Return on Investment

By Mike Johnson

Our time and energy are limited. So we want to maximize the results of our efforts.

Not all endeavors are worth your effort. So it's wise to perform a cost-benefit comparison before jumping in.

I once managed a donut shop for hands-off owners. Iím sure the appeal of the business was the high profit margin on a donut.
But donuts only sold for about 30 cents. Despite the low 10% ingredient cost, labor, expenses and overhead ate all the profit. You just couldnít overcome expenses with a 30 cent item. Even if you sold them by the dozen.

At 7-Eleven, I managed 55 stores. Same dilemma. Here the product cost was about 65% of its price. Gasoline cost was 95%. Only half my stores sold gas. Sales were much higher than the donut shop but most non-gas 7-Elevens earned less than a thousand dollars profit per month after labor, expenses and overhead. Each facility cost hundreds of thousands of dollars and had many moving, complex parts. Including the headaches of high shoplifting and employee theft. So that return on investment seemed puny for the all the work, hassle and resources involved.

This point was really driven home years later when wife and I owned trailer parks. At our peak, we owned three parks with a total of 140 rent streams. One year, with just 3 employees, we earned more profit/equity gain than my group of 7-Elevens had earned in its best year with 55 locations and 550 employees. And the trailer parks were mostly passive income! I found it amazing that my little operation had smoked the return-on-investment of an international corporation.

With trailer parks, we werenít selling 30 cent donuts or 75 cent candy bars. We were selling 12-month leases for lots and trailer home rentals. Each sale was worth $3,000 to $12,000. Just one sale, to each tenant, once a year. And our manager at each park made that sale for us.

The trailer park business model was much more simple and efficient than the donut shop and convenience store model. It provided a much larger return on investment of property, workload, hassle, time and energy.

"Work smarter, not harder" is a profound concept. There are many ways to earn money.

Researching and selecting the smartest ways FIRST, saves decades of time and energy later.

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More:

Why Hard Work is a Big Mistake

The Many Ways to Earn Income Besides Jobs

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