originally launched with great success in 1998, when it had a rather large traffic base, but like many “.com” businesses, it lacked a revenue model. After a few failed attempts to rehabilitate the site, I finally decided to just make it a free database of legal resources. I dumped a bunch of data into the site; some useful and some not. I let it ride like that for a year, and then discovered that Google lets publishers place ads on their website and share some of the revenue when a consumer clicks the ad. I put some code on the site to pull Google ads, and viola! I made about 8 cents the first day! That was free money. I didn’t have to do anything once it was set up. The website itself took a couple of days to install, an hour every few months to update, and $200 in license fees and custom development. But, now I don’t have any real ongoing “work” to do on the site. I put the ads all over the site, and just sat back to see what would happen. The revenue grew steadily from 8 cents per day to 80 cents to 8 dollars a day, then to $500 per month, and it grew from there. The site now makes substantially more and it takes very little management from me. This is only one of the Candy Stores that I own, and one of the reasons I am able to sit in Bali by the pool and write.
Erica has a bit of an animal addiction. She owns a horse that cost $10,000, a $2,000 dog, and some sort of exotic cat whose breed I can’t pronounce that cost $3,000. Erica’s penchant for exotic animals could be her husband’s financial ruin, but Erica’s pets are actually her Candy Store. Rather than just owning expensive pets for the fun of it, Erica owns them, loves them, feeds them, and breeds them. Take the $2000 dog, 5 litters later, she’s made $50,000. The horse is a bigger gamble, but once a horse has certain certifications, he can be “bred” for quite a lot of money (footnote: they don’t really breed horses like dogs, but the effect is the same: you sell your horse’s stuff for thousands of dollars). Once the horse has proven to be a good income stream, you can actually sell the horse for a lot more, say $50,000 for a horse that you paid $10,000 for.
I’m not an expert on this business at all, but Erica is. She’s been doing it since she was a kid, when she’d apparently breed spiders (either she’s messing with me on this, or its true that you can breed your pet tarantulas). For Erica, she has the combined effect of being able to buy and enjoy her animals, and making a nice side-living on them. The Candy Store for Erica isn’t a full time job. If it was a full time job, she might work far more and make less per hour for her time. She’d have to buy insurance, deal with liabilities, buy software, deal with licensing and permits, and a host of other things that don’t worry her at this stage. She’s an animal owner who knows how to pick the right animals, breed them and make a little Candy Store income on the side.
Tim is a prop guy in Hollywood. He’s been in that business for a long time. Along the way, he realized that the studio sets used highly sensitive microphones that pick up any little sound. Thus, in the world of stage props, the key is to find props that don’t make much noise, or you have to fix them so that they aren’t noisy. One of the most noisy things on the typical sitcom set is a paper bag. Tim came up with and patented the Silent Bag.
It was a few thousand dollars to obtain a patent, and a few hundred on a trademark for SILENT BAGS. This, plus his expertise in the prop industry made him the sole source for Silent Bags. He was going to be able to generate a few hundred dollars every month for many many years. In fact, his kids worked for him assembling bags in the garage, earning money and helping Tim so that he didn’t have to spend his weekends building bags. Tim has been able to enjoy a decade of Candy Store income from his Silent Bag business. As with many other Candy Stores, Tim gets the benefit of tax deductions for his business operations.
What I have observed from many people’s Candy Store businesses is that if they are run properly, they are not taken “big.” There is an equilibrium to achieve. If you take Tim’s Candy Store, I don’t know what he makes, and its none of my business. But, by way of example, if he makes $8000 per year, but he uses the business to pay himself back for business mileage, travel, meals, and writes off his home office, pays his cell phone bill and internet, he may very well write off $8000 per year in expenses, and thus make his entire Candy Store income tax free. The value of that income stream is quite significant. It is an asset.
If Tim wanted to make $8000 per year in tax free income, he would have to buy about $200,000 in municipal bonds. That would make Tim’s little Candy Store worth at least $200,000 to him, and over time, his income from the Candy Store climbs, increasing this value each year. If he sold the business, he might only get $50,000 for it. If he took the $50,000 and put it into a safe investment, he would be lucky to make $150/month. He’s wise to keep the Candy Store.
But, he’s also wise not to try to make the Candy Store his vocation. He’s got a well paying job in the entertainment business that he’s mastered, and he can’t, and shouldn’t give that up to “go full time” into Silent Bags. He’s far better financially to keep the Candy Store as just that and to make his “primary” living doing what he’s good at. Thus, he’s able to maximize the value of his time by making the most for each hour of his time in his vocation, while keeping the free money that keeps coming in from the Candy Store.
If Tim tried to take his Candy Store big, he would suddenly have to spend a great deal of money on marketing; liability insurance; professional fees; etc. He would have to run a business that is 50 times the size of the current business, and incur significant risk. He would also have to quit his well paid day job. He wouldn’t have a Candy Store, he’d have a business to run.
