User Power
Value/Post Ratio
74%
- Nov 7, 2013
- 39
- 29
Hey everyone,
Like just about everyone, I am interested in passive, cash-flowing businesses. There is a place for the obscure crypto coin or seed stage venture investment that might 10000x in 10 years (providing zero cashflow along the way) but I prefer dependable cashflow. It seems that most businesses that are passive/passive-ish and cashflowing fall into the unsexy/boring business category. I first had my eye on these a few years ago after discovering the "unsexy business thread" on another forum, Wallstreetoasis, viewable here:
www.wallstreetoasis.com
Sequel/update here:
www.wallstreetoasis.com
This has also become more popular lately among a certain crowd on Twitter. I was introduced to SMB/Holdco/Micro-PE twitter by a forum member here. A notable figure in the space is Codie Sanchez, who can also be found at Contrarian Thinking . She is attempting to create a "mini-Berkshire" of businesses. This is basically creating your own private equity fund, except that there are no LPs.
I already have ecommerce businesses that are extremely non-passive and have an exponential growth curve. I am aware laundromats, franchises, and vending will not generate ROI like a tech/ecommerce company. I already have one of those, so I view these more as investments that are both more interesting and more cashflowy than the stock market or real estate (which are great too, by the way).
I have been researching business models that have great cash flow and are anywhere from 98-100% passive. By that I mean: a maximum of being obligated to physically be somewhere once or twice a year, and regularly spend a couple hours a week in the home office making some calls and reviewing reports/portals. The reason I want something so hands-off is not so I can sit on a beach but so I can scale effectively. Just like MJ says in TMF , you should be buying a business, NOT a job.
I came up with the following models and thought this would be a perfect place to ask people if there are any other similar models, since people here seem to be involved in or at least aware of even the most obscure things.
1. Billboards - seems like you have to wait for someone to retire and snipe their preexisting billboard company. I don't think startup is advisable here, but I could be wrong. There is a clear exit path if you ever want to sell (I wouldn't) because 2 massive companies dominate the space.
2. Traditional ATMs - You can go startup, or buy existing on atmbrokerage.com . Even the larger routes are cheap, asking 2.5-3x multiples. The issue here is that ATM usage, and cash usage in general, is trending downward. While it's very possible to still make money, I would rather have something with the potential to grow over time. You can outsource all of this. There are a few machine vendors, there are companies that will service them all over the place, if you have enough you can get an armored truck route to pick up and reload cash, there are companies that will scout locations for you and sell the owner on the idea for a fee.
3. Crypto ATMs - The regulation is somewhat difficult here. You have to register with FinCEN and as an MSB, and in some states a money transmitter. Compliance can get expensive and really only makes sense if you are going to go in big. Just like a traditional ATM, everything can be automated. There is actually a franchise option here that handles the compliance headache and the sensitive banking relationships. They make it literally 100% passive for a reasonable fee. I personally think it is the better choice. Unlike traditional ATMs, this has the potential to grow massively. It also has the potential to die completely (though at this point, I consider it unlikely). You might ask what is the point of using one of these, but unlike a crypto exchange there is no KYC (or at least much, much less) and there is a host of other benefits. The fees are high but will come down over time with increased demand. 22% of this country is underbanked or unbanked, which shocks some people.
4. Check cashing machines - Again, onerous regulations here that are better handled by a franchise type situation. Luckily there is a check cashing machine franchise where you own the machines and the business runs fully passively. You do not even take the risk of stocking the machine with cash...this is done by the owner of the location in which it is placed. I am researching this one a little more. Again it serves the 22% of the country that does not use banking services.
