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GOLD! From 0 To $240,000 Per Year PROFIT In 18 Months

richardd

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Jun 11, 2017
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From 0 to $240,000 per year profit in 18 months

I've been a follower of this forum for about a year now, had read the Millionaire Fastlane book, and finally have decided to tell my story. About a year and a half ago, I found myself unemployed and with near zero savings, two house payments, and a second baby on the way. Things were so dire that I was contemplating bankruptcy. I had just lost my slow-lane job with one of the original big three TV network companies. Worked there for about 3 years making the mistake of transitioning away from my career in computer consulting thinking that having a job would bring a certain level of security. It didn't. Man, those were dark days.

I decided to go back to consulting. But this time instead of taking on just one client full-time, I took on a second, and then a third, and then a fourth. A couple of them, I was billing 40 hours a week, working at the client site for 1, while telecommuting for the other. Clients 3 and 4 were part-time, billing 10-20 hours a week for each but at higher rates, also remote. FYI if you haven't heard, businesses more and more are allowing the telecommuting way. So, if you hate going into your job, look for opportunities to work from home. They're out there.

Well I did this for the past year+, and life has been shit busy, but I saved up a ton, about $200,000 in a year. That felt good. I felt secure with a lot of savings, I had multiple income streams, and the second baby now walks and can feed herself. My wife suggested we invest the $200K in money market funds or CDs. Sounds good, right? Earn 2.3% APY resulting in a whopping $383/mo.! I love my wife, but not for us.

Investing in low-yield financial instruments, and working for someone whether consulting or full time. These are strong characteristics of the slow lane. I've always had an entrepreneur’s mindset. I wanted financial freedom from the daily 9-5 grind, or for me this past year, the 5am-1am grind, including weekends. Even though I had the high-paying clients, if you think about it, it's never good to have all your nuts in very few baskets. And you definitely don't want your schedule dictated to you as consulting can often times do. Besides, money was still tied to my time, and this current work schedule was unsustainable. So having a business seemed like the way to go.

How did I start a business that gives me the financial freedom and time freedom that I so desired? Funny thing. I didn't. I didn't start a new business. Oh, I created a new corporate entity initially for my consulting. But I'm just not creative enough, nor risk averse with family and kids to take a chance there. And besides, burning a year of my life working my a$$ off to roll the dice on a new venture. Nah. So did this mean that I just wasn't going to pursue financial freedom, and maybe instead continue the 100 hours a week work load? No.

About 6 months ago, I started looking at buying software/internet businesses. Why reinvent the wheel? The number of businesses sold on the internet is growing rapidly. Sure there's a ton of scams, get-rich-quick opportunities offered by fake sellers. There are a lot of businesses that the seller just wants out because of failing operations. There are businesses that are a dying breed tied to the old world, pre-internet. For example, consider commercial printing companies which as a side note I was an owner of one about 10 years ago. I'll get back to this in a moment. There are businesses that run in a saturated space like many ecommerce, dropship/Amazon businesses that may have once been profitable, but have lost their edge due to the marketplace. Oh, and blogs, need I say more. Lots of bad opportunities!

So let me quickly detour farther into the past. 10 years ago, I was the owner of a print shop. We had lots of B2B customers looking for printed material on paper. They were all local customers, who often times paid late since we invoiced at NET 30. We had employees running the machines to print and cut and collate and staple. We had leased printers and other equipment. We had leased store-front space. We had a lot of COGS (Cost of Goods Sold), namely the paper itself. Ultimately we failed, and went out of business. Simply put, sales decreased over time, the business didn't scale, the cash flow was shit due to late payers, the overhead was horrendous, and having full-time employees was expensive and such a burden.

Years later, I tried blogging. Tech centric since I'm a programmer. That was a waste of time. AdSense brought in a few hundred bucks a month. But since I don't like writing (even this posting is painful to me), it turned out not to be worth it. I tried ecommerce, AliExpress/Shopify drop shipping of apparel. Did OK for a few months, but then the sales dried up, and I had difficulty coming up with new products to sell. Hated that as well. Definitely not sustainable. So ultimately I failed.

Which bring us back to now. I say I failed, which I'm sure many of you reading this have done so as well. But I say that to make a point. Failure is not truly failure when considering what it really is. As humans, we all fail, probably every day in one form or another. Most of our failures are inconsequential. We break something. We say the wrong thing at the wrong time. We buy some product that doesn't live up to our expectations. But guess what? We adjust our behaviors to mitigate risk so that next time, we do better. Business should be treated the same. Choices that you make in business can be driven by experiences, good and bad. I have a ton of that, especially the bad.

So based on my past failures, I came up with criteria for what my next business acquisition would require. Here they are:

1) No full-time employees. Didn't want the headache.
2) Profitable. Of course.
3) Years of proven profitability.
4) Digital/software products or services. No inventory. No drop shipping.
5) Scalable.
6) No physical location. Allowing work from home without need for leasing office/store.
7) Flexible business. Caters to expanding product and service line beyond current offerings to customers.
8) Low weekly hours necessary for owner operation.
9) Instant credit card sales, vs NET30 or other delayed payment processing.
10) Minimal marketing.
11) Full control. No partnerships. Limit dependencies with external entities.

