A Cash Cow Business

26 February 2012 | talking about Leadership

Venture capital investments are great. It allows people to focus on the business instead of day to day cash flow issues. For some businesses, venture capital is the way to go. There is no way Steve Jobs would have had a consulting practice on the side to help grow Apple. He needed all in complete focus to succeed. However, one mistake I think many entrepreneurs make is they think they need outside investment to grow their business. They get so focused on raising money they forget to look outside the box. One approach I have used for years to fund businesses is what I call a cash cow business. This is nothing more than one business funding the growth of another more important business.

Some businesses generate profits from day one - consulting business for example. Another example would be some sort of retail or service business. You mow someone’s lawn and they pay you. Profit on day one. Why not start one of these simple profit-at-day-one businesses to fund your dream business? I can illustrate this with two examples from my life.

 
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Why Amazon Is Amazing To Me

11 February 2012 | talking about Internet, Leadership, Stock Market

I love Amazon.com. I buy almost everything I can from them. Retail, hosting, media, and more. I even own stock in Amazon. I am a very happy consumer and investor. However, what I find so interesting about Amazon is not my consumer joy or my nice gains as a shareholder; it is their business model. In so many ways they have re-engineered traditional business models. The single most fascinating aspect of Amazon to me is their way of monetizing business bi-products.

As an Internet retailer Amazon has to make major investments in data centers. Trust me: Amazon runs on more than just a Linux computer under Jeff Bezos’ bed. They have built data centers all over the world. Normally, this would be a cost of doing business. In order to sell products online they have to build data centers. Using the bi-product of having to build data centers Amazon built a billion dollar hosting business, Amazon Web Services. Amazon leverages their infrastructure and rents the use of this space to web sites all over the world. This is like Best Buy starting a construction company because they are building big box retail locations. Amazon turned what traditionally would be a fixed expense into a most likely very profitable business unit.

 
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