113th Edition – April 4, 2021
Never in the history of the United States has the time been so favorable for a person with small capital to start their own business as it is today.John Cameron Aspley, 1936
In 1933, Harry Larson dropped a penny into a weigh machine slot that would change his life. He didn’t change his diet or daily workout regimen, but financially, he’d never be the same. He learned the power of compounding.
The Hungry Crowd
Before jumping into the weigh machine business, Harry needed to make sure there was an appetite for the machines.
After he weighed, he noticed 7 others stepped up and weighed themselves.
Harry later learned that the best place for machines was in drug, candy, and grocery stores. He noticed that shoppers of that time period were worried about their weight, so putting a penny in a slot during each shopping trip was the norm.
The machines were like a self-marketing machine.
Harry learned that each weigh machine cost $175. He purchased the first three out of his savings. He went on to buy 67 more out of the pennies taken from the first three.
Harry’s homework paid off because the average monthly profit of the first three machines was $98. Additionally, no servicing of the machines was required which further strengthened his bottom line.
Scaling and Financing
Even a weigh machine business needs organization and a plan for growth.
Harry established a line of credit with the manufacturer after acquiring the first three machines. He used his line to buy 5 more machines and more as he found new locations.
The manufacturers did more than provide financing. They helped him on where to place the machines in stores and provided complete instructions on how to set up the equipment.
Harry did well for himself as he uncovered the law of compounding:
- the first 3 locations averaged $33 in profit each month
- the next 3 locations averaged $20 each
- the next few locations averaged $17 monthly
- monthly income was $768 on 70 machines
Harry not only paid off his entire investment, but he made a great living too.
A Tip of the Cap
This week, I was book browsing in a Barnes & Noble store in Kansas City, Missouri. I’m a fan of Robert Hagstrom who has written several excellent books on Warren Buffett.
I had no idea he had a new book out – Warren Buffett, Inside the Ultimate Money Mind. In that book, he referenced the story above about Harry. That prompted me to find the source material which is included in the 1936 book, One Thousand Ways to Make $1000. Thumbs up.
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