If you’ve visited my website, bizstartupmentor.com, you know I’ve started eight successful businesses. What I haven’t shared are the ones that didn’t work out.
I bring this up because, on one occasion, I got zeroed out. It was my own fault. I had to act fast to get back in the game. The business I’m about to describe below is a business I started with virtually no money, and in my view is the best business to start with no money.
Before I begin . . .
“No money” means you don’t have any cash or have very little to get started and probably can’t qualify for a small business loan. It doesn’t mean you can’t use other people’s money.
This could mean getting credit from a vendor, using a credit card, or borrowing from friends or family if you have to. Either way, you may need to get creative.
But, before getting into what I consider the best business to start if you don’t have any money, I want to cover two key concepts. These will help you see what you’re doing as part of a larger strategy:
Business Pyramid Strategy
Return on Investment
The business pyramid strategy is where you use the cash from a smaller, easier-to-start business to “buy into” the next business that is larger and more profitable.
You repeat this process until you get into or purchase the business you really want. Or you just keep going.
A great way to analyze a business opportunity is by looking at the return on investment (ROI). This is how the big boys look at business opportunities. It gives you a great perspective as you start your business pyramid strategy.
For example, if I invest $100, what will I get back and over what period? Typically, ROI is measured annually. If I put $100 in a bank account earning 6% interest, I’d have $106 at the end of the year.
In terms of ROI, here is the beautiful thing about retail:
ROI = net profit × inventory turn ÷ investment.
For instance:
Invest $100 in inventory.
Generate a 30% profit on sales.
Reinvest the $100 plus the 30% profit.
Turn my inventory six times a year.
By year-end, my ROI would be 482%, or $482. If I turn my inventory 10 times, my ROI will jump to 1379% or $1379.
Your inventory is just one of the important variables over which you have some control. If you improve your percentage of profit, the ROI improves even further.
Are you starting to get the picture? With the strategy I will describe below, it gets even better.
Retail arbitrage means buying discounted products from stores like Walmart, Target, or thrift shops and reselling them at a higher price. You can start with very little money.
You do this by leveraging free online platforms to sell your products. Amazon and eBay are the two great platforms for selling products. Both are easy to learn and use. And it does not require any of the usual digital marketing strategies like advertising on social media platforms or the like.
Retail arbitrage is simple but requires time and commitment. I actually enjoyed it. By visiting stores regularly, I learned their discounting patterns and found better deals.
I hit big chains and thrift stores on a regular schedule. The key was using apps that scanned barcodes to check market prices and profit potential.
Recommended apps:
Amazon is easier because it already has the product photos or descriptions, while eBay does not. The thing with Amazon is they have brand and other restrictions, so some of the products you purchase can’t be sold on Amazon. That’s where eBay comes in.
Profit margins with retail arbitrage can be excellent—sometimes 70% to 90%. This improves ROI and helps you build cash faster. You can start retail arbitrage with very little money. I used a credit card with a $300 limit when I started.
Inventory liquidation refers to products that retailers or manufacturers sell at discounted prices to clear them out of their inventory. The inventory liquidation industry is almost $2 billion a year. I call it the underbelly of the industry. TJ Maxx and Overstock are two of the biggest retailers selling distressed merchandise.
I found the inventory liquidation industry a lot of fun and fast-moving. If you are any good at negotiating, it’s even more fun. Never paying the asking price is almost the norm.
There are a lot of companies that deal with inventory liquidation. In this business, the adage is you make your money when you buy, so push for the best price you can get. The liquidation salespeople you deal with usually know what they have to get and have a pretty good idea of what the merchandise is worth. So expect some back and forth before you come to terms.
You can usually find a couple of liquidators in most major metropolitan areas. I had my favorites. When you first approach a liquidator, they will be skeptical of you because there are a lot of tire kickers. After you do your first deal, they will start treating you differently.
If you let them know the kind of merchandise you are mainly interested in, they will let you know when they have something that might be of interest to you.
During the entire time I was dealing with liquidation inventory, it was never on credit. It was cash in hand. You find what you want, you pay for it, and you take it away.
I usually brought a trailer with me. When I first started, I used a U-Haul. Merchandise moves in and out of the liquidator’s warehouse quickly. Floor space is at a premium, and these companies don’t like holding inventory.
Sometimes they will give you a day or two, but they expect you to get your purchases out the day you buy.
After I had built up some cash from my retail arbitrage gambit, I started to buy pallets of liquidation inventory. Pallet loads usually range in price from a couple of hundred dollars to $2,000, depending on what’s on the pallet.
By reinvesting my profit, I was able to build up the ability to buy truckloads pretty quickly. Initially, I rented a couple of storage units and used them as my storage and working space.
There are different categories of merchandise you have to be clear about before you start buying. They include excess inventory (new), overstock (new), shelf pulls (new), liquidation (typically new), and returns (used).
There are other categories, but the price and condition of each category reflect its type. I stayed away from returns except once, and it was a huge mistake.
Sometimes you will get a manifest with a list of the items on each pallet, but often you would not. Generally speaking, the deals for pallets with no manifest were cheaper.
So, I would inspect them to see if there were items that would at least pay for the pallet. Hopefully, I would make a profit selling the other stuff on the pallet. Usually, I made out pretty well.
My wife and I would have two garage sales a year to sell off the junk. Our garage sales were legendary because we were selling new stuff. After the garage sales, we would donate the rest and take the tax deduction.
After about three years, I was able to accumulate enough cash to buy a business.
Don’t get me wrong, the distressed merchandise business was fun and profitable, but it had the disadvantage that the merchandise was changing constantly.
So I cashed in my chips and moved on. I know a number of people who are still in the business. It just was not for me long-term.
If you don’t have money, this business model was as close to a “sure thing” as it could come.
I have watched tons of YouTube videos about starting an online hustle. I have a couple going right now. But for someone who wants to dig out of a hole, this model has a manageable learning curve and the ROI required to build up cash quickly.
For me, the ramp-up was a bit slower because I needed to use some profits for my family’s living expenses. So, I did not have as much to roll back into inventory each time I was in the buying mode.
But, by the time I was ready for my next move, our family was living comfortably on what I was generating in profit, and I was able to build up enough cash to buy a company.
Regardless of where you start, keep in mind the business pyramid strategy and use an ROI analysis to compare your business opportunities.
You can do this!
How To Start and Finance A Business Even If You Don’t Have Any Money https://bizstartupmentor.com/business-startup-guide/
B-Stock
B-Stock is a leading platform for buying liquidation and overstock inventory. They work directly with major retailers to offer products in categories like electronics, apparel, and home goods.
Liquidation.com
Liquidation.com is a popular auction site for surplus and returned merchandise. They offer a wide range of products, including pallets and truckloads of inventory, in multiple categories.
LinkedIn Inventory Liquidation Group
The Inventory Liquidation Group on LinkedIn is a great community for connecting with others in the industry. Members share tips, resources, and opportunities for buying and selling liquidation merchandise.
© 2024 Biz Startup Mentor
You information is safe with me. I will not share it with anyone.