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Ask HN: What is a way of making residual income with $5K a month?

105 points by hanyoon ↗ HN
My friends and I have decided that we are sick of living paycheck-to-paycheck. We want to start a business together that would bring us residual income. I have a few ideas, but I am all ears if you have any suggestions.

A little about me: I am highly knowledgeable in HTML/CSS/JS, website development, wordpress, graphic design, online marketing, and social marketing. I've worked with companies such as ARCO Gas, AMPM, HiteJinro, Ballantines Whiskey, and the LA Dodgers.

I have experience and understanding of the current state of the web and effective marketing.

An idea: buy cheap high quality phone cases from China

* The $5K / mo would give us a variety of cases to choose from, as well as bulk discounts. Obviously, we would start small to test the market, maybe invest $1K in inventory

* Simple, modern website that makes purchasing easy on the web and mobile

* Highly targeted market. Example: (Item: a Justin Beiber case) Facebook ad target teenage girls in the USA who have liked Justin's facebook page

* Analytics, A/B testing, whatever I can do to maximize profits

* Sell $1 cases for ~$10; should result in very high ROI

* Even though the case market is saturated, with targeted ads I'm thinking it would be possible.

Any other ideas?

edit: Don't get whats with all the downvotes :/ We are legitimately trying to start something that would help us get out of living paycheck to paycheck, and are simply open to hearing ideas. Isn't this what the whole entrepreneurial spirit is about?

78 comments

[ 3.7 ms ] story [ 133 ms ] thread
MarkCole
If someone had a "sure-fire way" of making an extra $5k a month, I don't think they would be keen to share them.

In my opinion the case market is pretty saturated, and it's a hit or a miss about whether you get anywhere with it, or just lose your money. You say with targeted FB ads you can do it, but you need to get one customer for every $9 you spend, that's not a lot.

If you're looking to start a business, I'd highly suggest building/selling something that you can sell for much higher than $10. More in the region of $100 - $500. The plus side of this if you need to make fewer sales to reach your target.

You have skills that could make you an extra $5k a month and more, that would be much easier than peddling cheap phone cases. Take on additional consulting project for example?

Or optionally, follow the advice of many financial bloggers and simply cut your outgoings to prevent the living paycheck-to-paycheck situation.

olivierduval
- "invest $1K in inventory" => no, start with orders THEN buy what's ordered...

- "Justin Beiber case" => warning: you can't use people (or pictures or cartoon or...) images like that... and the rights can be pretty high

- "$1 cases for ~$10" => didn't you forget taxes, delivery, lost,... business is not: sell $10 - buy $1 = profit $9

Well... I think you should take a look at the business side

julius
In this case you need to buy inventory first. Buying from China means shipping takes weeks. And you need to get some samples shipped first, to choose your manufacturer.

Your customers will not want to wait for their phone case for 8 weeks. Shipping phone cases one-by-one from China is obviously out of the question as well.

You also need to buy the Justin Bieber rights, before taking orders.

Also do not forget to setup with a fulfillment partner. You do not want to send out 1000 packages yourself.

Having $9 per case to work with is not too bad. Depending on the costs of the shipping (china+fulfillment) and licence, the numbers might still work out.

But I am not too sure on the advertisement side of things. A customer might be too expensive.

Symbiote
On eBay, for $1.49 including delivery from Hong Kong, one Justin Bieber phone case [1]. There's an even cheaper one for $1.39, but Bieber looks younger, so I guess that's old stock.

I buy stuff this way, typically when I don't need it urgently. I've bought phone cases, memory cards, small electronics — they have to be under €10, so they don't incur a customs charge. [3] Delivery often takes a month (by ship), but sometimes I'm lucky and it's just a few days, presumably there was space on a plane.

The competition is the 95% of sellers based in the US, who are selling the same cases for $10 with much faster delivery. [2]

The idea seems to rely on people not shopping around, since

[1] http://www.ebay.com/itm/Justin-Bieber-Cute-Hard-Phone-Cover-...

