A Lesson in Biz-ness for my Son...

[M.D. Holloway]

Over the past 6 months my Son has decided that instead of getting a 'real job' he will buy / fix / sell or make. So ... that's what he has been doing. To date he has done the following transactions:

Bought / Sold / Turn Time:
Honda 125, $40 sold for $250 ($80 parts invested, 2 hours time fixing) 3 days
Kawasaki 50, $20, sold for $50 (no parts, cleaned up, 30 minutes time) 2 days
Yamaha XJ700, $100, sold for $600 (no parts, no cleaning - 0 time) 10 days
Honda 80, $25, sold for $100 (clean carb, inflated tires, cleaned up - 2 hours) 5 days
Kawasaki Ninja, $200, sold for $350 (came with engine completely apart - project bike, decided not to rebuild - sell as is) 29 days
18 hp B&S mower engine, $10, sold for $40, 5 days
10 hp mower engine, $5, sold for $20, 10 days
mower engine (unknown hp and make), free, sold for $40, 5 days
(2) McCulloch chainsaws, $20, sold for $75, 3 days
Chevy 351 engine block, free, sold for $50 (cleaned up), 5 days

Spent $435 + $80 in parts = $515

Grossed $1575

Still in inventory:
50cc 4-wheeler (Chinese make), bought for $175, looking to drop a Predator engine from Northern Tool into it for $100, repaint and sell for $400+, been in inventory for 2 days.

Small 8 hp engine, free, not sure it works, asking $20, been in inventory 6 days

Weed Wacker engine, free, not sure it works yet, asking $10, been in inventory 6 days

Fabricated a smoker, spent $200 in metal, paint - took a total of 15 hours to design, cut metal, weld. Sold for $450.

He has $1100 in his bank account. He spent some of his money on a grinder and a MIG welder (nothing great, something from Harbor fright, but he's learning on it). he uses his money to buy stuff to resell.

Advice I have provided when buying:

1) does it have a clean title?
2) what is it worth?
3) what needs to be done to resell for a profit?
4) what do you think you could get for it?
5) how long do you think it will take to sell?

His idea of success is to double his $ invested with each sell. So that's his goal. We discussed what is need to be successful and we discuss what it will take:
Goal, skills, resources, incentive, plan.

So his road map is (according to him):
Goal: to make a minimum of 50% profit with every transaction and every transaction be done in less than 15 days.

Skills: continue to learn how to weld, fix, sell better

Resources: Dads garage & tools, my tools

Incentive: money and not having to work for someone else

Plan: fabricate smokers, look into other things as well as finding items (motorcycles, engines, stuff like that) on-line and private sales, buy below asking price, resale for a profit using the internet or private sales.

So far, the only thing I get on his case about is having inventory - I keep telling him that if he turns his inventory faster he can make more money even if it is not at a 100% mark up. Make 25% in a day is better than 100% in 2 weeks.

He's learning...

[stomachmonkey]

Originally Posted by M.D. Holloway

So far, the only thing I get on his case about is having inventory - I keep telling him that if he turns his inventory faster he can make more money even if it is not at a 100% mark up. Make 25% in a day is better than 100% in 2 weeks.

He's learning...

But if he keeps at it and turns it into a living at some point his costs are going to increase.

He can't keep using Dad n Moms Handy Storage Center forever. At some point he'll need his own shop / storage space. Along with that comes bills, insurance, etc...

If he's turning that many vehicles he'll eventually need to get a dealers license which will have it's own associated costs.

At some point he'll need to hire help.

What he should be doing is running "the business" on paper and accounting for what will eventually be the real costs of doing business.

He'll be better prepared to make a go of it in the real world.

[M.D. Holloway]

yup - totally agree. He is at a trade show www.worldpac.com today attending STX sessions today and tomorrow. What would be very beneficial would be a workshop on how to start a business and the tools required to do so. Hmmmm....you just gave me an idea!

[GH85Carrera]

He will have to do a lot of $40 profit deals to make a real living. It is for sure a skill that he can use as a side business for extra income, but it will be a real challenge to do that for a living. He will have to move upscale and get into cars were a 50% profit can be some money, but have him watch Wheeler Dealers. Ed China is a master and works on a lot of unusual cars. THe very ofter do a full refurbish and make very little.

Good luck to him. At least he is not a lazy do nothing. Keep trying and learning, onward and upward.

[scottmandue]

Just my two cents...
First, I think it is extremely cool you are encouraging him with these projects.
Second, Whatever he ends up doing in life the troubleshooting and business skills he is learning will be with and help him for the rest of his life.

