How I Made 200k+ Per Year from a $12,500 Investment
I realize the title seems a little unreal. You might think it is just another hype laden get rich quick story, but it’s not. I really made 200k+ for several years with a $12,500 investment. I used two basic principles. Here is how it happened, and how it can happen to you.
The Back Story
My former business partner and I were sitting at a car wash one sunny afternoon when he received a phone call. Since his car was still a good ten minutes from being finished, he took the call. I heard the usual banter one typically hears from one sided conversations.
“Why are you looking to sell?”
“I might be.”
Afterward, I asked what it was all about. The conversation was straightforward. Two sisters were looking to sell their business and called my business partner to see if he was interested. The business was in the same industry sector as his current start-up, yet held a different niche focus. He told them he probably wasn’t interested in buying it, but would take a look.
The following Monday he called me into his office. Once seated he slid some papers across the desk for me to look at. I asked what I was looking for and he told me, “You’ll see.” He was right. I looked at the profit and loss statements in bewilderment. They were clearing 50k per month! I told him it would be stupid not to buy this. He agreed and told me he had made an offer to his father to come in as partner at x percent.
We were friends at the time and I could not have been happier for them. I told him how awesome that offer was and how I thought his father would jump at the chance because I sure would. Those last three words. “I sure would.” It was an offhand remark that would change my financial future for a long, long time. He told me how glad he was to hear that because he wanted to offer me an opportunity as managing partner with 12.5% ownership of the company.
You could have knocked me over with a feather. I told him I needed to go talk it over with my wife, but I was in. I knew she wouldn’t object, but I wanted to make sure she understood what we were getting into. I had an idea of what the road ahead would look like.
So after a lengthy discussion and a good night’s sleep, I told him I was in. There was only one problem… I had no clue how I was going to come up with the money. The purchase price of the business was 400k. How was I going to come up with 12.5% of that?
The three of us met that afternoon and discussed our options. We looked at how we could come up with 400k. We discussed financing all of it. We discussed financing a portion of it. We looked for different assets we could tie the loan too. I knew if we did not find something fast, the opportunity would slip away.
And that… is my first principle. Learn to recognize opportunity. It’s one principle that will serve you well. I have used it time and time again to make thousands and thousands of dollars. You just have to learn how to spot it. Not every opportunity is great, even though most opportunity presents itself as such. You must know how to look through the smoke and mirrors to separate the good and bad ones from the great ones. Recognizing great opportunity will make you thousands of dollars over the course of your life, possibly millions.
So how do you do it? The short answer is measure it. Weigh the risk versus the reward. Successful people do not think like everybody else. Most people think in terms of how much more they can make per hour. They look for a second or third job to boost their income. They are a slave to the time clock, stuck in a middle class mindset.
Successful people think in terms of risk vs. reward. This is actually a principal I learned from Robert Kiyosaki long ago in his book, Retire Young Retire Rich. If you don’t have it, stop reading now and get it. Then come back and finish this case study. Yes, it really is that important. You will thank me for the purchase later.
Now back to risk vs. reward. When presented with an opportunity ask the following questions:
- If I do this what is required of me?
- What happens in a best case scenario?
- What is the worst case scenario?
- If I don’t do this, what is required of me to find an equivalent opportunity?
By asking these questions you are measuring risk. The way you spot great opportunity is answering the questions. If your part requires minimal investment, and your opportunity is easy to scale, you are sitting on a gold mine. If it all goes south and you lose a minimal investment, what’s the harm? You paid to learn a valuable lesson. You will certainly not make the same mistake again. This is how successful people think.
You might think, “Whoa, wait a minute though. This is a bit scary.” Yep, it is. In fact, every time you take hold of great opportunity to make something of it, fear will be present. He is there at every initial start-up launch, capital funding drive and corporate infrastructure build. He is also present when you are launching your online business, setting up your first LLC, and begin driving your own business bus.
Don’t worry though. Just recognize him for what he is… a motivator. Don’t let him play the role of master and you are fine. Don’t let him be absent either. That could make you naive. There is a line from the popular song Heavy Dirty Soul by 21 pilots that sums it up. They say, “death inspires me like a dog inspires a rabbit.” In other words, when fear is present, keep moving! The opportunity requires your attention and skill set to reach its full potential after all. Run towards the great ones and watch fear fall further and further behind like a chain smoker running a marathon. It really works.
So now that you know how to spot great opportunity, shift your focus towards it. Instead of thinking, “I can’t afford that opportunity” you should be asking, “How can I afford that opportunity?” It’s a subtle shift, but a powerful one nonetheless. Flipping that switch in your mind turns you from a passive idealist, to an active dreamer. That’s what I did when I told my former friend I was in.