[2] http://www.ebay.com/bhp/justin-bieber-phone-case

[3] https://en.wikipedia.org/wiki/Low-value_consignment_relief

schmrz
While it may not be "right", you don't need an inventory, not even a payment system. You will not be charging the potential customers. The point is that you test the market, just to see if anyone would be interested in buying. Once they get to the checkout, simply say that it will be "available soon" and optionally ask for email so you can actually sell to them later.

For anything you want to build and sell, you need to make sure that you (a) have a market, (b) can reach the market (marketing).

Again, it may not be completely right, as you may feel (as I do) that you are misleading customers a bit.

AznHisoka
Your last paragraph is where this all falls apart (assuming there is demand, a huge assumption of course). Paying $500 for 1000 clicks which results in 50 sales (given an optimistic 5% conversion) essentially just results in break even.
Guest192038
Why not work backwards and start making sales before you have stock, so you know if the business is possible, and if so, what kind of margins you're working with to pay for advertising, inventory, fullfilling orders, packing, shipping, wages, rent, etc?

For example, setup your online store and buy your Facebook ad campaign for teen girls, and try to sell them the Justin Beiber case that you could potentially order from China. When they go through the order process, inform them it's 'out of stock', and flag a potential sale in your database. Now, analyze the numbers, look at how much your ad campaign costed, how many potential sales you generated, how much it would cost to order those actual cases from China, how much it would cost to ship them, etc, and see if the business makes sense. If so, start with a small batch of inventory as you said, you'll get more experience with the entire process, any hidden costs or time involved you overlooked, and go from there.

pc86
If you are willing to invest a slightly higher amount to test the waters, you can buy a small batch (e.g. 100 units) but sell at the large batch price (e.g. what you would if you had 10k units). You will lose money overall but if your 100 units sell out in 3 days you might not lose as much sleep placing that order for 10k units.

Depending on the product the variance in price between a small order and a large order can greatly influence perceived demand.

someone12345125
"Even though the case market is saturated, with targeted ads I'm thinking it would be possible." I spent a bit of time in this market years ago... YEARS Ago... Don't enter it. Your thoughts that targeted ads will work prove to me that you're not actually that knowledgeable in digital marketing. If you think that you're going to discover some magic formula to sell these cases that all of the cell phone case creators (including the phone manufacturers) in addition to amazon and much more haven't done and with an unbranded no name business and phone - you're fucking wrong.
Kiro
What's up with the edit? You can't downvote submissions (afaik?) so what are you referring to?
biot
Despite hanyoon being an HN user for ~5 years, it's apparently the first time they've noticed that all text submissions are displayed as low contrast, similar to a downvoted comment. Even the ever-popular "Who's Hiring?" posts display the text identically.
gcb0
ha. i only browser with a stylish extension that turn every web sites white on black with decent contrast. never noticed that either.
mgirdley
I see this done all the time:

Build websites for a couple dozen clients. Charge hosting fees and maintenance each month to keep sites live.

Marking up AWS hosting to $50 / mth and charging some hourly here and there at $100 / hr adds up quickly.

mipapage
That only lasts so long until the client figures out they are being fleeced. My wife hawks those businesses that are way overpaying for their web hosting and the like (maintenance each month to keep sites live).
morganvachon
Indeed, I've found the sweet spot for managing and hosting a website for a small business or individual to be around $10/month and I net maybe $5/month/client out of that after hosting fees and time invested. There's a plethora of "build it yourself" hosts out there who use economies of scale to offer simple shared hosting for under $5/month with a site builder engine that's good enough for the masses. Look at A Small Orange[1] as a great example of how to thrive while offering a good but cheap service.

It can be done, but given the small scale it's basically pocket money, not any sort of real income, unless you can build a brand and scale it up. That's the secret sauce: Marketing.

[1] http://asmallorange.com

PlzSnow
I'm a bit horrified at the naivety of this post. I think the best thing you can do is just try it, with the presumption it will fail. Then learn the lessons why it didn't work and try and try again.