Bill’s used car a month
Bill keeps it simple. He’s not a car dealer, but sort of a car lover. He’s got an instinct for a deal, at least for cars that he knows well: exotics. He’s got a few investments that allow him to live semi-retired, but he has turned his car-obsession into a Candy Store. He’ll buy an exotic car about every other month, when he knows absolutely that he’s gotten it for far under its value. He’ll then drive it, and circulate the info to exotic dealers and even do his own advertising. If he does it right, he can make a couple thousand dollars every month doing this. Now, this isn’t for everyone. Bill has to play with cash, often over $100,000. But, his return can be several thousand dollars. If he only makes $3,000, then his return on $100,000 is 3% per month, or 36% per year. He gets to drive some amazing cars, and he isn’t working very much for that money. He doesn’t have to own a car dealership, deal with returns, customers, liability, mechanics, and the full time hassles that come with being full time. He’s keeping it simple, and keeping the Candy Store.
Cory’s audiobook studio
Cory is a long time friend, business partner and brilliant entrepreneur. He and I co-founded ChristianAudio, now the largest Christian audiobook publisher in the World. Like many of us, was a hungry entrepreneur as a young man, running a house painting franchise, doing landscape and hustling wherever he could.
In the early years of ChristianAudio, Cory needed an audiobook studio; not just a typical recording studio. So, he studied extensively on the subject and decided to build a studio in his garage. He rents the studio out to his business to produce audiobooks.
As his business grew, he experimented with outside studios, and continues to use other studios all over the U.S.. He uses studios that are convenient to his book narrators all over the country. But, it turns out that his little studio is so perfect for book reading that he can keep using it for his business. He also rents it out to others who want to record voice-over, audiobooks, podcasts and more. He doesn’t even have to work to earn this extra money. His wife just lets people in, and they bring their own people for production and narration. Cory can keep the Candy Store, let it make money for him, and head off to run a real business in the day, and when he returns, he’s made money for letting someone use his studio for the day. He has one of the best Candy Stores I’ve seen.
Golf cart GPS units on lease
I’ll tell you just the little that I know about a really smart guy I met once. He purchased a company out of bankruptcy. The company had owned golf cart mounted monitors that showed the players the holes and the distances. He then sold the “business” to another golf company, but he kept the equipment that was leased out to various golf courses. As I understand the story, he made back his investment by selling the ongoing business, the brand, and technology. But, he kept the Candy Store. He kept the GPS hardware that the golf courses lease. Each golf course pays him a monthly fee for the units that are connected to their golf carts. He has one employee to manage this business and it generates something on the order of $50,000 per month. He doesn’t really run that as a business, he is off doing bigger things. But, you can imagine how well he can live if the Candy Store makes $50,000 per month, and he can still go run another company and make even more than that.
Bill’s pool cleaning
Bill is a maintenance supervisor. Its a good job. Income is stable, with good benefits. He’s done it so long that he can do it with his eyes closed. Bill is quite handy of course. He can fix anything, clean anything, probably do just about anything. For the past 5 years, Bill has cleaned the pools at a couple of apartment complexes every week. He makes $200 each per month. So, he’s got $400/mo in income in his Candy Store. He has no out of pocket other than 4 miles worth of gas to get to my apartments. Lucky for him, the apartment buildings are near each other. If Bill was to run a full-blown pool cleaning service, he wouldn’t have a Candy Store. He’d have a business. He’d have to charge more, work harder, and drive all over town every day. At the end of the month, he might make the same as he does with his regular job plus the $400. Since he’s just “the pool guy” for apartments that have their own insurance, he doesn’t need any liability insurance or bonding. He doesn’t need any fancy accounting or corporate bookkeeping or tax filing. He still gets to write off his mileage, some of his business related expenses, etc.
Ricardo’s hair cutting
I know of several people who’ve trained to cut hair and done it professionally. Often, the salon is an early career that is abandoned later. Your legs hurt; customers are mean; you cut your fingers every day; you get tired of talking; whatever. The upshot is that I’ve known a few capable people who can do a mean haircut or dye job on a Saturday afternoon for 30% less than the salon. They may not like it much, but they realize that they are simply good at it, and a quick $50 for a dye job or $20 for a good hair cut is not bad for some extra weekend income. This Candy Store is a bit less appealing than a website, but for many people, its a way to secure that extra $200 per month that will make a big difference in how you live, how much you can save and ultimately you need some kind of Candy Store if you are going to make it to financial independence. Even if you aren’t super happy to be the Saturday Super Cuts, if that’s your talent: do it.
- Sell an ebook, run a blog blog, take over an existing useful website, run a fan-site, open an eBay or Amazon store and sell something you can make a substantial mark-up on.
- Rent your garage.
- What are you good at compared to others? What you do pretty well and without stress, that can bring $200/mo or more with an hour a week)
Bankruptcy court can be a unique opportunity for similar investments. I once bid on book rights that had existing royalties. The collection of rights eventually sold for about $200,000, but there was about $30,000 in royalties already due, and an estimate of about $40,000 per year that would continue being paid indefinitely. This is a Candy Store that I missed out on because I couldn’t bid high enough.
There are so many ways to make some money from getting weather reports from Sally Tomato. All of them are legal. If its really a Candy Store, its easy, and once you get it going, you’ll enjoy the income for many many years.
Requirements for a Good Candy Stores
- Low capital outlay
- Low ongoing capital requirement
- 2 hours a week on average
- $200-400/mo base with upward potential without much extra effort
- Low liability, low risk
- Low stress