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Entrepreneurial Investment Ideas


ATLValue
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Hi Everyone,

 

I have been thinking a lot recently about different entrepreneurial ventures to pursue outside of public equity investing and my day-to-day job. I get the sense that many people on this board also think about different avenues for investing outside of equities such as commercial real estate, apartments, hotels and franchises. I'm very interested in hearing any other businesses that members of the forum have thought about or actively pursued.

 

Thanks!

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Guest Schwab711

I loan money to friends or friends-of-friends that have started small businesses or need help paying for expenses in their life. They generally only go to me if they have no where else to go. My interest rate is usually 10%-20% a month. I generally require collateral or a royalty against the revenue of an event being financed. I always have contracts and I rarely rely on handshake agreements (it makes things a lot easier when dealing with friends). I've been able to earn some additional money helping one friend create databases and reports in access/excel for some small businesses and I usually only get the access/excel jobs because of the original loans. Originally, I wanted to earn some extra money and help out friends, but I have found that there are numerous benefits that come from working with small business owners that I never expected. I now have more of a 10-20 year outlook on these dealings and the potential benefits/returns that result.

 

I have also been involved in business akin to pawning since I was young. I've hit a couple homeruns along the way. I focus on books (particularly older, non-fiction stuff), more modern antiques (late 1800's and early 1900's stuff), and some liquid, in-demand everyday items (early iPhones, textbooks, and everything else that is commonly bought and sold by folks my age). This business is a lot nicer from an expected returns perspective than the music business, but it's harder to find consistent opportunities as an amateur. Profit is almost always made from judgement due to experience, which is nice in some ways. I've generally been severely burned almost every time I've strayed from my core niches. I still have a Civil War-era family bible that is worth roughly 1/20th of what I paid. Antique, US-made, bibles are a much more complex market than one would assume. I don't mean to offend anyone by talking about profiting from bibles; it's still my worst loss and a good example of the hidden complexities of markets. The reason it was such a bad investment was actually a really good lesson on value and the importance of understanding the details.

 

If you can easily price and sell an item then it's unlikely someone will sell it to you for a good price, unless they are desperate. Creatively trying to monetize an item can be the difference between profiting or not. This experience has been useful as I often look for "hidden value" during equity analysis. There are a couple of value bloggers that often discuss OTC stocks with "hidden value" ["hidden value" being similar to why Buffett thinks BRK is worth more than BV] and I'm often reminded of collectible markets. The pawn business is generally similar to market making. You are offering to buy at one price, sell at another, and your profit is the spread. Most items have a known trading range that fluctuates a bit (most items depreciate so the overarching trend works against you, unlike in the equity market). Another application from the pawn business is understanding the effect of portfolio turnover on returns. Multiple expansion for deep-value investments drives returns just like the time to sell an item drives pawn returns. Your returns are almost solely due to a spread in each situation, so the time it takes to realize the spread will ultimately determine your realized cagr, which makes calculating expected returns ahead of time nearly impossible. My experience has helped me better understand why I can profit from an item and why an item has any value in the first place. I think both of these have made me a better equity analyst. These experiences have likely made me approach equity valuations with a slightly different mindset. I'm used to dealing with collectibles going from highly valued to being worthless, seemingly overnight and without a clear cause (e.g. beanie babies and football/baseball cards).

 

I really wish I had more experience operating an actual business as opposed to just playing the spreads of various markets.

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Here is a thread that should help a little about thinking differently.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-100k-cash-question/msg119830/#msg119830

 

The best advice I can give is step out of your comfort zone to experience things your not use to.  Ex. if your not into comic books go to Comicon etc.  It will just start your creative juices and you will look at things in a way that others do not see. 

 

Set hard money limits at what your willing to lose in order to gain experience or to get a feel if something is worth pursuing (enough for you not to be lazy about the business, but not enough to really set you back).  Ex. I set aside some money for ticket scalping.  Lost money in the ordeal but gained a lot of experience about myself, got to practice negotiating, and the ticket business.  Let alone, I found some ways to get tickets cheaper for future reference and how not to fall for the bs they pull to get you to buy tickets.