At some point you will realise that the notion there's a "sure-fire way to $5K" is completely absurd.

Some random notes on your idea anyway:

- No-one buys from independent websites, only Amazon, eBay, etsy etc

- You will get no traffic to your website

- Phone cases are a commodity, there is no chance you can charge higher than Amazon

- Buying Facebook traffic to sell $10 items doesn't work economically

- Justin Beiber will close down your website with cease and desist

- You will end up with a 1000 cases that you can't even sell for 99c

- The real money is in value-added high-price items, or in selling services

joss82
OP: Keep all this in mind and change your idea a bit, you have the will the do it, and that's already putting you above 99% of all people.

Good luck!

sharemywin
been there done that. Tried Facebook advertising with a service gave up after zero leads where google was 10x cheaper. Ebay good luck they blocked me for saying my cases worked with ipads. even though I tried to explain that's not trademark violation. bought sites on flippa traffic slowly degrades(and adsense revenue) unless you pump money into it. tried building an affiliate site that aggregates Chinese wholesale sites(aliexpress,dx.com etc) and ebay so I could find the cheapast price. Tried monetizing with viglink.com made no money from them and a little from ebay affiliate program. spent couple dollars a day at 10 cent clicks wasted $300. my next idea will work for sure though...lol...
jackcosgrove
Buy a couple duplex properties in an inexpensive midwestern or southern state. You'll have to save up some money to do this, and depending on that amount your margins may be nonexistent. Being a landlord is a lot less work than running a business and far less speculative, and the profit margins show it. But you asked about income, not profit.
lumberjack
Why go for less populated areas? It seems to me that that would increase the risk since it will is easier for a small town to start dropping in population as opposed to a big town. Also land is cheaper and there is more room for development so less people need to rent.
diverted247
At the start of every month, buy $350 of the S&P500. At year 40, you should have over $1M and at year 50 over $2M.

https://vestu.com/articles/how_to_make_1m/

lumberjack
8% is very generous, I thought 7% was the commonly used figure which gets you 800k in 40 years. When you acount for inflation that is not anything you should consider retiring on.
canicode
I can't believe people on a forum such as this are completely financially illiterate. The 7% rate is already inflation adjusted. The nominal rate is about 10%. So plug in a 7% real return. The result will be in 2015 dollars.
dangrossman
Your comment would've conveyed the same information had you omitted the first sentence.
darkr
That doesn't take into account inflation. Presuming you do keep paying $350/month and not increasing that with inflation, that gives you $1,229,998.43 for 40 years.

If you apply the same U.S inflation rate as seen from 1965 > 2015 to cover a 40 year period, that gives you a cumulative inflation rate of -86.7%, leaving you with the equivalent value in todays money of $163,249.36

You might be a millionaire in 40 years, but you're not going to be rich..

diverted247
Inflation 1926-2014 was 2.93% annualized Inflation 1970-2014 was 4.15% annualized Via IA-SBBI in Morningstar.

You are correct that inflation plays a big role, it always has, it always will. One argument for equites is in their ability to digest inflation (raising prices and returning ever higher earnings). There are many choices here, some simple (S&P500) and some more advanced. End of the day, if you are not making a return ahead of inflation, you are falling behind.

Here is a snapshot of annualized returns from IA-SBBI: https://www.dropbox.com/s/l7gmcynm3tggnrw/Screenshot%202015-...

https://VestU.com provides investment courses, model portfolios, webinars for individual investors. We launch in Jan 2016 and are finishing up the courses now. The material is based on our co-founders experience managing investments at the B level for endowments (University of Texas System), Boards (BHI,CAM), and foundations (Meadows Foundation, Others) for over 40+ years.

onion2k
Isn't this what the whole entrepreneurial spirit is about?

No.

"Entrepreneurial spirit" is abut identifying a problem that people have and providing a solution it, and then building a sustainable business around that solution. It's not just cobbling together something so you can cash in.