Not that I'm saying he won't make a career out of flipping... but sometimes our teenage plans take a detour.

Like my plan of being a rock star/race car driver didn't exactly pan out.

[M.D. Holloway]

I appreciate the input! I think he has lots to learn but he just turned 17 and frankly what he is learning doing this exceeds bussing tables and taking orders - of course I would like him to punch a clock and have an ********* boss to give him a taste of reality!

[ckelly78z]

Sounds like you have a very industrious son there.

I used to do alot of the same thing. I would buy half a dozen broken push mowers for $100 from the local lawn, and garden scrapyard, and most of the time, I could have 4-5 of them cleaned up, running/cutting grass within a day, and sell them for $50-$75 each. I then graduated to garden tractors, and probably over a few years fixed/refurbished/rebuilt about 30 tractors from small riders, up to diesel John Deeres with 60" cut mowers.

There were several tractors that I made $1000 profit on, just by buying them right, and selling them well.

I moved on to cars, and scrapped out/sold parts/recycled probably a dozen or so cars....mostly rusty Datsun Z cars. Most of these I could get for less than $500, and could sell individual parts for far more than the whole engine, or car was worth. Many of these cars, I made 400%-500% profit, but it all took time, and energy, and effort to sell online, and ship the parts. This was much more doable 10 years ago, when scrap metal prices were close to $250 a ton for shredder steel (cars), where now, that same price is about $50-$60 a ton.

I also had a 40x60 pole barn to work in and store stuff in, that is now, fairly empty.

With the high scrap price, I could afford to pay $500 for a pickup truck that weighed 5000#-6000#, because I would pull off the saleable poarts and still scrap out the remainder for $500.

[Rick Lee]

I buy and flip a lot of musical gear. Sometimes it takes six mos. for an amp to move. But I usually use it for a while before I decide to sell, so I consider the time I used it vs. the profit or loss I take on the sale. I have an amp that I stole for $1200 and can sell tomorrow for $2800. I've used it for three years, so, even if I broke even on it, I'd consider it a deal to use such a high-end amp for free for three years. Best deal came across was a guy who had to be out of his apt. by a date certain and couldn't take all his guitars with him. I got one for $375 shipped and knew it was a $1000 guitar. I eBay'ed it for $1175 in about two weeks.

[aigel]

Paging LeeH - who just took a "real" job after wheeling and dealing. It is not easy to make a living if you turn trinket level stuff. It is a great exercise and fun for a kid or someone on the side.

Careful on titled vehicles. You are considered a dealer by the state after x transactions / year. Skipping title also is illegal. Some DMV have detectives that find the craigslist re-sellers and nail them.

G

[Rick Lee]

Originally Posted by aigel

Careful on titled vehicles. You are considered a dealer by the state after x transactions / year. Skipping title also is illegal. Some DMV have detectives that find the craigslist re-sellers and nail them.

In AZ you can sell three cars a year without a dealer's license. But they can only track that if you register them and then transfer the titles. If you're doing quick flips, it's called "curbstoning" and you're more likely to run into HOA or zoning issues if you're storing beater cars in your driveway. You're running a lot of risk by holding onto an unregistered and uninsured car if you plan to let prospective buyers take it out for a test drive with bogus or no plates. Of course, being married, I could get away with titling and reselling up to six cars a year before I ran into any trouble. And I doubt they'd come after me before I got to about double that amount. The IRS might be interested though, if someone were to alert them.

[Arizona_928]

Always confirm the vin in two places... That will save a lot of headache.
Always go with your gut...

[jyl]

Congratulations to your son. Not sure where he gets it, but he's got it!

Sure, flipping $40 items isn't going to be a grown-up living - but the lessons and skills he's learning will stand him in fine stead. Pricing, negotiating, sales manner, customer service, wrenching, bookkeeping, capital allocation, inventory velocity - all so important.

Hope you are good and proud of your boy.

[look 171]

Originally Posted by jyl

Congratulations to your son. Not sure where he gets it, but he's got it!

Sure, flipping $40 items isn't going to be a grown-up living - but the lessons and skills he's learning will stand him in fine stead. Pricing, negotiating, sales manner, customer service, wrenching, bookkeeping, capital allocation, inventory velocity - all so important.

Hope you are good and proud of your boy.

Absolutely agree with you on this.