 

 

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My best advice is find something and just start.  Might not be "the best" but just start and keep going.  You'll eventually fall into a business that fits you.

 

Don't jump into something because you could make a lot of money, do it because you enjoy it, or it interests you.  Starting a business is slow, requires patience, and is trying.  If you aren't interested in what you're doing it'll hard to keep going through the dry months.

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Here is a thread that should help a little about thinking differently.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-100k-cash-question/msg119830/#msg119830

 

The best advice I can give is step out of your comfort zone to experience things your not use to.  Ex. if your not into comic books go to Comicon etc.  It will just start your creative juices and you will look at things in a way that others do not see. 

 

That is a great thread.  I missed it the first time around.  Lot's of good ideas.  I was looking for something for my two kids, whom I was going to grubstake.

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I loan money to friends or friends-of-friends that have started small businesses or need help paying for expenses in their life. They generally only go to me if they have no where else to go. My interest rate is usually 10%-20% a month. I generally require collateral or a royalty against the revenue of an event being financed. I always have contracts and I rarely rely on handshake agreements (it makes things a lot easier when dealing with friends). I've been able to earn some additional money helping one friend create databases and reports in access/excel for some small businesses and I usually only get the access/excel jobs because of the original loans. Originally, I wanted to earn some extra money and help out friends, but I have found that there are numerous benefits that come from working with small business owners that I never expected. I now have more of a 10-20 year outlook on these dealings and the potential benefits/returns that result.

 

I have also been involved in business akin to pawning since I was young. I've hit a couple homeruns along the way. I focus on books (particularly older, non-fiction stuff), more modern antiques (late 1800's and early 1900's stuff), and some liquid, in-demand everyday items (early iPhones, textbooks, and everything else that is commonly bought and sold by folks my age). This business is a lot nicer from an expected returns perspective than the music business, but it's harder to find consistent opportunities as an amateur. Profit is almost always made from judgement due to experience, which is nice in some ways. I've generally been severely burned almost every time I've strayed from my core niches. I still have a Civil War-era family bible that is worth roughly 1/20th of what I paid. Antique, US-made, bibles are a much more complex market than one would assume. I don't mean to offend anyone by talking about profiting from bibles; it's still my worst loss and a good example of the hidden complexities of markets. The reason it was such a bad investment was actually a really good lesson on value and the importance of understanding the details.

 

If you can easily price and sell an item then it's unlikely someone will sell it to you for a good price, unless they are desperate. Creatively trying to monetize an item can be the difference between profiting or not. This experience has been useful as I often look for "hidden value" during equity analysis. There are a couple of value bloggers that often discuss OTC stocks with "hidden value" ["hidden value" being similar to why Buffett thinks BRK is worth more than BV] and I'm often reminded of collectible markets. The pawn business is generally similar to market making. You are offering to buy at one price, sell at another, and your profit is the spread. Most items have a known trading range that fluctuates a bit (most items depreciate so the overarching trend works against you, unlike in the equity market). Another application from the pawn business is understanding the effect of portfolio turnover on returns. Multiple expansion for deep-value investments drives returns just like the time to sell an item drives pawn returns. Your returns are almost solely due to a spread in each situation, so the time it takes to realize the spread will ultimately determine your realized cagr, which makes calculating expected returns ahead of time nearly impossible. My experience has helped me better understand why I can profit from an item and why an item has any value in the first place. I think both of these have made me a better equity analyst. These experiences have likely made me approach equity valuations with a slightly different mindset. I'm used to dealing with collectibles going from highly valued to being worthless, seemingly overnight and without a clear cause (e.g. beanie babies and football/baseball cards).

 

I really wish I had more experience operating an actual business as opposed to just playing the spreads of various markets.

 

Thanks that is a really interesting perspective to come from, a few things that I never really considered but a great way to combine a hobby that you enjoy with a money making opportunity.

 

Lending to friends and family backed by collateral is also interesting but would be difficult to originate consistently.

 

Here is a thread that should help a little about thinking differently.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-100k-cash-question/msg119830/#msg119830

 

The best advice I can give is step out of your comfort zone to experience things your not use to.  Ex. if your not into comic books go to Comicon etc.  It will just start your creative juices and you will look at things in a way that others do not see. 