After kicking the ball around concerning funding, we were having trouble coming up with viable solutions. I knew if we did not come up with something quick, the opportunity would be gone. I hit the internet hard and fast. As it turns out, I hit gold… well copper at least. I discovered we could easily finance 300k through the SBA for about 10%. That is a horrible interest rate for sure, but it was our best chance. Plus, it was not permanent. It was just a loan. A few years later we could refinance the loan with a traditional bank and get much better terms, provided our business was thriving. Again, there was risk, but I knew the players and what we were capable of.
So we financed a 10 year note with the SBA and got our 300k. Now, I had to come up with $12,500 to secure my 12.5% interest. That was easier said than done, or so I thought. We had just moved from a rental to our new home after living with my mother for almost a year due to some horrible circumstances at my previous job. That experience ended with me getting fired because I would not support a lie. It also meant we were wiped out because we made a move from South Florida for me to take that job… which lasted nine months. That’s right, I was fired after nine months, moved my family in with my mom for almost a year, moved to a rental, then finally purchased a home. We were tapped, but I was not bothering myself with those minor details.
Instead, I refinanced an automobile and took out a signature loan with my local credit union to secure funding. I came in next week with my check and everyone was surprised that I actually came up with the money because they were well aware of my financial situation. Yet again, I had been training myself for YEARS to spot great opportunities. When the offer was made, I immediately started thinking, “how can I afford this?” and I did! Shifting focus really made a difference.
Burn the Ships
Now, I would love to tell you we went on to make millions. That was not the case. We almost shut down a year later. We did not realize upon purchasing the business that half of the former clients were upset with the former business owners. New ownership was an easy exit. I touch more on this in my short ebook, Swing Batter. You will find details about the type of business I owned and what went south during the first year tucked inside. It’s enlightening, and you might be surprised at the type of business we owned.
The short version, however, involves our great opportunity posting a 60k loss. My former friend called me one evening to say it was over and we would discuss compensation for the purchase amount after the corporation was dissolved. I asked if he had called his father yet and he said he had not. I hung up and immediately called him to see what we could do. Don, his father, was not going down without a fight. I was so glad, because I was not either. A few moments later my phone rang again and I was told we were all going to meet around the conference table Monday morning to decide our fate.
That cold, January morning found us glum. However, after talking for a few hours the mood began to change. We decided that we were not going to give up. Instead, we were going to burn the ships. That meant getting out of the apartment we had leased in the northern part of the state. We took turns living up there to run the business so we would not have to drive 3 hours one way to make a daily commute.
And while getting rid of the apartment would free up cash, it would not compensate the deficit for what we were considering next… opening a second location in our home city to serve as a corporate headquarters. It was a great idea for sure. It made sense, except for one tiny issue. We had no business locally. Getting accounts was challenging enough, but servicing those accounts from a location three hours north was impossible. SO now we were going to open a second location and spend thousands upon thousands of dollars with ZERO business to support it.
On the surface it sounds crazy. However, remember the whole risk versus reward discussion? When viewed through that lens it made perfect sense. plus, my former business partner had spent a good portion of the weekend coming up with an incentive structure that rewarded us based on our performance. The more we grew, the more our pay increased. Keep in mind though. These were not easy benchmarks. We had just posted a 60k loss our first year. Our benchmarks were set at 1 million, 2 million, 5 million and 10 million.
We also came up with a plan to take over the state from a strategic standpoint. We actually drew circles on a map. That is addressed in more depth in the ebook I mentioned above if you are curious. What we were really doing was burning the ships. The term is coined from Captain Hernan Cortes when his Spanish expedition landed in Veracruz in 1519. Once he landed he gave the order to burn the ships. The message was clear. Retreat was not an option.
Again, this is a shift in focus. Once we took abandonment and defeat off the table, we got really creative really quick. We implemented our plan and hit our first benchmark before year’s end. Next year we hit the second one. We doubled in size every year after that except for our last. The last year we jumped from 15 million to 22 million dollars in sales.
I remember my first dividend check from the business was $1,500. Then they jumped to $6,250. Eventually they came in amounts of $12,500. That’s right. I was getting a checks every month for the full buy in amount I originally had to cough up. There were months where I received checks for a little more than 25k. One month I received one for $37,250 and a couple of months they were more than 50k.
I was amazed and humbled. I still am. Those were some of the most creative and challenging times of my life and I absolutely loved them. I learned that I was a master negotiator and could deliver the goods. I learned my weaknesses and delegated those to others who were stronger than me. Yet, what I really did, what yielded the most return for me, were those two simple principles. They are mindsets really. Recognize great opportunity and burn the ships.
You can do the same with your dream, whether it be freelance writing, or something else. I look forward to generating the same returns in this field as I did with my former venture. If you have an online business and are trying to get it off the ground, my ebook may be able to help you. It’s designed for newbies and those who took off, but feel stuck. The Unabridged Ultimate Sales Funnel Pocket Guide will set you on the right track. If you need further assistance, shoot an email over. I’ll do my best to help. I really want you to succeed!