5. Ice vending machines - I see these popping up more and more lately. You can swipe a card or insert cash and receive either a bag of ice or bulk ice to fill your cooler. These are normally seen near lakes, beaches, national/state parks etc. There are a few options here: Ice House America / Iceborn, Kooler Ice, and Everest Ice. IHA is the big name in the space, but as I did more research I soured on them a bit. Their largest machine is literally the size of a house and costs $125k. The lease you'll have to offer in order to place one of these machines is enormous, probably $2-3k per month due to the sheer dimensions. The machine is as large as it is so that you never run out of ice even when demand spikes. This struck me as very inefficient. It also struck me as a gamble - I would much rather place smaller machines, then if some machines are constantly running out of ice, I would replace those machines with larger machines and move the smaller machines elsewhere. Here you are just hoping the site you select has insane demand, and god help you if it doesn't because you cannot easily move this monstrosity. IHA is also a franchise. The crypto ATM and check cashing machine franchises make sense to me because they do literally 100% of the work and the business is 100% passive. But I am not sure what exactly IHA provides for their rather high fees. You are obligated to service and clean the machines yourself (and they break often and get disgusting inside). You have to find the location, negotiate the lease, pick up your cash. It seems to me to be the same as starting your own ice vending business, except IHA is extorting you for fees because there are limited places to get these kinds of machines. You can view the FDD (franchise disclosure document) for IHA, or any franchise for that matter, online.
*quick tip: go to DFI Franchise Search to search for FDDs. Normally to get these you have to be approved by the franchisor and go through a whole process to get a FDD. That, or pay fees to weird websites that have them. Almost all are available here for free. IHA is not...I found it elsewhere.
So anyway, the returns did not look spectacular when I viewed the FDD, and it was also a little evasive, long story short. To be brief, Kooler Ice seems even worse. That's when I found Everest Ice. You can view their youtube channel here:
And I have to say, the guy in their videos is one of the best salesmen I have ever seen. The machines are MUCH cheaper ($40k for one...I would imagine you could get this cut in half if you went in for 10+ out of the gate). They are much smaller and can be moved by two strong dudes, a dolly, and a pickup truck (you can and should bolt them into the ground and insure them). The lease for one of these should be only $200-300 for the space. There is only one moving part, so the thing almost never breaks. If it does, they have a service network all over the country so you don't have to drive out there. Picking up cash would require your physical presence, but the machines also take card and an armored truck route MIGHT be possible (however not sure due to some of the more remote locations you might put these in). The machine is essentially self cleaning and just needs a filter change once per year. You would also need to restock the ice bag roll, which would be maybe 2 times per year for a very busy machine. But hey, road trips are fun. Allegedly these will net $15-20k per year if placed properly (so just about as much as the IHA machine, which costs 3x more...I believe IHA, like many franchises, is just making a ton of money by marking up their ridiculous equipment). You can brand these however you want and there is no "territory" as it is fully your own business. Despite not being a franchise or charging a fee, Everest seems to provide more support than IHA, which is crazy. There are also larger machines if demand is high in a particular location. The margin here is high as you are looking at a 5 cent cost per bag of ice, for which you will charge $2-3. Extremely high margin and nearly passive. Nice.
6. Laundromat - I know next to nothing about these, however to me it seems like a giant vending machine. There is a guy, Investment Joy, on youtube, who chronicles his experiences buying and running laundromats:
It seems like these often throw off very high returns and a ton of functions can be automated (doors automatically lock from the outside after close time, cash truck route, plenty of companies to service the machines). I would only be looking at traditional laundromats and not ones with wash/dry/fold, which require a person to be physically present. These do boost sales 20-30% but it doesn't fit my model. There is a franchise solution here, WaveMax, but I don't think franchising makes sense for laundromats since the brand doesn't really seem to matter. They also require 1 employee and the wash/dry/fold service and the startup costs are enormous. It seems much better to buy existing laundromats and spruce them up a bit. The fee to build a new one and tap into the water supply can be and usually is insane. Codie Sanchez, who I mentioned earlier, buys a lot of these. Seems like you are looking to buy for a 3-6x multiple of EBITDA, based on numerous factors but mostly the age of the machines. Add the value of any real estate if real estate is included.
7. Car washes - If these are good enough for Shaq to have owned 150 of them, they're good enough for me. Again, giant vending machine. This one seems like it will require a lot more repairs and oversight, so the strategy here would be to buy a large one or multiple small ones and hire some mechanically minded guy to check in on them. I would look to automate as much as possible and I would not be interested in any hand wash type places. Think more of a vending machine than a labor-heavy "business." I think there is a guy here out of Chicago who owns some of these and would love to talk to him. DM me if you are reading. I looked into car wash franchises' FDDs and they are all a bloodbath, just awful. This originally turned me off to car washes entirely, but I think the play here is to go non-franchise. The numbers likely look much better without the franchise model. For a car wash, it doesn't make much sense to me.
