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Admittedly, I
spend a lot of time at Financial Armageddon discussing the downside risks ahead. But that doesn't mean it's
time to throw in the towel and give up. Undoubtedly, most of those who buy
into my view of the world will want to try and make the best of a bad
situation.
And as much as
I believe there is little we can do to change things at the macro level,
despite -- or because of -- the interventions of central bankers and other
overconfident fools, that's not necessarily the case in our own lives. When
it comes to whether we will survive or thrive, I believe creativity and human
ingenuity can still be of tremendous value to us as individuals.
In that regard,
the clever ideas detailed in a Slope of Hope post, "Opportunities
EVERYWHERE (Market Sniper)," on ways to
make money from the kinds of situations I believe will be increasingly
commonplace in the days ahead, represent interesting food for thought.
The basic
concept is to find businesses with dormant or grossly under
utilized assets. I have found around 30 different categories in which
you can find these under utilized assets in the
typical business. I am sure there are many more. What is important here is
you get your creative juices flowing. What you will be doing is to find ways
your "client" can make more money and/or save money. This works
anywhere and in any part of the business/economic cycle. In fact, during
times of economic distress, you will find that business owners are even more
open to what you can offer them. When times are good, some narrow minded
business owners are in the "don't rock the boat" mindset.
Here is the
basic proposition you will present to business owners and decision makers:
"IF I can, at absolutely no cost to you, increase your net cash flow,
would you be willing to pay me 15% of that net positive cash flow that I
create for you?" And/or "IF I can save you a significant amount on
your operating costs, at no cost to you, would you be willing to pay me 15%
of what I save you?" If I cannot help you, you are under no obligation
and we will part as friends......now think about
that. What business owner in his right mind would say NO to such a
proposition? If he/she does, you would not want to do business with them
anyway! As an aside, that 15% is somewhat arbitrary. You can make it any
percentage you wish. I have found that 15% is a good rough guideline. Do not
ask for too much and do not discount the service you will be providing
either. Depending on the type of deal, you can set yourself up as a toll
booth operator. You can create substantial monthly cash flow from your deals.
Often, that is not possible and you can receive decent lump sum payouts. The
more deals you do, the more deals you will be able to do! I call this
"Business Combinations." Perhaps the best way to get you thinking
along these lines is by illustration of some of the deals I have done and am
doing.
Call Center
Operation. Call centers are expensive to set up and not cheap to operate. I
found a rather large call center that was dealing strictly with businesses.
It is on the West Coast and its hours of operation were Monday through
Friday, 6 am local time until 5 pm local time. I went to the owner and asked
him: "IF I could increase your cash flow, at no cost to you, would you
give me 15% of that new cash flow I bring you?" His answer was: "Of
course I would!" I then found another, smaller, operation that was
marginal and the owner was thinking about shutting it down. It dealt with
consumers and was running him $25,000 a month to operate. His hours of operation was 5 pm to 9 pm Monday through Friday
and on weekends. My question to him was: "If I could find a way to save
you a substantial amount of money in your operation, would you be willing to
pay me 15% of what I save you?" His answer was: "Of course I
would!" So here was the deal: The call center selling to consumers was
moved to the other call center dealing with businesses who was paid $10,000
per month for that use. I recieve $1,500 per month
from him. I saved the other owner $15,000 per month and every month he cuts
me a check for $2,250. This is a good example of a toll booth operation.
Non-competitive
Manufacturing And Delivery: I found two manufacturers in the City Of
industry, CA. They were non-competitors. That is very important. They
manufactured and then delivered to the Western United States. As business
conditions worsened, both were sending out trucks half full. So, for a fee,
Manufacturer A agreed to also deliver for manufacturer B. Then, manufacturer B
was able to dispose of its delivery fleet. This type of deal cannot be
monitored. My fee for putting this deal together was 25% of the total fleet
sale from manufacturer B. The check came to $178,600. This is an example of a
lump sum payment type deal.
Exchange of
Services and Adding New Business Lines: I have a good friend who is a young
MD type doctor. He was loaded down with student loans and he operates his own
office in Encino, CA, a fairly wealthy area. It costs him $225 per hour to
keep his office doors open. He had to do hospital rounds at night to survive.
Radio time is now going begging. So, I worked a deal for him with a local
radio station. He gets advertising air time and even has his own medical
"show" on that station. He is also now the personal doctor for the
station owner and the few employees. This was an exchange of services. I did
not charge for putting this deal together but it lead to a new business line
for him that I proposed and share in that revenue. He is located in a wealthy
area. There are a lot of wealthy older people in the area who do not like
going to see the doctor but from time to time, need medical help and
attention. So we set up a medical concierge service that also gets advertised
on that radio station. We make house calls and the fee is not cheap. We now
have eight doctors on call and business is brisk.
The Mailer: I
have not personally done this but know a person who did and this is
brilliant! This took some money for postage costs and he got a financial
backer to put up the small sums required to do this kind of deal. He got a
directory of all the independent CPA's, PA's and bookkeepers in the State of
California. Around 30,000 names and addresses. He then set out a letter of
inquiry to all of them. Basically: ANYBODY WANT TO
SELL? He received over 1400 positive responses. He subtracted those from the
list and to the rest, keeping it geographically specific, he sent out another
letter of inquiry. Basically: ANYBODY WANT TO BUY?
From this, he put together over 700 transactions! Many were cash transactions
and he got paid. Many were non-cash transactions where the new owner pays the
old owner a specific percentage of the billing on the "retired"
owner's clients. He gets paid on that as well. The deals were all done over 9
years ago now. He has made over 5 million from these deals and is still
getting checks. Think of the possibilities!
Click here to
read the rest.
Michael J. Panzner
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