Even though the case market is saturated, with targeted ads I'm thinking it would be possible.

The first thing you should do is research the cost of those adverts. Highly targeted adverts are valuable, and consequently they're expensive. I wouldn't be surprised if an ad targeting young women with an interest in Justin Beiber on Facebook will cost upwards of $2 each time someone clicks, so you'll be needing a to get upwards of a 20% conversion ratio just to cover the $10 you're planning to charge, and that's before any other costs. That's not a sustainable business.

MoOmer
Actually, that's the start-up fantasy. In the real world, the vast majority of entrepreneurs create their business out of necessity - not out of some lofty goals to improve anyone else's situation.

Source: helped a professor with research on entrepreneurship and small business teamwork for 2 years.

will_pseudonym
-please put up an email address in your profile if you want people to contact you. And trust me--if you're starting a business, email just became your new best friend.

-read everything @patio11 has ever written. Use your brain and research ability to understand his wisdom. Ignore this advice at your own peril.

-start high end markets first. Better margins, better customers.

-think about what products suck! Talk to affluent friends, ask them that question. If you don't have affluent friends, go make them. Your life and this endeavor will be amazing if you do. Trust me on this. Just make sure they're good people. If you can't tell the difference, that's your side job. Learn how to tell the difference.

-bite your tongue. I'm serious, literally bite it. Listen to what ppl are telling you--it could be your next product! Biting your tongue is like a phones mute button. You should be using both to become a much better listener. I started an interruption/swearing jar with my fiancé to break myself of those habits faster. It's tough but super rewarding.

-learn sales. Frank bettger (how I raised myself from failure to success in selling). Dale Carnegie (how to win friends and influence people).

-improve yourself. Sleep 8-9 hours. If you use an alarm clock you're doing life wrong :D, diet (quality and quantity. Whole > processed * 1000. no sugar.) exercise. Move fast, lift heavy things. Sign up for Charlie Hoehn's anti anxiety course. Assuming you're a guy, check out The Mating Grounds and Helping Joe. They'll help you improve your life immeasurably. Sign up for talk therapy. If strapped for cash, group therapy is very effective and inexpensive.

-pay attention to the world around you. The problems to solve will present themselves.

-Don't force anything. It'll hurt to get the round peg into the square hole, and you might lose a finger in the process. NB: Your finger is your happiness.

-cut out negative people, but don't create a Hooli yes-man echo chamber.

-watch randy Pausch - the last lecture. And Randy Pausch - time management.

-email if you need help! I'm an extremely generous person.

orthoganol
There is probably some valuable information there but anyone who recommends Tucker Max seriously should be taken with a grain of salt (if not simply disregarded).

People love to posture like they know it all (usually not the tech founders that HN funds)... Look for little things like recommending Tucker Max that suggest maybe they are in fact posturing, because they're trying to grow their brand here or whatever reason. Sorry to sound so harsh.

will_pseudonym
If you don't mind me asking, what is wrong with Tucker Max?

I was, perfectly honestly, hurt by your harsh words. I'm trying to search to figure out what I've done to wrong you, and I'm struggling. Can you help me understand what our shared goal is in this conversation so I have the right frame of reference to continue this conversation, if we are to have it?

EDIT: added comma for clarity

Chris2048
Damn sealion...

http://wondermark.com/1k62/

will_pseudonym
That's hilarious. :) I'll continue to play my sea lion role as necessary though. As the manatee was born to be gentle and kind, so shall I kindly respond to close minded internet commenters. Like an Internet Amish, I shall turn the other cheek.
jgorn
Thanks for sharing, some really useful resources here that are new to me.
will_pseudonym
You're welcome! Thank you for the appreciation! So glad I wrote it out and posted--always a risk of getting shouted at by negative nellies when it comes to HN. :)
pc86
I agree with most of your advice but I couldn't survive without an alarm clock. I've spent the last few years waking up between 4:25 and 4:45 but can't get up before 7 without an alarm.
johnorourke
Business is hard. Anything of value takes effort and time. Read "The Lean Startup" and "The 4 hour work week". And whatever you do, don't build a website - a website is not a business. Start with eBay, then try something like Shopify once things get better, and spend your money testing ideas and assumptions.
socialist_coder
The reason you are getting down voted is because of the wording in your title. "Sure-fire" invokes bullshit get rich quick schemes, the opposite of what the "entrepreneurial spirit" is about.