So, I'm sitting on my $200,000 nest egg from all that hard work. I'm researching businesses for sale. And I find one that is a software company that sells proprietary accounting software. Promising! I'm a programmer with tons of experience in accounting. The business has been operational for 30 years, with recurring clients going back 10+ years, and has been run by this one couple who are well into their retirement years but hadn't pulled the trigger. And guess what? This software business satisfies all 11 of my requirements above. Well, I send their broker an offer of about $200K with half of it owner-financed for 5 years. They accept. Done deal. The profit annualized is $70,000 with an initial investment of $100,000. ROI = 70%. Nice! Since taking over, I'm happy with the performance, and I only spend maybe a couple hours a week on it. I outsource the programming.

Why stop there? I know MJ preaches monogamy. But I feel you can scale your company multiple ways. 1) expanding your sales in your current product/service line, and 2) buying existing businesses to generate more revenue. The only limiting factor of the second is that you will hit a limiting threshold in time when managing and marketing your multiple business holdings. Hopefully by then, you have gotten to a point where you can hire managers to offload that work. In any case, I next took over... a blog. I laugh when I write that because as mentioned before, I hated blogging. But I'll give you a little secret. You can hire writers, which I have a whole staff of them.

The blog is more than just a blog with hundreds of thousands of viewers per month. It has an online Facebook page with a quarter million followers, and a Facebook group with tens of thousands of passionate people whose lives revolve around my niche. And I am one of them, also passionate towards the content that we generate. So, I placed an offer, and got it, trademark included. $80K. We make money working with an advertising agency that deals with handling ad fill. Profit after paying our writing staff has been about $3500/mo. So annualized is $42,000 profit/year. ROI = 52.5%.

Next acquisition. I bought a web site backup service. We have hundreds of customers that we perform nightly backups of their sites as well as make sure their sites are operational 24x7. I outsource that work to offshore for cheap, but excellent labor. I love the guys who keep this business going strong day to day. I barely do anything but accounting for this. Maybe spend half an hour a day. I got it for $35,000. And annualized we make $30K in profit. ROI = 85%.

And most recently I've assumed a web marketing business. This too has a team of contractors that do the heavy lifting. Premium one-word, business-specific, domain name that garners 30K organic traffic a month. Very little ad spend. We generate about $8000/mo. in profit, again annualized to $96K profit for an ROI = 240%. I haven't figured out why the previous owner sold this other than he didn't want to do it anymore, and wanted to concentrate on his other business. He's got rep. I did my research.

So here's the grand total annualized profit:

Accounting Software Business: $70,000
Blog and Online Community: $42,000
Web Site Backup Business: $30,000
Web Marketing Business: $96,000

Total Annualized Profit: $238,000

Mind you, since these ventures take up maybe a total of a couple hours a day for me to run, I am free to focus on marketing for growth, while keeping a couple of my consulting clients. I quit the one client where I had to go into the office, and the other remote client, I just quit because I didn't have time for them. So I work from home now. The consulting dollars gets me to $400K a year, but I will most likely stop consulting next year to completely focus on my businesses. And my family and I are planning on moving to Central America this winter, because we love it there, and hell, I can work from anywhere that has internet.

One last note on being a serial entrepreneur. I look for synergies between my businesses and any future acquisitions. Each of the four ventures that I now have complement one or more of the other businesses, so I can leverage/cross-sell amongst the lot of them. This specific business model is starting to gain traction. But one challenge for me is branding when cross-selling. I haven't figured out how to consolidate the brands most efficiently. Each has their own distinct brand that current customers trust. And future customers may gravitate to the current branding. So not sure yet, but it's a good problem to have.
 

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Last edited:

Kevin88660

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From 0 to $240,000 per year in 18 months

I've been a follower of this forum for about a year now, had read the Millionaire Fastlane book, and finally have decided to tell my story. About a year and a half ago, I found myself unemployed and with near zero savings, two house payments, and a second baby on the way. Things were so dire that I was contemplating bankruptcy. I had just lost my slow-lane job with one of the original big three TV network companies. Worked there for about 3 years making the mistake of transitioning away from my career in computer consulting thinking that having a job would bring a certain level of security. It didn't. Man, those were dark days.

I decided to go back to consulting. But this time instead of taking on just one client full-time, I took on a second, and then a third, and then a fourth. A couple of them, I was billing 40 hours a week, working at the client site for 1, while telecommuting for the other. Clients 3 and 4 were part-time, billing 10-20 hours a week for each but at higher rates, also remote. FYI if you haven't heard, businesses more and more are allowing the telecommuting way. So, if you hate going into your job, look for opportunities to work from home. They're out there.

Well I did this for the past year+, and life has been shit busy, but I saved up a ton, about $200,000 in a year. That felt good. I felt secure with a lot of savings, I had multiple income streams, and the second baby now walks and can feed herself. My wife suggested we invest the $200K in money market funds or CDs. Sounds good, right? Earn 2.3% APY resulting in a whopping $383/mo.! I love my wife, but not for us.

Investing in low-yield financial instruments, and working for someone whether consulting or full time. These are strong characteristics of the slow lane. I've always had an entrepreneur’s mindset. I wanted financial freedom from the daily 9-5 grind, or for me this past year, the 5am-1am grind, including weekends. Even though I had the high-paying clients, if you think about it, it's never good to have all your nuts in very few baskets. And you definitely don't want your schedule dictated to you as consulting can often times do. Besides, money was still tied to my time, and this current work schedule was unsustainable. So having a business seemed like the way to go.