 

Set hard money limits at what your willing to lose in order to gain experience or to get a feel if something is worth pursuing (enough for you not to be lazy about the business, but not enough to really set you back).  Ex. I set aside some money for ticket scalping.  Lost money in the ordeal but gained a lot of experience about myself, got to practice negotiating, and the ticket business.  Let alone, I found some ways to get tickets cheaper for future reference and how not to fall for the bs they pull to get you to buy tickets.

 

 

 

That is a really great thread, thanks for sharing I hadn't come across it in my time on the forum. With respect to ticket scalping I always put in for the Masters ticket lotteries, I usually don't win but when I do get allocated some tickets it is a pretty easy $2000 payday!

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Guest Schwab711

I never mentioned family in my post. As Travis guessed, there's a pretty large difference between close friends and random folks you encounter in life. Maybe I use the term friend a little more freely than others.

 

I loan money to friends or friends-of-friends that have started small businesses or need help paying for expenses in their life.

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Hey all:

 

As a child I collected coins...Nothing serious of course, but I've always enjoyed them.

 

When I had some success in life & business I started seriously buying silver coins.

 

A few years later, the price of silver & gold went up & I fell upon hard times.

 

I started liquidating my collection.  At first I was dismayed by the prices offered by buyers.  I quickly learned how to sell & market my collection.

 

As I neared the end of my collection I came to the realization that I could actually make money buying & selling.

 

Fast forward a few years and now I have a thriving side business.  I am hoping to expand it significantly in the near future. 

 

I have cultivated good relations with several suppliers.  Perhaps even more importantly, I now have a book of happy, repeat customers.  I have several now who buy from me on a periodic basis (usually monthly). 

 

Margins are thin, and you have to know EXACTLY what you are doing...but you can easily do several thousands of $ in sales in one day.

 

You also only need a few things:

 

A). computer

B). Camera

C). Printer

D). Shipping supplies

E). Desk & cabinet

F). safe deposit box & home safe

G). high speed internet connection

H). local post office

 

This is also a business that has tremendous scale.  I have no doubt that a good, organized, motivated individual could do $1MM+ in sales yearly.

 

Another business that shares many of the same characteristics is selling of used, high end watches (Rolexes).

 

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I think sites like Gazelle, but in different markets can do well. They buy phones and ipads from people, and re-sell them at higher prices. Yes, people can sell products on places like eBay and Craigslist, but they take the headache out of having to deal with those platforms, and deal with potentially shady buyers. People can sell their phone to them without having to find their own buyer. So they act as a broker, instead of a true marketplace.

 

Would take some capital to buy products from people, but what other industries that currently have marketplaces would more of a brokerage model work?

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Like DTEJD, I think valuable niche products such as coins and Rolexes are great candidates for side businesses. You do really have to know the product well though. I met with someone recently who has a side passion/business buying and selling cars. Similarly, he only focuses on niche cars that have a cult-like following.

 

Travis, great points.

 

On the cars, down in your neck of the woods my wife's cousin runs a car dealer that focuses on a specific type of car he's passionate about: http://www.sevenhillsmotorcars.com/

 

My brother is a musician (plays bass) and started to do this at one point as well.  He'd buy high end amps on ebay and then resell them on craigslist for a multiple of it.  At one point he was in sales for an audio engineering company.  He said one of the company's largest dealers was a guy operating out of a condo in San Diego.  He had a garage full of gear and he had insanely high turnover all from selling online.  My brother's boss at the audio engineering company also bought and sold on the side.  This guy found his niche in Fender Strat guitars made in Mexico.  The market for American made strats is somewhat stable, but Mexican is all over the map.  He'd buy low on craigslist, re-word the copy and sell high.  He said he liked to do a few guitars each weekend and pick up between $1-2k in profit.

 

In terms of scaling you can't scale the guitar resell business.  Maybe you sit around and only work a few hours on weekends and make $50-80k a year, but that's it.  It's a nice salary for essentially arbitrage, and it can fund doing other things, but you won't be a millionaire off of it.

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