> Say Hello To The Lean-Hedge Model
Many people think that in order for you to start a business, you must get into massive debt and get investors. Or, like Shark Tank, that you need a great idea that will change the world. I’m not saying that you shouldn’t get investors, or that you shouldn’t come up with great ideas.
Obviously, to make a really profitable business, some level of investment is required to make a whole bunch of money. (Think, the next Apple or Starbucks).
What I’m saying is that entreprenuership is viewed as very risky because many people get into a whole bunch of debt and declare bankruptcy. That’s not what we should be doing as beginners (assuming that you are a beginner. If you are Jeff Bezos, this article is not for you!). Instead, we should be using the lean-hedge model.
“Simply put, you create a cash-flow business to hedge against the expenses of a long-term investment-heavy become-wealthy business.”
What the “fx!$rench-toast” is the lean-hedge model?
When you first start a business, your money should go down-down-down then down and, after a certain point, your money should go up when the business finally becomes profitable.
Many people may not survive the time where the business initially loses money and get into debt. What if, we created a cash-flow business BEFORE we started our Starbucks to hedge against its initial expenses?
The lean-hedge model constitutes two parts. First, you create a “cash-flow” business. A cash-flow business requires very minimal investment and usually involves creating wealth with your time, sweat and effort.
Let’s take a look at some examples:
> A translation business
> A personal freelance portfolio site (you make a site then you do cold e-mail marketing)
> Freelancing (UpWork, Fiverr). You need to invest connects.
> Educational business.
> Info marketing. (You create an informational product on something you’re knowledgeable about. Then you sell that information).
> Online Fitness/Diet/Health Coaching ($50–300/month, personalized calls, creating a workout plan)
> Publishing small e-books on Amazon. (Several Medium writers seem to be doing this).
> A YouTube channel, cash flow channel
> A web development agency (I’m a dev, but if you’re not a dev, graphic designing agency, content writing agency, whatever. Trade time for money.)
> Digital Marketing
> Virtual Paralegal (Did you know there are a million attorneys in the U.S. alone?)
> Dropshipping to a certain degree (Organic Tik Tok dropshipping, where you create content to drive traffic to your shopify store instead of spend money on ads).
(Disclaimer, my first two cash-flow businesses, which were language teaching failed miserably as marketing for language-teaching was very hard. My translation business is taking off, as B2B marketing is fairly easy via cold e-mailing.).
Note that there is a crossover point. At some point, your long-term business stops losing money and starts making more money than your cash flow business.
At this point, my cash-flow business (freelancing, translation company) is solidly making 7k+/month hitting my bank. I’ve decided to start a slightly more investment-heavy digital marketing agency called:
Here are the anticipated investments (time or money intensive) for this business:
- ($$$) Figma/UI-UX design by a top Front-End designer (in negotiation)
- (Time): Some copywriting (I will do this myself)
- ($$$) HTML Development for an animated website (in negotiation)
- (Time) Backend Development (I will do this myself via Laravel)
- ($$$) Logo Design
- ($$$) Logo Intro Video
- Intro Video (I’ll edit this myself with Premiere Pro)
etc.
Then you consider the 4 Ps of Marketing: Product, Place, Price and Promotion. Above gets the “product” ready. Then consideration for promotion and pricing needs to be made. To get into those other aspects will unnecessarily elongate this article.
Basically, the entire point of the lean-hedge model is this:
> Don’t take risks. Don’t get into debt. Create a cash-flow business first, then use that money to slowly develop your business.
If you want to learn what it takes to create a cash-flow business, check out my other articles on “Nightmare Mode” (which teaches you how to make work as fun as playing video games” and the article on “Why most people can’t escape a 9–5” which shows you what type of time management practices you must put in place to win.
If you have any questions, please hit me up on Telegram: simpsdotbiz
Or please don’t be shy and leave a comment. Thanks! I enjoy every comment I get.
p.s.: I’m not trying to be a popular Medium writer, I’m not in the Medium partnership program. I just write here to organize my thoughts or my learning (programming tutorials being one of them). So grammar/whatever may be off, since I’m not reviewing. Many of my articles aren’t finished. However, if you have any comments, or questions, please don’t be shy. Leave a comment.