How did I start a business that gives me the financial freedom and time freedom that I so desired? Funny thing. I didn't. I didn't start a new business. Oh, I created a new corporate entity initially for my consulting. But I'm just not creative enough, nor risk averse with family and kids to take a chance there. And besides, burning a year of my life working my a$$ off to roll the dice on a new venture. Nah. So did this mean that I just wasn't going to pursue financial freedom, and maybe instead continue the 100 hours a week work load? No.

About 6 months ago, I started looking at buying software/internet businesses. Why reinvent the wheel? The number of businesses sold on the internet is growing rapidly. Sure there's a ton of scams, get-rich-quick opportunities offered by fake sellers. There are a lot of businesses that the seller just wants out because of failing operations. There are businesses that are a dying breed tied to the old world, pre-internet. For example, consider commercial printing companies which as a side note I was an owner of one about 10 years ago. I'll get back to this in a moment. There are businesses that run in a saturated space like many ecommerce, dropship/Amazon businesses that may have once been profitable, but have lost their edge due to the marketplace. Oh, and blogs, need I say more. Lots of bad opportunities!

So let me quickly detour farther into the past. 10 years ago, I was the owner of a print shop. We had lots of B2B customers looking for printed material on paper. They were all local customers, who often times paid late since we invoiced at NET 30. We had employees running the machines to print and cut and collate and staple. We had leased printers and other equipment. We had leased store-front space. We had a lot of COGS (Cost of Goods Sold), namely the paper itself. Ultimately we failed, and went out of business. Simply put, sales decreased over time, the business didn't scale, the cash flow was shit due to late payers, the overhead was horrendous, and having full-time employees was expensive and such a burden.

Years later, I tried blogging. Tech centric since I'm a programmer. That was a waste of time. AdSense brought in a few hundred bucks a month. But since I don't like writing (even this posting is painful to me), it turned out not to be worth it. I tried ecommerce, AliExpress/Shopify drop shipping of apparel. Did OK for a few months, but then the sales dried up, and I had difficulty coming up with new products to sell. Hated that as well. Definitely not sustainable. So ultimately I failed.

Which bring us back to now. I say I failed, which I'm sure many of you reading this have done so as well. But I say that to make a point. Failure is not truly failure when considering what it really is. As humans, we all fail, probably every day in one form or another. Most of our failures are inconsequential. We break something. We say the wrong thing at the wrong time. We buy some product that doesn't live up to our expectations. But guess what? We adjust our behaviors to mitigate risk so that next time, we do better. Business should be treated the same. Choices that you make in business can be driven by experiences, good and bad. I have a ton of that, especially the bad.

So based on my past failures, I came up with criteria for what my next business acquisition would require. Here they are:

1) No full-time employees. Didn't want the headache.
2) Profitable. Of course.
3) Years of proven profitability.
4) Digital/software products or services. No inventory. No drop shipping.
5) Scalable.
6) No physical location. Allowing work from home without need for leasing office/store.
7) Flexible business. Caters to expanding product and service line beyond current offerings to customers.
8) Low weekly hours necessary for owner operation.
9) Instant credit card sales, vs NET30 or other delayed payment processing.
10) Minimal marketing.
11) Full control. No partnerships. Limit dependencies with external entities.

So, I'm sitting on my $200,000 nest egg from all that hard work. I'm researching businesses for sale. And I find one that is a software company that sells proprietary accounting software. Promising! I'm a programmer with tons of experience in accounting. The business has been operational for 30 years, with recurring clients going back 10+ years, and has been run by this one couple who are well into their retirement years but hadn't pulled the trigger. And guess what? This software business satisfies all 11 of my requirements above. Well, I send their broker an offer of about $200K with half of it owner-financed for 5 years. They accept. Done deal. The profit annualized is $70,000 with an initial investment of $100,000. ROI = 70%. Nice! Since taking over, I'm happy with the performance, and I only spend maybe a couple hours a week on it. I outsource the programming.

Why stop there? I know MJ preaches monogamy. But I feel you can scale your company multiple ways. 1) expanding your sales in your current product/service line, and 2) buying existing businesses to generate more revenue. The only limiting factor of the second is that you will hit a limiting threshold in time when managing and marketing your multiple business holdings. Hopefully by then, you have gotten to a point where you can hire managers to offload that work. In any case, I next took over... a blog. I laugh when I write that because as mentioned before, I hated blogging. But I'll give you a little secret. You can hire writers, which I have a whole staff of them.

The blog is more than just a blog with hundreds of thousands of viewers per month. It has an online Facebook page with a quarter million followers, and a Facebook group with tens of thousands of passionate people whose lives revolve around my niche. And I am one of them, also passionate towards the content that we generate. So, I placed an offer, and got it, trademark included. $80K. We make money working with an advertising agency that deals with handling ad fill. Profit after paying our writing staff has been about $3500/mo. So annualized is $42,000 profit/year. ROI = 52.5%.

Next acquisition. I bought a web site backup service. We have hundreds of customers that we perform nightly backups of their sites as well as make sure their sites are operational 24x7. I outsource that work to offshore for cheap, but excellent labor. I love the guys who keep this business going strong day to day. I barely do anything but accounting for this. Maybe spend half an hour a day. I got it for $35,000. And annualized we make $30K in profit. ROI = 85%.

