By Stefan Aarnio, Award winning real estate entrepreneur, author and coach.
- START UP – Set up a distributorship of other people’s products with little or no cash. This allows you to get into business as fast as possible with as little risk as possible.
- DISTRIBUTION PHASE – Sell other people’s products and earn commissions. Selling other people’s products allows you earn cash flow right away, avoid holding inventory, and build a distribution channel. Your distribution channel will be your most valuable asset in this stage and further stages if you wish to evolve the business further.
Note: Most businesses never advance to production in Step 3, for many the cash flow of a distribution business is enough.
- PRODUCTION PROTOTYPE – Your distribution has began to bank up cash and your coffers are filling up. With your banked cash, you can begin to experiment with producing your own products. You own the distribution channel, so selling your own product through your own distribution is the path of least resistance at this stage.
- MASS PRODUCTION – If your experimental product is successful, mass produce your own products and reap the highest profits available to any business anywhere. At this stage you are earning commissions on the sale of your own products plus the high profit margins of your own production. This is the sweet spot where you scale the business as large as possible.
- END GAME – bank the cash that is now flowing in from your booming business. At this point you become a bank of sorts and buy out competitors or form a cartel or monopoly to dominate the market.
Why is the Ultimate Business Model superior to other models?
- Zero risk or low risk to start – By starting out as a distributor, the capital costs of starting the business are either zero or nearly zero compared to a producer business model. Minimizing risk in the beginning is one of the most important factors to consider before jumping into business.
- Maneuverability – The ultimate business model is light in the beginning in that it can change products or strategies with ease. Until you find success with the right product and the right distribution method, you can change variables until you find the right mix to scale up.
- An opportunity to seize the rewards of being a producer – Once your distribution channel is proven, there is an opportunity to get into the production business if you believe higher profits can be captured. However, there is always the opportunity to stay out of the production business all together and keep earning distribution cash flow.
- Profit on Day 1 – The ultimate business model allows the entrepreneur to make profits on day 1 without waiting for the production cycle to run it’s course. This is a huge advantage when starting a business.
- Requires Zero Capital to start – Many distribution businesses can be started with literally zero dollars. This low barrier to entry makes it easy to start at the bottom and work your way up.
How to Apply the Ultimate Business Model to Real Estate Investing
When we apply the 5 Stage Ultimate business model to real estate, we start with zero cash in a distributor style business. We start simple and grow more complex as our skill set grows. By starting simple and growing with our skill set we can minimize our entrepreneurial risk, which is 87% of the reason why most businesses fail.
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Stefan Aarnio, award winning real estate investor, entrepreneur, author and coach was recently inducted into the Rich Dad Hall of Fame. His book, “Money People Deal: The Fastest Way to Real Estate Wealth” is currently available on moneypeopledeal.com. To learn more about Stefan Aarnio please visit StefanAarnio.com