You Can Make Money Doing Anything Part 2

My niece has apparently started collecting coins. Not ridiculously expensive ones, from what I know just the 2007-2015 Presidential Dollar Coin set. I'm pretty sure that these coins are not old enough, rare enough, or cool enough to really be worth more than one dollar each. But my wife paid $2.69 each to have two of them shipped to our house for my niece's birthday.

Now lest anyone thinks ill of my wife for spending 2.69 times the worth of each coin to get them. I submit to you the following:

As a customer we got:
1. Convenience (of reciept) - the coins were delivered directly to our door and ordered from our couch. In order for us to do this on our own we would have the hassle of going to the bank, ordering a roll, bag or something of $1 coins, sorting through the coins and returning the unneeded coins back to the bank (or spending them). We would have to repeat the process until the two coins we were looking for were obtained.
2. Selection - both the coins were immediately available and in stock. So no return trips to the bank and no sorting.
3. Convenience (of time) - I'm sure it did not take my wife more then a few minutes to peruse and order. The bank method, assuming we found the right coins on the first pass, would likely take 30 minutes to drive to and from the bank twice (or I suppose you could sort them in the lobby) and sort the coins and return the uncollected coins.

2 coins @ $2.69 per coin = $5.38 USD
minus 2 coins @ $1 each = $3.38 USD = cost of transaction
$3.38 * 2 (sets of 30 minutes) = $6.76 per hour.
Even at the median hourly wage in the USA in 2014 of $17.09 per hour, this is a no brainer!

So just how much should a $1 Presidential Coin be worth? Well, if we paid an "average" American to get two coins for us in the above parameters, it would cost $5.27 per coin. Of course this does not factor in gas, car maintenance, taxes, FICA, healthcare, paid leave, vacation, retirement, time for payroll, hiring, firing, theft etc.

Obviously al51ny (the gracious guy on e-bay who sold us the coins at an apparent loss to him) is dealing in large numbers of coins and likely enjoys sifting through thousands of coins to find the diamonds in the rough. He is probably a major collector who is sifting through coins anyway and doesn't mind categorizing them, packaging them, and shipping them. He probably thinks my wife is a dolt for buying $1 coins for 2 dollars and 69 cents. Clearly she is buying them at a loss...

But it is to his gain. Win - Win. The best kind of commerce. We are buying birthday happiness for our niece at $1.69 loss per coin. He is shipping junk in a small envelope for probably just under $1 in profit and likely doesn't waste much time in the process. If he does a large enough scale he could become very wealthy at this. Simultaneously the paper company sold two envelopes and two coin holders, the office supply store sold printer ink, a printer, a pen and 6 staples, the post office sold a stamp, e-bay got some commissions, and you got to read this post. So, Win - win - win - win - win - win - win. The bank lost the battle, but will win the war and the government won all the battles and will the war (taxes on each party and huge margins on the dollar in the first place--fodder for another day).

I love business. Thank you al51ny for enriching my life a little on the cheap. When open markets win, we all win!

Winning in the Margins--50 cents = $434,124

Winning in the Margins!! 

Richard Paul Evans wrote the book The Five Lessons a Millionare Taught Me. Lesson four is "Winning in the Margins". It's been several years since I read his book and I don't truly remember how he explained the principle, but this principle is one that has stuck with me and somewhat haunted me. Though this isn't exactly how he meant it, if I remember correctly, I'm beginning to see that we need to "win in the margins" of every part of our life and business. Said another way, it's the great magnitude of little things.

 

I’m convinced that this is the primary reason for business success or failure. Success in business finances and personal finances isn't a matter of doubling income, it's a matter of doubling net profits! This can be done in several ways. A failing business and successful business are usually not that far apart. Understand that if I make $4,000/month and I am saving $400/month. I only need to make $4,400 and save the extra $400 to DOUBLE my retirement income. In other words an increase of 10% in salary can increase your retirement savings by 200%! And if we take the same principle into retirement things get even better! If you can retire on 100% of you retirement savings (and I hope you can, otherwise you probably should think three times about retiring, and then keep working instead) then you can blow the extra on whatever floats your boat (how 'bout buy a boat and then buy what floats it to the little island that you also will own one day) or retire a lot sooner! Or realize that your time is freed up to make some real money and make a real difference in the world and your world.

 

All the little things matter a ton! It’s the last little push that makes all the difference. Your salary pushes you up the hill, the margin pushes you the last 3 feet so you can coast down the other side. Once you've paid for all of your expenses, every dollar you earn goes in your pocket (after Uncle Sam picks your pocket of course).The little things--the extra dollar you earn (Richard Paul Evans' mentor's meaning), the extra dollar you don't spend, the extra smidgen of a percentage point added to a loan, the extra smile you give your customer, the extra perk you give to over-perform, the extra flair you give your marketing, the extra thanks you give your employee, the extra few dollars negotiated in a business contract, the extra $1/hour you negotiate in your salary which equals $2080 if you work full time. If you can’t get an extra dollar try an extra 50 cents for $1040, or even 25 cents for $520. Ask your boss for an extra 25 cents when you are negotiating your salary--who can say no to that?--and you get yourself a nice Christmas bonus of $520. You may even get a Christmas bonus from work too!