If there was a sure fire way to generate $5k profit monthly, everyone would do it, and then it would not be profitable anymore. That's just basic market equilibrium.

If you really just want some ideas, don't use the "sure-fire" language.

Chris2048
The other reason is, everyone want to make money, whatever situation they are in. Why would we care about how much some other individual cares to make?
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hanyoon
I misused the word "sure-fire," I stand corrected. My philosophy in a sure-fire way of creating a profitable SaaS or even a simple software is to find an inefficiency in the way businesses are run. However, seldom get to hear the needs of small business owners whom most likely do not have the budgets to invest in a new system. It's usually the "big gun" corporations that have the ability to spend sacks of money to fix their inefficiencies.

TL;DR: Small business/startup owners, what is one simple software/service which would seem to be 1) cheap to implement; 2) easy to implement, that you wish you had?

dang
Ok, we took "sure-fire" out of the title.
hanyoon
Pretty cool that you can do that! Thank you :)
alinhan
I have another idea for a product that you could import and sell, instead of phone cases from China.

I don't know how to contact you directly, so maybe you can drop me an email. My email address is: my HN username at yahoo dot com.

Silhouette
Generating $5K/month in revenues is a respectable achievement for a new business. It's more traction than many new businesses will ever achieve, and of course most new businesses will fail.

If you're talking about spending $5K/month in costs to run your business, and then presumably on top of that the value of the time that you and your friends are putting in, then you need way more than $5K/month in revenues to make a significant profit.

If it was that easy, everyone would be doing it. Unfortunately, as others have said, a lot of the assumptions implicit in your post are wildly unrealistic.

lumberjack
2M in rentable real estate should do it.
buro9
Go to a local dentist, look at how they do things like X-Rays.

What you will find is that they pay GBP 20k+ for an X-Ray machine that connects via USB Dongle to an old Windows machine... really old.

You'll also find that all of their equipment is old copies of Windows, in dusty long-unsupported equipment.

Sell a service, that virtualises all of this and that you manage. Charge them GBP 250 per month for it, on top of any capital expenditure up to GBP 3k for the host server (probably on-site as a Dentist shouldn't go down when an internet connection goes down).

Now go round the other dentists in the area and repeat until you have 20 dentists on-board.

You now have GBP 5k per month in residual income, for hardware that will take minimal effort to support, and for images of Windows taken from existing machines that are now backed-up.

The lesson here: You're probably looking for some complex and advanced solution that you can automate to great fortune!... but actually there's a lot of money just begging to be given to people who solve the simplest stuff in fields where the computing skill is very very low but the expectations of computing and value from it is very high.

Your profit exists in that space. No-one is doing the simple stuff in those fields.

Other ideas: Beauty/Hair Salon booking systems that work inside the hairdresser and whose web and automated phone system actually works too (Twilio + Google Apps (for Calendar and Google Contacts) + a website will do this with medium effort - it's a small integration project).

The other lesson here: It's not doing stuff that is hard, but selling it.

ryanackley
actually there's a lot of money just begging to be given to people who solve the simplest stuff in fields where the computing skill is very very low but the expectations of computing and value from it is very high.

This is true...but dentistry is not one of those fields. There are many companies that already do IT for dentistry. Source: my uncle is a dentist. He has been with the same company since 2004.

buro9
The last time I was in my local dentist I was the first patient of the day and the Windows machine needed rebooting as it didn't see the USB dongle. We got chatting about the fact that it was Windows XP, and her fear that the machine would die but she couldn't upgrade as that specific X-Ray machine was only supported by Win XP (and wasn't purchased too many years ago - the company selling the X-Ray dongle provided the whole solution).

