Step Twenty Three to a Fortune:
Buying something you need and something to sell for profit at the same time.
I wanted to buy a group of breakers at a price that I could resell some of them, use one of them, and put more money in my hand than I had when I started.
My bottomless pocket theory has always been that when a capitalist learns to buy for less than he can sell for, the more he spends the richer he gets. It is more an ideal to strive for than a reality, but it is true. If you have time to buy right, even an emergency need can be turned from an expense to a profit.
Our goal at this point of the learning and experience curve (step 22) calls for an investment of up to $6.72 for a return of $7.39 or more.
I had a breaker go out and needed a new one. It was going to be quite expensive as the Federal Breakers are no longer being made. Lots of people are replacing these breakers with a different brand for safety reasons. As a master electrician, I know where I can use these breakers with minimal risk.
I find a group of these breakers for sale at a good price. The owner warrants they were all working in relative safe condition when he decided to replace his panel on the advice of his electrician. He was not asking much at all.
I bought the whole group for ten dollars.
From a $190.26 reserve pool, I plan to invest up to $6.72 in expectation of growing that to $7.39 or greater. That should yield a gross profit of $0.67 or more.
Starting capital $190.26
Planned investment risk $6.72
Investment receipt goal $7.39
If I can buy several items cheap enough, I can sell some for a profit and get the one I need for free.
I purchased a group of Federal breakers for $5. I used a two pole 50 amp breaker which I needed and listed eight breakers for sale.
The winning bid was for $18.02 and $7.00 for shipping.
Even though I'd described the breakers as old, the buyer thought he detected water spots on one of them and rust on a rivet holding the plastic together. I told him the original owner said they were working fine when he sold them to me, and that I had tested them in my own home and found them to be in working condition. Because they were Federal breakers, I could not warrant they would perform properly, but they would hold under a load.
Rather than take a full loss on this deal and refund the whole amount. I negotiated a partial refund at the buyer's option. The buyer would keep all the breakers, use the ones he wanted and discard the ones he did not want. He would get a $7.00 refund.
I got 11.01 for the breakers (rather than the original $18.02) and $7.00 for postage. It ultimately cost me $6.75 for the postage, $1.61 to ebay and a $7.00 refund. I gross $4.65 off this deal and a free used breaker.
The Lesson: The more you spend, the richer you get when you buy for less than you can sell for.
I sold the breakers for for $4.65 more than I paid out.
Ending gross capital (before deductions) $194.91
Is it possible to turn an expense into a profit? So long as I have time enough to find a bargain for the expense that come up from time to time.
What did I learn from this deal? I learned that the price we pay when we buy determines the profit we can make when we sell.
Raw materials, applied skill, and a little labor can increase the market value of a product.
I started with $190.26 in capital. I was looking to risk $6.72 in hopes of growing it to $7.39. After the sale before tax and charitable deductions I had $194.91.
35% tax on profit of $4.65 would be $1.62 That leaves $3.03
Giving back to world we share, we pay 10% or $.30 for a worthy cause.
Now we have $193.29 for investment and surplus to cover bad deals.