8. Bamboo Farm - Check these out on onlymoso.com . I have a friend who bought a 10 acre plot in central FL and is doing this. He is a smart guy. Still, I can't figure out if this is a good idea or if it's just a way to scam rich people. This is less cashflowy than the other things on this list, since you are only making modest money along the way until the major harvests. However having land is fun, and you can hunt, or let your friends hunt, on the property to keep boars from damaging your plants.
9. Nail Salon / Lash Salon / Hair Salon / Salon Suites - I like these simple little businesses and they are all very similar. I think the franchise model here is the correct one, as people might care more about brand. Throughout the years there have been franchisors offering manager-managed or corporate-managed models if you put up the cash. I believe Amazing Lash Studio did this for awhile. Now that they are more developed, it's no longer available. The AUV numbers on these businesses are not super high when compared to others that take up the same square footage, but the costs are also low so the profits work out. I personally lean toward the fourth option: the Salon Suite model. Here you have one employee at the front counter. The suites in the salon are all rented to independent stylists. Your average person out of cosmetology school does not have the funds to go lease a 1000sqft commercial space. You are leasing them smaller double digit sqft spaces on a month to month basis so it isn't scary for them. However, I consider these to be an arbitrage play when you are leasing the space, and it isn't "business-y" enough for me. I would only do this if I owned the real estate, which might mean a full ground-up development. There is a successful franchise model for this one that advertises absentee multi-unit ownership, too.
10. Massages - Similar to salons but featuring a recurring subscription. There is one new franchise that does great numbers and offers a corporate-managed model for a fee, but I didn't like the brand. I suppose maybe you could buy someone's multi unit territory of an older brand when they sell or retire. So this business does not seem possible at the moment, but is one where managed opportunities may pop up from time to time.
11. Restaurants - Many will balk at this one because everyone has a friend or relative that opened a Subway, worked 100hrs a week and went bankrupt. Fortunately some of this risk can be minimized by using a franchise consultant and not just referring to the (complete bullshit) Inc 500 / Entrepreneur Magazine lists of "top franchises" and calling the big brands. Subway is a brutal company that is not franchisee focused whatsoever and their FDD shows it. With multi unit ownership, an absentee model is possible with restaurants. I don't like QSRs (fast food, think Burger King) and I don't like full service (think Applebee's). I like simple, focused fast casual. Like Chipotle (not available as a franchise, btw). The key is to quickly open 5+ units so that the whole operation can be overseen by a manager. This is not "passive" but it is absentee/remote at a certain point. There are up and coming franchises in this space that will sign a management services agreement if you are a multi unit owner, who will literally manage the whole thing for you from their corporate staff. Some of them are attractive. I would recommend two things for 2022 and beyond: renting a small space sub 1400 sqft and focusing on takeout/delivery.
12. Medical - From optometry/eye care, to stem cells, to dentistry, to chiropractic, to laser treatments, franchise opportunities pop up from time to time that offer corporate management for multi unit owners. Again, for salons, massages, restaurants, and medical I feel the franchise model is more than worth it. Some may feel differently. These are businesses I would never want to start on my own without guidance or a brand name, and are far more complex than a vending machine. What makes them more manageable is the franchise model plus the corporate management arrangement.
That's all I was able to come up with. Surely there are even more interesting businesses out there. Does anyone know of any? Challenges to any of these are welcome, as I know much more about some than others. There is really no place to discuss this kind of thing on the internet. Just the occasional nugget on SMB twitter. Vending / car wash / laundromat forums seem dead.
Also shameless plug, I am not affiliated in any way with this guy but he guided me to the franchise opportunities I mentioned above. I would never have known about them without his help. I think it's clear that car washes, ice machines, and laundromats are better outside of the franchise world, but I feel that some of these really need the franchise model if you want it to be passive-ish. This guy has a youtube channel called Franchise City that is a great resource, and he is also a franchise consultant:
I look on in horror as people open 7 Elevens and Subways without ever reading an FDD or even knowing what a franchise consultant is. I think using their services, whether this guy or someone else, is invaluable and required if you want to be successful.
Anyway, any ideas/people to follow/forums or sites to visit so I can go deeper down the rabbit hole are much appreciated!