Right at about 19, I started this cabinet, woodworking thing and never looked back. With it, I supported myself through college. All that taught me so much and I was forced to learn it early. I learned how to deal and read people, that was the most important. Sure you can judge a book by its cover and that there are good people out there (a lot more "good" then we like to believe) Once you get burn early in life, you learn to take your flame suit with you everywhere you go. These skills can't be taught in school.

[aigel]

Originally Posted by Rick Lee

In AZ you can sell three cars a year without a dealer's license. But they can only track that if you register them and then transfer the titles. If you're doing quick flips, it's called "curbstoning"

Yes, her it is called "skipping title", it is illegal. DMV has law enforcement out in CA to curb it (no pun). They will look for multiple cars for sale by the same person (at the same time or in short periods) and they will nail them for skipping titles.

I have bought and sold cars frequently and always step away from any skip title situation. Only buying from the person named on the title and only selling to new owners that write their name down on the title while I witness it.

G

[LeeH]

Some random thoughts from someone who's been a reseller for years:

Don't get caught up in the percentage. Yeah, it's good to double your money, but if you're making 150% on $5 items, then your hourly rate is still low. What if you only make 10%... but on a $5000 item?

Resellers I know tend to specialize in a few things, but be open to anything they can flip. See something for sale that you've never seen? Look it up! I found a box of pagers for $50 at Goodwill a couple of years ago. They'd been there for days. Just the fact that there was a whole box of pagers made me curious. Further inspection revealed it was a local area system, like restaurants use. A $50 purchase netted $500 in profit.

Make friends! Building a network of other resellers will pay off. Something out of your league (too big, too expensive)? Call your friend! Ask for a finder's fee. The same guy might call you when he finds something that's out of his area of expertise. I was on a run a couple of months ago and saw a "free" sign on a T-shirt silk screening machine sitting in front of a house. Called one of my friends who promptly picked it up and sold it. I did nothing and my friend gave me half the proceeds... $250.

The resellers I know who make a living at it have a truck, a trailer, on call help (for large items), storage, and a hunter mentality. The stuff is out there. Sitting on the free section of Craigslist hitting refresh pays off for a lot of people. Local Facebook for sale pages are active all over the country. Lots of folks who'd never buy or sell on Craigslist love dealing with local people who have visible profiles on FB. Placing "want to buy" ads has paid off for me and a lot of my reseller friends.

Buying is WAY easier than selling. It's easy to think, "Hey, I just made $200!" on a buy. But, if that item gets parked in the garage instead of fixed, cleaned, listed, and sold, then pretty soon you'll have a lot of inventory and be running out of space. Fact is, some items do take weeks, months, or possibly years to sell. About the time you're ready to give something away, the phone will ring and it'll be some guy who's 50 miles away begging you not to sell the item you've had listed for 6 months before he can get there in an hour.

Yes, I did go get a real job after doing this (and accounting/software consulting) for years. With no barriers to entry and more people selling their own stuff, it's a lot harder to make money now than it was 6-8 years ago. You still can, but it's a lot harder than it used to be.

[M.D. Holloway]

Originally Posted by Wayne at Pelican Parts

Hey guys, this is how I got my start - buying, fixing, and selling computers in college. Made $40K a year around 1994 or so (which was darn good for a college kid).



I'm not sure I agree completely with that statement. While it's completely true with a traditional business, it sounds like he isn't paying storage, and he isn't having problems financing the purchase of new product. So, the opportunity cost of maintaining the inventory is pretty low...

-Wayne

I see what your saying, my motivation is to get the junk out of my space sooner than later. I figured he would hang on to stuff waiting for the best bid which may not happen for a few months.

[sugarwood]

Let's not get all career counsellor on a high school kid.
This is not his adult career, but a great teenager experience.

[LakeCleElum]

MD - You should be so proud that your son is learning skills and working with his hands instead of spending all day behind the screen of his device of choice.......

He is learning a work ethic, people skills and how to run a business. I know so many young adults that can't change their own oil or know which end of a hammer to pick up.....He is learning skills he will use his whole life......

I would only add: He can have a job and be a flipper on the side.....I did it for many years.....

[dafischer]

Good on your son for being so industrious. I did the same thing for two summers during college. Think mid 70's and $100-$200 60's sports cars. Some flipped as is, some parted, some worked on to turn a bigger profit. I made more doing this than the other two summers working construction (I was on the 5 year plan), and had fun doing it.

Not a career, mind you, but a great lesson in business and capitalism.

[Ayles]

How about adding tech component like building a database of inventory using access or tracking sales in excel?