 

In addition to skills and attitude (much of which depends on your upbringing and social construct and much of which depends on what you are willing to work for), I bet this largely accounts for the disparity between classes--at least between low and upper middle class. If you and I both live on $50,000 to pay all our bills and you make $50,000 and I make $55,000 and invest the extra $5,000 at 7% per year interest in a Roth IRA from age 20-65 (check out bankrate.com for many easy financial calculators). I will have over $1.5 million dollars when I retire and you will have $0. If I want to double my retirement to over $3 million, I need only make $60,000 per year instead of $55,000. Or perhaps I ask for an extra 25 cents/hour when we get hired and I make $50,520 per year. That 25 cents ($520/year) invested = $158,991 in retirement. You could go on a SWEET 25 cent vacation for $158,991 even factoring in inflation. Or blow it on Christmas for the next 45 years, that works for me too. If you can make an extra 1% (8% instead of 7%) on your interest, you get an extra $58,071. Two simple tiny changes: 25 cents and 8% = $217,062. May as well ask for a dollar, you may get 50 cents and then you’re well on your way to half a million!

 

As a business owner, if you negotiated 25 cents lower, you could give out some sweet $520 bonuses to all your employees every year! Or if you are an owner of a company with 1924 employees, you could pocket an extra $1,000,000 a year. Of course you’d have to consider whether that extra 25 cents would lose you some good employees or morale which may cost you more. But most studies show there are better ways to say “thank you” to your employees than an extra 25 cents an hour...like saying "thank you"…though a $158,991 Christmas retirement check wouldn’t hurt either.

Do you need to be a mechanic to run a mechanic shop?

When I was a teenager and young adult (I'd like to think I'm still a young adult (but with more wisdom) and since I often work with 80 and 90 year olds, I am still a young adult by comparison) I used to stand around my parent's kitchen, leaning or sitting on the counter tops, listening to my family members discuss many topics. Since my father worked at Fidelity Investments conversations often revolved around investing and his customers who would call in for advice or to move money around buying and selling stocks, bonds, and mutual funds. I learned concepts such as "buy low, sell high", "invest early and often", "diversify", "the power of compounding interest", and to ask the question "why do you want to buy that mutual fund", as that was the most common beginning to most stories.
As I got older, my oldest brother ventured out into several businesses (some that I was a part of--lawn maintenance/landscaping, some that I wanted to be a part of but was not--real estate, and some that I did not want to be a part of but affected my world--bee keeping!). I was then introduced to a whole new world of concepts. I miss those days of staying up way past my bedtime soaking in the aspirations of my brother and learning about his and other people's successes and failures (from these alone, I could probably write a book). There are several ideas that I continue to come back to from time to time and expand upon as I gain new knowledge and understanding. One in particular still seems to haunt me.
I was probably in my late teens or early twenties and was interested in cars, especially about fixing them. My brother had a jeep and had rebuilt and improved several systems on it. I had seen the jeep in various phases of rebuild sitting under my parent's carport throughout my high school years, but had very little experience in fixing cars myself. I had an old Plymouth Horizon in high school that I had bought from another brother. I had replaced the door handle several times (poor design and huge muscles-ha), the wiper blades, the tires, mickey moused the exhaust system up with hangers, the brakes (mostly my best friend who later became a car mechanic did this one), and packed my wheel bearings once (thank goodness my older brother showed up while I was attempting this one with no prior training and went easy on me--but that is another story). In any case, I wanted to know more, but did not have a suitable mentor, so I began taking classes at the local applied technology center. I thought that being a car mechanic would be a good job to have to work on the side while I went to school for a bachelor's degree, rather than working at McDonald's.
One day while discussing business in the kitchen, my brother must have been trying to get something through my thick skull. Finally he asked, "could you run a car mechanic shop?" "No, I'm not a mechanic yet. But one day I will be able to run a shop." I replied. "Wrong! You don't need to be able to fix cars to run a mechanic shop!" he said. "But I'm learning how to fix cars" I protested. He must have been exasperated. It's a wonder he even tried to continue, but he explained that running a business and working in a business are two different skill sets altogether. I don't remember the specifics, but that phrase still haunts me while I think about running a business--any kind of business--"you don't need to be able to fix cars to run a mechanic shop". I don't think he even realized the full importance of his idea. Larry Miller is not a great basketball player. Michael Jordan is not a car manufacturer or car salesman. I'm not even sure that Ray Crock could make a cheeseburger.
Robert Kiyosaki, author of the Rich Dad, Poor Dad book series and associated products makes the distinction between a small business or specialist "S" and a big business "B". Small business owners own a job. Big business owners own an asset. S jobs: dentist, lawyer, accountant, doctor, etc. B jobs: business owner of a system. I was stuck in my mentality of becoming a specialist--a car mechanic--then becoming an owner of a mom and pop mechanic shop (an "S" or owner of a job). While he was trying to take me to the mentality of going straight to a "B" (owner of Jiffy Lube chain).
What I find interesting at the moment is that I have become a more highly paid "S"--a physical therapist--and am about to open a clinic (where I will own the job). I guess I am still working on elevating my mentality. What is also interesting, is that my lawyer says that my wife cannot be a part owner in the business because she is not a physical therapist. Professional companies (pllc, pcorp) cannot be owned by anyone outside the profession, supposedly to protect the public from greedy business people and ensure proper services (you can sue the whole company and individual professional for malpractice etc. because they are all members of the same profession). So I am forced to be an owner of an "S". Interestingly this also affects taxation. A work around seen throughout the professional world is to have another company own proprietary information and service marks and real estate and rent or lease this to the underlying professional company. In other words a "B" company can own what makes the "S" company go 'round, but cannot own the "S" company. The "S" company is never a true asset because it cannot be easily sold (small market--only the professionals in the particular category--in this case only a physical therapist would be interested in buying a PT clinic, because it could not legally be bought or run by anyone else), or bequeathed, and cannot legally be divided into shares for an IPO. In essence, all the "S" company does, is allow you to own a job. It's a "B" company that holds all the magic.