Like just about everyone, I am interested in passive, cash-flowing businesses. There is a place for the obscure crypto coin or seed stage venture investment that might 10000x in 10 years (providing zero cashflow along the way) but I prefer dependable cashflow. It seems that most businesses that are passive/passive-ish and cashflowing fall into the unsexy/boring business category. I first had my eye on these a few years ago after discovering the "unsexy business thread" on another forum, Wallstreetoasis, viewable here:
Gas Station, Car Wash, Fast Food - Owning Unsexy Businesses
Most entrepreneurs my age seem to be focused on creating the next amazing app or website, which frankly bores me because I'm not a tech geek. Anyone else give much thought to
Sequel/update here:
My Story: The Sequel to the "Owning Unsexy Businesses" Thread
Hey everyone, About six months ago I created a thread on WSO that ended up having a profound impact on my life. The thread was about owning and operating relatively "unsexy"
This has also become more popular lately among a certain crowd on Twitter. I was introduced to SMB/Holdco/Micro-PE twitter by a forum member here. A notable figure in the space is Codie Sanchez, who can also be found at Contrarian Thinking . She is attempting to create a "mini-Berkshire" of businesses. This is basically creating your own private equity fund, except that there are no LPs.
I already have ecommerce businesses that are extremely non-passive and have an exponential growth curve. I am aware laundromats, franchises, and vending will not generate ROI like a tech/ecommerce company. I already have one of those, so I view these more as investments that are both more interesting and more cashflowy than the stock market or real estate (which are great too, by the way).
I have been researching business models that have great cash flow and are anywhere from 98-100% passive. By that I mean: a maximum of being obligated to physically be somewhere once or twice a year, and regularly spend a couple hours a week in the home office making some calls and reviewing reports/portals. The reason I want something so hands-off is not so I can sit on a beach but so I can scale effectively. Just like MJ says in TMF , you should be buying a business, NOT a job.
I came up with the following models and thought this would be a perfect place to ask people if there are any other similar models, since people here seem to be involved in or at least aware of even the most obscure things.
1. Billboards - seems like you have to wait for someone to retire and snipe their preexisting billboard company. I don't think startup is advisable here, but I could be wrong. There is a clear exit path if you ever want to sell (I wouldn't) because 2 massive companies dominate the space.
2. Traditional ATMs - You can go startup, or buy existing on atmbrokerage.com . Even the larger routes are cheap, asking 2.5-3x multiples. The issue here is that ATM usage, and cash usage in general, is trending downward. While it's very possible to still make money, I would rather have something with the potential to grow over time. You can outsource all of this. There are a few machine vendors, there are companies that will service them all over the place, if you have enough you can get an armored truck route to pick up and reload cash, there are companies that will scout locations for you and sell the owner on the idea for a fee.
3. Crypto ATMs - The regulation is somewhat difficult here. You have to register with FinCEN and as an MSB, and in some states a money transmitter. Compliance can get expensive and really only makes sense if you are going to go in big. Just like a traditional ATM, everything can be automated. There is actually a franchise option here that handles the compliance headache and the sensitive banking relationships. They make it literally 100% passive for a reasonable fee. I personally think it is the better choice. Unlike traditional ATMs, this has the potential to grow massively. It also has the potential to die completely (though at this point, I consider it unlikely). You might ask what is the point of using one of these, but unlike a crypto exchange there is no KYC (or at least much, much less) and there is a host of other benefits. The fees are high but will come down over time with increased demand. 22% of this country is underbanked or unbanked, which shocks some people.
4. Check cashing machines - Again, onerous regulations here that are better handled by a franchise type situation. Luckily there is a check cashing machine franchise where you own the machines and the business runs fully passively. You do not even take the risk of stocking the machine with cash...this is done by the owner of the location in which it is placed. I am researching this one a little more. Again it serves the 22% of the country that does not use banking services.