And most recently I've assumed a web marketing business. This too has a team of contractors that do the heavy lifting. Premium one-word, business-specific, domain name that garners 30K organic traffic a month. Very little ad spend. We generate about $8000/mo. in profit, again annualized to $96K profit for an ROI = 240%. I haven't figured out why the previous owner sold this other than he didn't want to do it anymore, and wanted to concentrate on his other business. He's got rep. I did my research.

So here's the grand total annualized profit:

Accounting Software Business: $70,000
Blog and Online Community: $42,000
Web Site Backup Business: $30,000
Web Marketing Business: $96,000

Total Annualized Profit: $238,000

Mind you, since these ventures take up maybe a total of a couple hours a day for me to run, I am free to focus on marketing for growth, while keeping a couple of my consulting clients. I quit the one client where I had to go into the office, and the other remote client, I just quit because I didn't have time for them. So I work from home now. The consulting dollars gets me to $400K a year, but I will most likely stop consulting next year to completely focus on my businesses. And my family and I are planning on moving to Central America this winter, because we love it there, and hell, I can work from anywhere that has internet.

One last note on being a serial entrepreneur. I look for synergies between my businesses and any future acquisitions. Each of the four ventures that I now have complement one or more of the other businesses, so I can leverage/cross-sell amongst the lot of them. This specific business model is starting to gain traction. But one challenge for me is branding when cross-selling. I haven't figured out how to consolidate the brands most efficiently. Each has their own distinct brand that current customers trust. And future customers may gravitate to the current branding. So not sure yet, but it's a good problem to have.
Sounds like you are running your own private equity firm! Well done on your good result.

Maybe you will find this thread relevant or interesting.

 
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richardd

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Sounds like you are running your own private equity firm! Well done on your good result.

Maybe you will find this thread relevant or interesting.

I actually came upon your thread recently. And I had been reading articles about Baby Boomers / Business Owners trying to offload their life-long businesses. It's really a great model in my opinion to start or grow one's company. They've built the trust with their customer base, but no longer wish to continue, and I don't blame them. Good deals are to be had here. Interestingly, the customers that I've acquired give me feedback that we're doing a better job with customer support. The retired couple I referenced in my post here just wasn't engaged in the last few years.

I'll check out your posting more when I get a chance.
 

CareCPA

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Is there a point where you'll hire a CEO/CFO of your "portfolio?" Then you only have to manage 1 or 2 people instead of all your businesses.

Also curious on how you're finding deals: existing network, business brokers, cold outreach, etc.

Awesome progress in just 18 months. I've been internally debating the balance between growing the current business and acquiring others.
 
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richardd

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Is there a point where you'll hire a CEO/CFO of your "portfolio?" Then you only have to manage 1 or 2 people instead of all your businesses.

Also curious on how you're finding deals: existing network, business brokers, cold outreach, etc.

Awesome progress in just 18 months. I've been internally debating the balance between growing the current business and acquiring others.
I'm sure there will be a time where I'll want/need to do so. I'm in my mid 40s now, so I have lots of energy. I would imagine that when I go full out on the marketing, I'll hit a point where I'm putting in way more than 40 hours a week. My experience is around 60 hours, my quality of life starts to disintegrate.

I'll probably keep buying businesses over the next couple of years. So that hopefully may be the bridge I have to cross within that time frame.

As for the deals, there are so many sites selling businesses. BizBuySell and Flippa have been successful for me recently. I look for ROI of at least 50%. Preferably in the 75% range. Just as a side note, I don't like Empire Flippers because they focus mainly on ecommerce. And they typically do the 20x monthly revenue valuation. Not even profit based. Two things I hate about this. One, the business could have good revenue numbers but poor margins leading to ROIs way lower than my 50% threshold. Two, I'm not good at ecommerce from the stand point of constantly finding new products to market when the current ones drop in sales due to passing fancy or decreasing market share from saturated markets.
 
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richardd

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I wanted to add a little to my original post. I've been fortunate to be highly skilled with a relatively high earning potential as a full-timer/consultant within the corporate context. If I just kept one gig going though, I'd be living pay check to pay check with my family's lifestyle. Since I decided to take on a second job (and a 3rd and 4th), I was able to raise capital, and then scale very quickly to almost a quarter million in yearly profit. This shouldn't discourage people who make way less in their full-time jobs. Hustle for the extra dough.

I came upon a web hosting business recently that the owner wanted to sell to me for $15,000 with about $22,000 in yearly profit. It would have worked well with my current web site backup business. I would just consider it a business expense to acquire 1000+ customers who I could then re-market our current products. But even as a stand-alone, adding an extra $20,000 yearly income to someone who makes a more modest living than I would be a very good launch point for them in my opinion.

Once you achieve this surplus in income over expenses, you achieve what I call financial escape velocity. The escape velocity is like a rocket going fast enough upwards to reach a speed where it achieves orbit around the Earth due to going faster than the downward forces can recapture the vessel.

In financial terms, you reach a point when your profits exceed your expenses which allow you to increase income/profits by reinvesting any excess money. At this point, you have realized financial independence, since you are fully in control of your income, and keeping your employer will no longer be a requirement.
 

softwareRules

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This was an inspiring read! Is it conceivable to work from home at a full-time job and still take consulting jobs to save up for that initial investment/acquisition? It seems like most clients for freelancing dislike weekend or evening work (unless it's a different timezone, weirdly enough).