I thought of the above solution whilst there, asked her if anyone did such a thing, and the answer was no-one she knew of. I'm happily employed, but she was fairly desperate to pay that much immediately if it could mitigate the risk of that equipment failing on her suddenly and with a very expensive bill.

Scarblac
X-Ray machines are probably heavily regulated, would it even be legal for a third party to change that hardware setup?
TurnipTheBeet
Most of the machines that you'll find in a small office are actually two separate devices. There's the x-ray emitter and an x-ray sensor. The sensor replaces the x-ray film that had to be manually developed, and is often just a USB device that integrates with whatever imaging application is in place. The sensors can be installed by anyone for the most part.
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kohanz
My impression is that dentists are a lot like other sole proprietors, you will find some that keep up with technology and others that don't. I have visited fairly high-tech dentistry offices, with technology that appears to have been developed within the last 5 years at most. I also have a few friends who are (recently graduated) dentists and they are driving adoption of newer technology in their offices. Your local dentist may just not be informed of what's available. A quick search shows that Dentistry SAAS does exist (http://www.curvedental.com/).
GFischer
I've seen startups addressing all of those fields (example: http://www.rockerhair.com/ for beauty salon booking systems), but, quoting William Gibson, "the future is already here — it's just not very evenly distributed"
TurnipTheBeet
This is a fantastic idea that I've often considered myself. I work for a dental school and regularly interact with faculty members that continue to maintain their own private practice offices. Some of the more tech savvy dentists manage their own systems, while others have "a guy" that takes care of it. Both of those scenarios scare the hell out of me.

Getting an EHR or imaging system up and running for a small office is for the most part straight forward. Getting those systems configured correctly is where things start to fall apart. Things like backups, disaster recovery, HIPAA and PCI compliance are easy to overlook or screw up.

Vendors aren't much better. I work with a number of systems that would be out of compliance had we followed the vendor's recommended method of deployment. Technical support from these companies are spotty at best.

That being said, there are only a few big names that are used by the majority of practices. If you can get in there and really learn the systems and make things "just work" then you'd be in a great position to sell your services.

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gambiting
Like.....absolutely surefire? I can only think of one - borrow $$$, buy a large warehouse/commercial building in a popular part of town, pay it off within 5-10 years either by renting it out/running a business that at least pays for the loan payments, then once it's paid off just rent it out - if it's large enough you will easily get residual income of $5k/month or more. That's like the only guaranteed way with >90% chance of happening. Anything else is a much larger risk and depends on you knowing how to run a company.
circlefavshape
"Don't get whats with all the downvotes"

You are asking a pretty daft question. There is no sure-fire way of making a residual income

walkbmc
Kudos i say, Ive always wanted to quit my job and start/build a business!!
GFischer
Based on your skillset, and some suggestions posted here, one possibility to generate recurring revenue would be to leverage your "highly targeted marketing" abilities and offer them to existing merchants, instead of trying to learn to do it yourself.

You could either resell / drop ship, or (better IMO) partner with the merchants, maybe on a commision basis? (no upfront cost for them, recurring revenue for you).

floydax
As someone that tried a similar idea with imported phone cases I won't recommend this path at all. It can be possible, but there are several challenges with this market. There is too much competition, the amount of stores and private sellers that exist will crush the profit margin and some of these private sellers aren't paying any taxes at all.

Another major challenge is the hundreds of devices and colors that exist and that you will have to stock in order to fullfil the orders on a timely manner.

Finding reliable suppliers is also a challenge, I've had a few experiences with chinese suppliers that I've found on Alibaba and they weren't the best. Inconsistent product quality, incorrect models\amounts shipped, lack of proper invoicing which made me have some issues with customs along with additional fees.

I tried some targeted ads with several groups, but it didn't help.