5. Ice vending machines - I see these popping up more and more lately. You can swipe a card or insert cash and receive either a bag of ice or bulk ice to fill your cooler. These are normally seen near lakes, beaches, national/state parks etc. There are a few options here: Ice House America / Iceborn, Kooler Ice, and Everest Ice. IHA is the big name in the space, but as I did more research I soured on them a bit. Their largest machine is literally the size of a house and costs $125k. The lease you'll have to offer in order to place one of these machines is enormous, probably $2-3k per month due to the sheer dimensions. The machine is as large as it is so that you never run out of ice even when demand spikes. This struck me as very inefficient. It also struck me as a gamble - I would much rather place smaller machines, then if some machines are constantly running out of ice, I would replace those machines with larger machines and move the smaller machines elsewhere. Here you are just hoping the site you select has insane demand, and god help you if it doesn't because you cannot easily move this monstrosity. IHA is also a franchise. The crypto ATM and check cashing machine franchises make sense to me because they do literally 100% of the work and the business is 100% passive. But I am not sure what exactly IHA provides for their rather high fees. You are obligated to service and clean the machines yourself (and they break often and get disgusting inside). You have to find the location, negotiate the lease, pick up your cash. It seems to me to be the same as starting your own ice vending business, except IHA is extorting you for fees because there are limited places to get these kinds of machines. You can view the FDD (franchise disclosure document) for IHA, or any franchise for that matter, online.
*quick tip: go to DFI Franchise Search to search for FDDs. Normally to get these you have to be approved by the franchisor and go through a whole process to get a FDD. That, or pay fees to weird websites that have them. Almost all are available here for free. IHA is not...I found it elsewhere.
So anyway, the returns did not look spectacular when I viewed the FDD, and it was also a little evasive, long story short. To be brief, Kooler Ice seems even worse. That's when I found Everest Ice. You can view their youtube channel here:
And I have to say, the guy in their videos is one of the best salesmen I have ever seen. The machines are MUCH cheaper ($40k for one...I would imagine you could get this cut in half if you went in for 10+ out of the gate). They are much smaller and can be moved by two strong dudes, a dolly, and a pickup truck (you can and should bolt them into the ground and insure them). The lease for one of these should be only $200-300 for the space. There is only one moving part, so the thing almost never breaks. If it does, they have a service network all over the country so you don't have to drive out there. Picking up cash would require your physical presence, but the machines also take card and an armored truck route MIGHT be possible (however not sure due to some of the more remote locations you might put these in). The machine is essentially self cleaning and just needs a filter change once per year. You would also need to restock the ice bag roll, which would be maybe 2 times per year for a very busy machine. But hey, road trips are fun. Allegedly these will net $15-20k per year if placed properly (so just about as much as the IHA machine, which costs 3x more...I believe IHA, like many franchises, is just making a ton of money by marking up their ridiculous equipment). You can brand these however you want and there is no "territory" as it is fully your own business. Despite not being a franchise or charging a fee, Everest seems to provide more support than IHA, which is crazy. There are also larger machines if demand is high in a particular location. The margin here is high as you are looking at a 5 cent cost per bag of ice, for which you will charge $2-3. Extremely high margin and nearly passive. Nice.
6. Laundromat - I know next to nothing about these, however to me it seems like a giant vending machine. There is a guy, Investment Joy, on youtube, who chronicles his experiences buying and running laundromats:
It seems like these often throw off very high returns and a ton of functions can be automated (doors automatically lock from the outside after close time, cash truck route, plenty of companies to service the machines). I would only be looking at traditional laundromats and not ones with wash/dry/fold, which require a person to be physically present. These do boost sales 20-30% but it doesn't fit my model. There is a franchise solution here, WaveMax, but I don't think franchising makes sense for laundromats since the brand doesn't really seem to matter. They also require 1 employee and the wash/dry/fold service and the startup costs are enormous. It seems much better to buy existing laundromats and spruce them up a bit. The fee to build a new one and tap into the water supply can be and usually is insane. Codie Sanchez, who I mentioned earlier, buys a lot of these. Seems like you are looking to buy for a 3-6x multiple of EBITDA, based on numerous factors but mostly the age of the machines. Add the value of any real estate if real estate is included.
7. Car washes - If these are good enough for Shaq to have owned 150 of them, they're good enough for me. Again, giant vending machine. This one seems like it will require a lot more repairs and oversight, so the strategy here would be to buy a large one or multiple small ones and hire some mechanically minded guy to check in on them. I would look to automate as much as possible and I would not be interested in any hand wash type places. Think more of a vending machine than a labor-heavy "business." I think there is a guy here out of Chicago who owns some of these and would love to talk to him. DM me if you are reading. I looked into car wash franchises' FDDs and they are all a bloodbath, just awful. This originally turned me off to car washes entirely, but I think the play here is to go non-franchise. The numbers likely look much better without the franchise model. For a car wash, it doesn't make much sense to me.