Any advice for other developer who have a full-time job and are already doing some side-hustles (writing articles for $$ already and making some video courses for publisher advances)
 
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richardd

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This was an inspiring read! Is it conceivable to work from home at a full-time job and still take consulting jobs to save up for that initial investment/acquisition? It seems like most clients for freelancing dislike weekend or evening work (unless it's a different timezone, weirdly enough).

Any advice for other developer who have a full-time job and are already doing some side-hustles (writing articles for $$ already and making some video courses for publisher advances)
It is feasible. Just ask my wife. Most smart phones nowadays have WiFi Hub capabilities, allowing you to work from virtually anywhere. For example, when I was working full-time at the client office, I also had my own laptop and cell phone. I was always connected to service the 3 remote clients. It may not work if your bosses are micro managers, and if you have tons of conflicting meetings. Believe me though, I made it work. When I had two meetings scheduled at the same time from two different clients, I'd pick the one that was most important. What's the worst that could happen, I'd get fired from the other That never happened.

My advice to developers: go with your core expertise. You can write articles and video courses for some extra money, and that's great. But you are probably not making as much as if you were charging for your programming/development skill sets. Find a away to get multiple clients who need your programming capabilities.
 

becks22

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I love this and your hustle! This is ultimately my plan within the next 3 to 5 years!
 
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richardd

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I love this and your hustle! This is ultimately my plan within the next 3 to 5 years!
Go for it. I wish I had done this 10 years ago. But if you haven't done so, start now. There are always ways to hustle for capital. And I'd recommend as soon as you have enough to venture into new businesses or scaling your current one, do it. Making money now compounds in business as it does in tradition financial instruments.
 
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richardd

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One more thing to add. Another reason why I like serial entrepreneurship is that you mitigate risk by spreading out your investment dollars across multiple unrelated ventures. Keep that in mind. Just like my not wanting to depend on one client for my income, namely an employer, I like not having everything on the line with one business. So if one drops in sales, or completely fails, the others are there to weather that proverbial storm.
 

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softwareRules

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For example, when I was working full-time at the client office, I also had my own laptop and cell phone. I was always connected to service the 3 remote clients. It may not work if your bosses are micro managers, and if you have tons of conflicting meetings.
I've been using the commute on public transit for working on articles/video courses. 40 minutes each way results in a lot of work getting done. Lunch time feels trickier because it can look odd to duck out with my personal laptop or bag (working in a large open office).

...Now I realize where you get the billable hours: 1 hr lunch + ~1.2 hrs of commute = 2.2 hrs per day, 11 hrs per week and that's without including any evening or weekend time.

My advice to developers: go with your core expertise. You can write articles and video courses for some extra money, and that's great. But you are probably not making as much as if you were charging for your programming/development skill sets. Find a away to get multiple clients who need your programming capabilities.
Video courses are $1500+ per course depending on length. Articles are $300, sometimes more, sometimes less. Good for keeping skills sharp and demonstrating expertise. I was able to turn an article and webinar into $2000 training session.

So you're right, that amount of cash is good for a quick cash infusion but not the same as a consulting gig.

Do you have advice on sites for clients or for niches? How many weeks or months long are your consulting gigs?
 
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richardd

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I've been using the commute on public transit for working on articles/video courses. 40 minutes each way results in a lot of work getting done. Lunch time feels trickier because it can look odd to duck out with my personal laptop or bag (working in a large open office).

...Now I realize where you get the billable hours: 1 hr lunch + ~1.2 hrs of commute = 2.2 hrs per day, 11 hrs per week and that's without including any evening or weekend time.



Video courses are $1500+ per course depending on length. Articles are $300, sometimes more, sometimes less. Good for keeping skills sharp and demonstrating expertise. I was able to turn an article and webinar into $2000 training session.

So you're right, that amount of cash is good for a quick cash infusion but not the same as a consulting gig.

Do you have advice on sites for clients or for niches? How many weeks or months long are your consulting gigs?
Since you apparently like blogging, maybe you should look at acquiring an already existing successful established blog in line with your skills. Then you can pump out content for yourself.

And if you do video as well, you should definitely add that to blogging. Video advertising dollars are much more than regular content. Viewers are more engaged, and thus advertisers pay more.

For my consulting, these contracts typically go at least 1 year. My current two have been with me for 13 months and I think 4 years.
 

Yzn

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Beautiful thread man. Wish you luck on your next acquisitions.

Reading what you had first noted down for yourself as a acquisition criteria, it sounded like a dream. Too good to be true. But as you explained more in the post it seemed very realistic. I hope one day I could do what you did.

Best of luck and thanks for this inspiration.
 

Grinder20

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From 0 to $240,000 per year in 18 months

I've been a follower of this forum for about a year now, had read the Millionaire Fastlane book, and finally have decided to tell my story. About a year and a half ago, I found myself unemployed and with near zero savings, two house payments, and a second baby on the way. Things were so dire that I was contemplating bankruptcy. I had just lost my slow-lane job with one of the original big three TV network companies. Worked there for about 3 years making the mistake of transitioning away from my career in computer consulting thinking that having a job would bring a certain level of security. It didn't. Man, those were dark days.

I decided to go back to consulting. But this time instead of taking on just one client full-time, I took on a second, and then a third, and then a fourth. A couple of them, I was billing 40 hours a week, working at the client site for 1, while telecommuting for the other. Clients 3 and 4 were part-time, billing 10-20 hours a week for each but at higher rates, also remote. FYI if you haven't heard, businesses more and more are allowing the telecommuting way. So, if you hate going into your job, look for opportunities to work from home. They're out there.

