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Keep the Candy Store

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.

Freelegalaid.com

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’s horse

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’s bags

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.

Practical Ideas:

  • 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