Today in America and across much of the world, there exist predatory lending institutions which are happy to give short-term loans at high interest rates to essentially anyone. The most common and obvious example is the payday loan. If you drive through “the wrong part of town,” you will see these on at least as many corners as there are convenience stores of cafes. They are everywhere and they are delighted to give short-term high-interest loans of a couple-hundred dollars to literally anyone regardless of the person’s credit or personal history.
I read an article about how bad these places are for their customers and for civilization, and it made me think of The $100 Startup by Chris Guillebeau.
What if it was possible to reliably beat predatory interest rates with smart investments? This idea could turn these predatory loans into widely available venture funding for small-scale projects like the ones Chris Guillebeau describes in his book. I call this idea, the micro-gig rather than Guillebeau’s term micro-business because this isn’t necessarily a business. The idea is to beat the predatory loan, not necessarily to build something sustainable that you want to keep doing in the long-term. I have always enjoyed projects more than businesses. It’s easy to pick projects up and set them down when you get bored. This makes the process a lot more interesting.
The biggest challenge is the timeline. In California, a payday loan of $300 gets you $245 cash but you only have a couple weeks to pay it back. This means that a successful project needs to generate a 20% return in a very short time. Luckily, this is actually relatively easy. Those levels of returns are much harder with larger dollar amounts than they are with these smaller amounts.
Here are a few initial ideas…
Flipping
There are huge online communities dedicated to the art of flipping. This means buying something and then immediately selling it for a profit. Personally, I have had great success with flipping.
It is super easy to find trendy things like Ikea furniture for very cheap and then sell it for more. Several times, I’ve been able to sell Ikea furniture for more than I paid for it new, even months or years later. This is especially true if you check out Ikea’s As-Is section where you can regularly find floor models and returns that are half-off. It’s super easy to flip these for their regular price or even more within a short time.
Another easy type of product is consumer electronics. I have found expensive and perfectly functional consumer electronics at thrift stores for just a dollar or two, then flipped them for a hundred times that. An easy example is Apple products.
Flipping: Appraisal
It is critical to know you can get a return before buying something to flip. Local sales through sites like Craigslist are usually going to give you the best return, but don’t forget ebay. This makes appraisal easy because you can check ebay for sold listings.
Here’s a true example from my flipping experience. I saw an Apple bluetooth keyboard with magic mouse at a thrift store for $5. I tested it on my phone to make sure it was working. Then I checked ebay’s sold listings for that device. They were going for close to a hundred dollars in “fair” condition. It was a no brainer! I bought it and flipped in the same weekend on Craigslist. About twenty minutes of work earned me $120.
Flipping: Just In Time
Another great tactic is using just in time inventory and specializing in a particular item. For example, I could work towards getting really good at selling “my amazon alexa that I never use.” Voice assistants regularly go for as much as half-off on ebay. So if I expect to sell it quickly, I might buy one to keep on hand. Once I start getting offers, I might buy a few more. As long as I can sell them at the same rate that I am buying them, my profits will continue to increase. If sales slow down, all I have to do is stop ordering them off ebay and wait to sell through my inventory.
Sell Food To Drunk People
When I had my cafe in Chico, I had an idea. I borrowed a push cart and food warmer from a dorm and ordered a bunch of pizzas. I got 30 day terms, so I didn’t have to pay for the pizzas until a month later. I spent no money to do this. When the pizzas came, I wrapped each slice in aluminum foil and put them in the warmer on the cart. I had no trouble selling as much pizza as I could fit in the warmer, at 400% markup. I expanded to offer bottled water and energy drinks. People loved it, and it didn’t cost me anything.
Thinking back to this, I am reminded of how many people I see selling “homemade” tamales out of their trunk outside the bars downtown. I can’t help but wonder if these are actually coming from those enormous bags of tamales that Costco sells for just a few dollars. How many other bulk food items could you sell out of a trunk for more than you paid for them?
Hundreds of percent of markup is expected and normal with food products, especially when the customers are drunk people. Those ten dollar salads at Starbucks cost less than a dollar to make.
Arbitrage
In many cases, companies have online sales with crazy low prices. So flip it before you buy it. I have often listed things for sale on Craigslist which I haven’t even bought yet. If someone wants it, I will buy it and then sell it to them for a nice markup.
There are great online communities dedicated to things like extreme couponing or general frugality which can help you find these amazing deals. Selling before you buy, or at the same time is called arbitrage. And it’s a huge part of price-equalization in every industry and market from foreign exchange to retail. Cash in!
Outsource It
Get someone else to do the work for you once you sell the product. Why do you think infomercials need eight weeks to deliver their products? Because they don’t manufacture the products until after they’ve been paid for. This is called just in time manufacturing, and though it is technically illegal, it is standard practice in the industry. This idea is very much in the vein of The Four Hour Work Week. Author Tim Ferriss would argue you should test any business idea this way.
There are so many examples you could do in your own town without needing to invest anything. Find a business where employees aren’t wearing branded shirts and sell the manager a batch. Then go order them from a local shop. They don’t want to pay up front? That’s fine. You know where to get a quick loan for a few hundred dollars.
Final Thoughts
All of these micro-gig ideas I’ve discussed here are basically foolproof, with very minimal risk. There are lots of other ideas with slightly higher risk and more potential rewards. I would love to hear about related ideas that are working for people, or feedback about the ones I’ve mentioned here.
Drop me a line at chris.j.trowbridge@gmail.com.