Well I did this for the past year+, and life has been shit busy, but I saved up a ton, about $200,000 in a year. That felt good. I felt secure with a lot of savings, I had multiple income streams, and the second baby now walks and can feed herself. My wife suggested we invest the $200K in money market funds or CDs. Sounds good, right? Earn 2.3% APY resulting in a whopping $383/mo.! I love my wife, but not for us.

Investing in low-yield financial instruments, and working for someone whether consulting or full time. These are strong characteristics of the slow lane. I've always had an entrepreneur’s mindset. I wanted financial freedom from the daily 9-5 grind, or for me this past year, the 5am-1am grind, including weekends. Even though I had the high-paying clients, if you think about it, it's never good to have all your nuts in very few baskets. And you definitely don't want your schedule dictated to you as consulting can often times do. Besides, money was still tied to my time, and this current work schedule was unsustainable. So having a business seemed like the way to go.

How did I start a business that gives me the financial freedom and time freedom that I so desired? Funny thing. I didn't. I didn't start a new business. Oh, I created a new corporate entity initially for my consulting. But I'm just not creative enough, nor risk averse with family and kids to take a chance there. And besides, burning a year of my life working my a$$ off to roll the dice on a new venture. Nah. So did this mean that I just wasn't going to pursue financial freedom, and maybe instead continue the 100 hours a week work load? No.

About 6 months ago, I started looking at buying software/internet businesses. Why reinvent the wheel? The number of businesses sold on the internet is growing rapidly. Sure there's a ton of scams, get-rich-quick opportunities offered by fake sellers. There are a lot of businesses that the seller just wants out because of failing operations. There are businesses that are a dying breed tied to the old world, pre-internet. For example, consider commercial printing companies which as a side note I was an owner of one about 10 years ago. I'll get back to this in a moment. There are businesses that run in a saturated space like many ecommerce, dropship/Amazon businesses that may have once been profitable, but have lost their edge due to the marketplace. Oh, and blogs, need I say more. Lots of bad opportunities!

So let me quickly detour farther into the past. 10 years ago, I was the owner of a print shop. We had lots of B2B customers looking for printed material on paper. They were all local customers, who often times paid late since we invoiced at NET 30. We had employees running the machines to print and cut and collate and staple. We had leased printers and other equipment. We had leased store-front space. We had a lot of COGS (Cost of Goods Sold), namely the paper itself. Ultimately we failed, and went out of business. Simply put, sales decreased over time, the business didn't scale, the cash flow was shit due to late payers, the overhead was horrendous, and having full-time employees was expensive and such a burden.

Years later, I tried blogging. Tech centric since I'm a programmer. That was a waste of time. AdSense brought in a few hundred bucks a month. But since I don't like writing (even this posting is painful to me), it turned out not to be worth it. I tried ecommerce, AliExpress/Shopify drop shipping of apparel. Did OK for a few months, but then the sales dried up, and I had difficulty coming up with new products to sell. Hated that as well. Definitely not sustainable. So ultimately I failed.

Which bring us back to now. I say I failed, which I'm sure many of you reading this have done so as well. But I say that to make a point. Failure is not truly failure when considering what it really is. As humans, we all fail, probably every day in one form or another. Most of our failures are inconsequential. We break something. We say the wrong thing at the wrong time. We buy some product that doesn't live up to our expectations. But guess what? We adjust our behaviors to mitigate risk so that next time, we do better. Business should be treated the same. Choices that you make in business can be driven by experiences, good and bad. I have a ton of that, especially the bad.

So based on my past failures, I came up with criteria for what my next business acquisition would require. Here they are:

1) No full-time employees. Didn't want the headache.
2) Profitable. Of course.
3) Years of proven profitability.
4) Digital/software products or services. No inventory. No drop shipping.
5) Scalable.
6) No physical location. Allowing work from home without need for leasing office/store.
7) Flexible business. Caters to expanding product and service line beyond current offerings to customers.
8) Low weekly hours necessary for owner operation.
9) Instant credit card sales, vs NET30 or other delayed payment processing.
10) Minimal marketing.
11) Full control. No partnerships. Limit dependencies with external entities.

So, I'm sitting on my $200,000 nest egg from all that hard work. I'm researching businesses for sale. And I find one that is a software company that sells proprietary accounting software. Promising! I'm a programmer with tons of experience in accounting. The business has been operational for 30 years, with recurring clients going back 10+ years, and has been run by this one couple who are well into their retirement years but hadn't pulled the trigger. And guess what? This software business satisfies all 11 of my requirements above. Well, I send their broker an offer of about $200K with half of it owner-financed for 5 years. They accept. Done deal. The profit annualized is $70,000 with an initial investment of $100,000. ROI = 70%. Nice! Since taking over, I'm happy with the performance, and I only spend maybe a couple hours a week on it. I outsource the programming.

Why stop there? I know MJ preaches monogamy. But I feel you can scale your company multiple ways. 1) expanding your sales in your current product/service line, and 2) buying existing businesses to generate more revenue. The only limiting factor of the second is that you will hit a limiting threshold in time when managing and marketing your multiple business holdings. Hopefully by then, you have gotten to a point where you can hire managers to offload that work. In any case, I next took over... a blog. I laugh when I write that because as mentioned before, I hated blogging. But I'll give you a little secret. You can hire writers, which I have a whole staff of them.