8. Bamboo Farm - Check these out on onlymoso.com . I have a friend who bought a 10 acre plot in central FL and is doing this. He is a smart guy. Still, I can't figure out if this is a good idea or if it's just a way to scam rich people. This is less cashflowy than the other things on this list, since you are only making modest money along the way until the major harvests. However having land is fun, and you can hunt, or let your friends hunt, on the property to keep boars from damaging your plants.
9. Nail Salon / Lash Salon / Hair Salon / Salon Suites - I like these simple little businesses and they are all very similar. I think the franchise model here is the correct one, as people might care more about brand. Throughout the years there have been franchisors offering manager-managed or corporate-managed models if you put up the cash. I believe Amazing Lash Studio did this for awhile. Now that they are more developed, it's no longer available. The AUV numbers on these businesses are not super high when compared to others that take up the same square footage, but the costs are also low so the profits work out. I personally lean toward the fourth option: the Salon Suite model. Here you have one employee at the front counter. The suites in the salon are all rented to independent stylists. Your average person out of cosmetology school does not have the funds to go lease a 1000sqft commercial space. You are leasing them smaller double digit sqft spaces on a month to month basis so it isn't scary for them. However, I consider these to be an arbitrage play when you are leasing the space, and it isn't "business-y" enough for me. I would only do this if I owned the real estate, which might mean a full ground-up development. There is a successful franchise model for this one that advertises absentee multi-unit ownership, too.
10. Massages - Similar to salons but featuring a recurring subscription. There is one new franchise that does great numbers and offers a corporate-managed model for a fee, but I didn't like the brand. I suppose maybe you could buy someone's multi unit territory of an older brand when they sell or retire. So this business does not seem possible at the moment, but is one where managed opportunities may pop up from time to time.
11. Restaurants - Many will balk at this one because everyone has a friend or relative that opened a Subway, worked 100hrs a week and went bankrupt. Fortunately some of this risk can be minimized by using a franchise consultant and not just referring to the (complete bullshit) Inc 500 / Entrepreneur Magazine lists of "top franchises" and calling the big brands. Subway is a brutal company that is not franchisee focused whatsoever and their FDD shows it. With multi unit ownership, an absentee model is possible with restaurants. I don't like QSRs (fast food, think Burger King) and I don't like full service (think Applebee's). I like simple, focused fast casual. Like Chipotle (not available as a franchise, btw). The key is to quickly open 5+ units so that the whole operation can be overseen by a manager. This is not "passive" but it is absentee/remote at a certain point. There are up and coming franchises in this space that will sign a management services agreement if you are a multi unit owner, who will literally manage the whole thing for you from their corporate staff. Some of them are attractive. I would recommend two things for 2022 and beyond: renting a small space sub 1400 sqft and focusing on takeout/delivery.
12. Medical - From optometry/eye care, to stem cells, to dentistry, to chiropractic, to laser treatments, franchise opportunities pop up from time to time that offer corporate management for multi unit owners. Again, for salons, massages, restaurants, and medical I feel the franchise model is more than worth it. Some may feel differently. These are businesses I would never want to start on my own without guidance or a brand name, and are far more complex than a vending machine. What makes them more manageable is the franchise model plus the corporate management arrangement.
That's all I was able to come up with. Surely there are even more interesting businesses out there. Does anyone know of any? Challenges to any of these are welcome, as I know much more about some than others. There is really no place to discuss this kind of thing on the internet. Just the occasional nugget on SMB twitter. Vending / car wash / laundromat forums seem dead.
Also shameless plug, I am not affiliated in any way with this guy but he guided me to the franchise opportunities I mentioned above. I would never have known about them without his help. I think it's clear that car washes, ice machines, and laundromats are better outside of the franchise world, but I feel that some of these really need the franchise model if you want it to be passive-ish. This guy has a youtube channel called Franchise City that is a great resource, and he is also a franchise consultant:
I look on in horror as people open 7 Elevens and Subways without ever reading an FDD or even knowing what a franchise consultant is. I think using their services, whether this guy or someone else, is invaluable and required if you want to be successful.
Anyway, any ideas/people to follow/forums or sites to visit so I can go deeper down the rabbit hole are much appreciated!
Dislike ads? Remove them and support the forum:
Subscribe to Fastlane Insiders.