The blog is more than just a blog with hundreds of thousands of viewers per month. It has an online Facebook page with a quarter million followers, and a Facebook group with tens of thousands of passionate people whose lives revolve around my niche. And I am one of them, also passionate towards the content that we generate. So, I placed an offer, and got it, trademark included. $80K. We make money working with an advertising agency that deals with handling ad fill. Profit after paying our writing staff has been about $3500/mo. So annualized is $42,000 profit/year. ROI = 52.5%.

Next acquisition. I bought a web site backup service. We have hundreds of customers that we perform nightly backups of their sites as well as make sure their sites are operational 24x7. I outsource that work to offshore for cheap, but excellent labor. I love the guys who keep this business going strong day to day. I barely do anything but accounting for this. Maybe spend half an hour a day. I got it for $35,000. And annualized we make $30K in profit. ROI = 85%.

And most recently I've assumed a web marketing business. This too has a team of contractors that do the heavy lifting. Premium one-word, business-specific, domain name that garners 30K organic traffic a month. Very little ad spend. We generate about $8000/mo. in profit, again annualized to $96K profit for an ROI = 240%. I haven't figured out why the previous owner sold this other than he didn't want to do it anymore, and wanted to concentrate on his other business. He's got rep. I did my research.

So here's the grand total annualized profit:

Accounting Software Business: $70,000
Blog and Online Community: $42,000
Web Site Backup Business: $30,000
Web Marketing Business: $96,000

Total Annualized Profit: $238,000

Mind you, since these ventures take up maybe a total of a couple hours a day for me to run, I am free to focus on marketing for growth, while keeping a couple of my consulting clients. I quit the one client where I had to go into the office, and the other remote client, I just quit because I didn't have time for them. So I work from home now. The consulting dollars gets me to $400K a year, but I will most likely stop consulting next year to completely focus on my businesses. And my family and I are planning on moving to Central America this winter, because we love it there, and hell, I can work from anywhere that has internet.

One last note on being a serial entrepreneur. I look for synergies between my businesses and any future acquisitions. Each of the four ventures that I now have complement one or more of the other businesses, so I can leverage/cross-sell amongst the lot of them. This specific business model is starting to gain traction. But one challenge for me is branding when cross-selling. I haven't figured out how to consolidate the brands most efficiently. Each has their own distinct brand that current customers trust. And future customers may gravitate to the current branding. So not sure yet, but it's a good problem to have.
@richardd, this is absolutely amazing! Congrats and thank you!
 
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richardd

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Beautiful thread man. Wish you luck on your next acquisitions.

Reading what you had first noted down for yourself as a acquisition criteria, it sounded like a dream. Too good to be true. But as you explained more in the post it seemed very realistic. I hope one day I could do what you did.

Best of luck and thanks for this inspiration.
Thank you for your kind words of encouragement.

I agree about it sounding too good to be true. When I laid out my plans for the last 18 months, I couldn't understand how simple it was. Please don't mistake that as easy. I mean simple as in logically simple. I figured really that the challenge was execution. And handling of the stress of long endless hours of work.

I chose this path for the simplicity of it. By taking over proven business models with real-world profit, it came down to plain math. When doing a startup, there are so many variables to reach success. Although I itch to do this in the future when I can take on the risk.

The main challenges to my path have been finding the right opportunities (see my list of 11 criteria), vetting the seller with due diligence while detecting scam artists (this is fun for me, but for a different topic to discuss), obviously raising the capital by hustling, and then transitioning the business upon closing.
 
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richardd

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I have a few high-level goals since this is actually a progress thread. I want to grow our profitability year-over-year by $100K. Honestly, we won't need the money. As mentioned before, my wife and I are moving to Central America to have a simpler life with fewer temptations for materialistic things. Basically we want to downsize, and teach our kids that life is more about enjoying the world and different cultures, and less about accumulating stuff.

But I sure would like never to have to worry about money again. And when we come back to the States years down the line, I'd love to be netting a million bucks a year as we head into our retirement years. My wife also loves philanthropy, and I kind of dig it too. I also would love to start some crazy venture that is not profit driven. Having lots of money makes doing those things a lot easier.

Anyway, back to the progress thread. I'm pretty sure I can get to another $100K in profit by 12 months from now. I'd just have to continue consulting for another year, and use those earning to add to my business portfolio. Also, I can work to scale up my current businesses. The only caveat is if I be willing to continue consulting. Or will my clients continue to renew me through next year? My will is fading since I've been working multiple consulting clients over the past year. I kind of just want to relax a bit. And when we live in Central America, I probably will lose more of this edge.

In any event. GOAL: extra $100K profit by next year.
 

Heal Piece

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vetting the seller with due diligence while detecting scam artists (this is fun for me, but for a different topic to discuss),
Look at buying my first 1 or 2 businesses. One through a mutual associate where I'm doing my own vetting face to face and have other partners involved, but I would love to hear more about your vetting process for buying a business online.
 

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richardd

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When vetting sellers online, it's tricky. I always look up their public profiles on Facebook, LinkedIn, etc. Unsolicited. I then reach out to them if they're selling their business. Often times with scams, they'll say something like they have no idea what I'm talking about. If they are selling, then we continue on with the transaction. You'll obviously also want to validate how long they've had their accounts. If it's been online for years, it's highly likely they are legit. But you want to cross reference their name with other online profiles and postings. Google is your friend.

You also can research their business online. Most that I deal with have social media accounts. Again, if their pages have been up for a long time and they post somewhat regularly, that's indicative of a legitimate business. Due diligence weeds out if they're full of shit or not. The aging of their profiles and pages on social media is importantly simply because most scam artists don't play the long game. Like I'm not going to create an account now, age it, and then scam someone years later. Although it's possible.

Usually when you are corresponding with a seller, their time is important so if a "seller" is hyper responsive, and then tried to close a deal that day... Don't be fooled. Selling a business is a process, just like buying a business. It takes time. Real sellers are wary too of fakers. So they will want to vet buyers as well. Oh, and even if a seller is legit, if they are that eager to sell say that day, their business is very likely shit.

Meeting in person is best. Getting copies of government issued ID is important too. All this can be faked, so you'll want to cross reference IDs with other databases online.
 
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richardd

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I do agree.
I'd not purchase an online business outside of FEI or empireflippers.

Make sure to hire a professional to help you during the DD phase.
FE International is good. During the Due Diligence phase, I sometimes get an accountant. Luckily for me the businesses that I've acquired had basic sale models. And I usually get a copy of their books, and then cross reference their sales with merchant account and bank statements. I have plenty of accounting experience, so the books give such a rich picture of their business. Poor book keeping by the way is a good indicator for being wary of an opportunity.
 

CareCPA

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Poor book keeping by the way is a good indicator for being wary of an opportunity.
Wary, yes, but I wouldn't necessarily run away.

I end up doing a lot of projects for e-commerce companies who want to sell but have no/terrible books. Brokers want at least trailing-twelve months, and preferably two years.
Usually it's a one-person company who has been so busy growing and expanding that they just don't have time to do the books.

When I'm done, they're usually surprised by their profit numbers - sometimes it's a good surprise, sometimes not so much, but I haven't found a correlation between lack of bookkeeping and poor profitability (so far).
Maybe the fact that they're getting it cleaned up before going to market is a good indicator?

However, I agree you should either know how to do due diligence, or hire someone who does. If a seller isn't giving you access to the information you need, then run.
Even if they have good financials, I'm still going to request direct access to Shopify/Amazon, Bank accounts, credit card accounts, processors, advertising accounts, etc.
 
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richardd

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Wary, yes, but I wouldn't necessarily run away.

I end up doing a lot of projects for e-commerce companies who want to sell but have no/terrible books. Brokers want at least trailing-twelve months, and preferably two years.
Usually it's a one-person company who has been so busy growing and expanding that they just don't have time to do the books.

When I'm done, they're usually surprised by their profit numbers - sometimes it's a good surprise, sometimes not so much, but I haven't found a correlation between lack of bookkeeping and poor profitability (so far).
Maybe the fact that they're getting it cleaned up before going to market is a good indicator?

However, I agree you should either know how to do due diligence, or hire someone who does. If a seller isn't giving you access to the information you need, then run.
Even if they have good financials, I'm still going to request direct access to Shopify/Amazon, Bank accounts, credit card accounts, processors, advertising accounts, etc.
I agree on all your points. Poor bookkeeping can be just that. There are ways to validate based on bank statements as well as tax returns.

Yeah and getting access to their accounts, even if only view through desktop sharing or over their shoulder is key.
 

Create_Value

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I agree on all your points. Poor bookkeeping can be just that. There are ways to validate based on bank statements as well as tax returns.

Yeah and getting access to their accounts, even if only view through desktop sharing or over their shoulder is key.
Can any of you recommend a website, book, online course, mastermind, or something similar for a beginner to walk this path (of purchasing a business with positive cashflow that meets RichardD's criteria)?

Ideally, I'd like to find a mentor who would profit share with me when I do all the work and they save me from dumb mistakes while speeding up my learning curve.
 

Nigel B

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OP - congratulations, and thanks for sharing. This is a truly inspirational post for a number of reasons.

It highlights what is possible in a short time with some serious graft.

It's generic enough to be applicable to anyone prepared to put the time in to learn how to differentiate between a good buy and a bad one (i.e. it could work for any market, not just software).

While it highlights success, a 'diversified' approach like this mitigates the risk of subsequent buys.

Have you thought about helping others with finding and acquiring? Not as a broker, but as an expert - that aspect would for sure keep many from jumping on this model- perhaps that is another string to your multi-stream income strategy.

Thanks for the inspiration! May your success continue to grow momentum!
 
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richardd

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Can any of you recommend a website, book, online course, mastermind, or something similar for a beginner to walk this path (of purchasing a business with positive cashflow that meets RichardD's criteria)?

Ideally, I'd like to find a mentor who would profit share with me when I do all the work and they save me from dumb mistakes while speeding up my learning curve.
You don't need to profit share with a mentor. But I understand your concern. I highly advise against partnerships. You lose control which is one of the main tenants of the fast lane.

I understand that such an arrangement on the surface seems like a good idea, but you really want to just get out there and find value in business opportunities. Using a mentor as a crutch will handicap you. Making business mistakes is a part of the process. Start small to limit risk. Learn by doing. Ask questions in this forum if you're not sure what to do, but you should get into the game.

I honestly don't have any recommendations on books or web sites beyond this forum. I got to this point by experience of failure, not success. Sure I scoured the internet to read up on a ton of things business and technology related. But I'm here now because of execution and failure, which leads to success.
 

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