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If you want to be successful in business, investing & building wealth, even if you’re broke… the Trick is to stay within the “Margin of Safety”1.
What is the Margin of Safety? It can be summed up into two powerful words.
That’s it. But that’s not really it…
When we apply this concept across to our lives, we become not only more sophisticated investors & business folk, but we also relax and reduce stress as we build wealth.
Will the Margin of Safety help you?
It will if you identify with one of the following fears:
I just don’t have time to start a business or invest.
I want to start a business, but I’m terrified it won’t work out somehow. What if I put all this work and effort into something and it doesn’t work out?
I don’t want to quit my job…what if my idea doesn’t work out?
I don’t want to be over-stressed trying to make an idea happen while I hold down my 9-5.
I’ve seen so many businesses fail, I want to be sure mine is cash-positive before I invest any real money into it.
What can I produce that people can’t get somewhere else?
I don’t want to sell anything, I’m not good at selling.
I feel like selling products is kind of desperate. I don’t like how it makes me feel. I just want to make money on the low.
Creating a business and investing is too difficult. I don’t know where to start. I don’t think I’m smart enough or have the time to figure it all out.
Beloved Black people, I’m sayin’ this: All of these fears go away when we understand “The Margin of Safety: Never Overpay”. I’m about to apply this concept to three areas:
3. Your Mind.
By the end, I want you to know that you have options and can start building wealth today.
Margin of Safety applied to Business
If we apply the Margin of Safety to Business. Here is what happens… We assess our “assets”. Remember, “assets” are things that are worth money and help us build wealth (stocks, businesses, property, etc.).
Maybe you don’t have $10,000 dollars in the bank to spare on starting a business. Even if you did, “The Margin of Safety” demands that we never overpay to start a business.
So we need to find businesses that we can start at low cost but that pay us a reasonable return.
Maybe you’re saying: “I don’t have the kind of money to start a business. I need a bank loan.”
Think about what you do have.
What are your “hidden assets” (things of value that you don’t realize are actually valuable)?
Do you have spare rooms in your house, a car that you barely use or are you more of an artist who is content to spend your time creating new music, poems, blogs, artwork, videos, podcasts, etc.?
What if I told you that these “hidden assets” can be leveraged to create income and jumpstart your business? The following ideas help you to start a business without breaking the #1 rule: Never Overpay.
Each of these ideas can help you stay within the Margin of Safety.
You’ve already heard about this one.
Maybe you know your city like the back of your hand and love showing people around it.
Did you know that Airbnb has a business model for that…
Airbnb allows you to host an “experience”. You show people around, kick it, and they pay you to do it.
Like a trip planner, you build an experience for people, submit it to Airbnb, once approved, people will come to you to enjoy the experience you built for them.
Imagine taking 20 people/week for $200 per person on ballpark and hiking tours? $4K a week isn’t bad. Check out Airbnb “experience” page HERE.
If that sounds like too much, then you can allow people to rent out spare rooms in your place while they enjoy your city. You can estimate how much you can earn HERE.
Let’s say you live in Detroit.
You could rent out a spare bedroom for $289 a week based on just one person.
That same person will pay $514/wk if they want the entire house.
If TWO people want to share a bedroom for a week, they pay $393.00/wk.
If they want the entire place to themselves, then $725.00/wk.
You get the point…There is money to be made here.
If you could successfully rent out one spare bedroom to one person every week for a year, you could make over $15K a year…That’s just one room and one person.
Imagine if you did the same with 4 rooms and put two people in a room? You’re over six figures.
Yes, AirBnb allows people to share rooms with strangers.
I have done it…
If you rented out an entire place for a year to just two people per week, you’re making $37K… That’s in Detroit… Other cities have different markets. (AirBnb offers $1 million dollar insurance for damages should they occur).
I was in Philadelphia back in November for a conference and stayed at an AirBnb.
Dudes who owned the house didn’t even stay in the house.
They had these finger-print locks on the door that allowed renters to enter the building using a given pass code.
It was kind of a nice set up. These dudes were probably making close to six figures on their AirBnb while holding down their tech jobs. Young guys too, like 25. I was impressed.
You can do the same thing.
Can you see how “The Margin of Safety” is at work here?
When you host a guest, AirBnb takes a 3% cut off of every commission. You do not handle money. You do not do the background checks. You set the price you want to charge your guests.
Basically, this is a low cost way to start making money from things you already own. You never overpay because you didn’t pay much in the first place.
This is staying within the margin of safety.
Alright, now maybe you’re saying: “Sounds good, but I don’t even have a house, tho & I don’t know anyone who will let me use theirs even if I cut them in.” Okay.
There is always another option.
Let’s start with that car you own, it’s drive-able, kind of nice. Here’s what you can do with it: Rent it out to visitors entering your city.
Crazy? Wait for a moment before you decide. Hear me out…
If you live in a major city, people are beginning to skip Enterprise in favor of easily bookable, personal rentals from individuals rather than companies.
Websites like Turo allow for private car owners to rent out their vehicles to others…and get paid for it. Here’s how it works:
You list your car on Turo and each time the car is rented, Turo cuts you 65-90% of the trip cost (depending on the type of insurance you have).
Price of cars is based on how in demand your car is for your area. Turo sets this price based on market value, location, time of year, etc.
But you can set your own daily price for your car and advertise your car to others if you choose. Turo will also advertise your car on their website for potential clients.
Turo includes a calculator so you can estimate how much you would earn based on your car price.
Check that calculator out HERE. (Also, Turo insures your car so that if someone crashes it or whatever, you are not liable and damages of up to $1 million dollars are covered by Turo. For this insurance, you pay Turo 15% of the money your car makes using their website).
So if your car is worth $10,000 and you rented it out for 12 days a week, you would earn about $313.00 a month or about $3759.00 a year.
Doesn’t sound like a lot, does it?
But it doesn’t need to be…At least not right away.
“The Margin of Safety” is all about paying a small amount in order to get larger returns.
If you went with Turo, you wouldn’t be paying anything…It is free to list your car on Turo. There are no monthly fees. No buy-ins. None of that.
You would be tapping into your “hidden assets”, your seldom used car, in order to make money.
This is using the “Margin of Safety”.
You didn’t pay for anything, therefore… YOU DIDN’T OVERPAY. You kept the #1 rule of business and investing determined by the billionaires like Graham and Buffet: Never Overpay.
Right now, you might be thinking: “That’s great and all, but $3759.00 a year is not worth leaving my job over…”
True, it isn’t. Good thing you don’t have to leave your job.
You can do this on the side. Your car is gone for fewer than two weeks out the month and you make money just like people who rent out houses.
Here is the best part, though: The estimated $3759.00 is based off of just one car.
What do you think happens when you can afford to purchase another car and rent it out?
Maybe you save your dollars until you can afford to purchase a new car or lease a better model.
What if you had 10 cars in rotation?
Now you have a business, especially if you don’t mind your car(s) being rented out for more than 12 days a month.
For example, if you rented out 10 cars worth $10,000 for 16 days out of the month. You would pull in over $60K a year.
Say you have 10 cars worth 18K a piece, and you rent out for 25 days…Now you’re near 100K a year.
If you have only one car and no money at the time, it will take some time to build up to $60K a year on your car rental business…But not too long, particularly if you are leasing and renting out more expensive cars to clients.
“The Margin of Safety” advises us to start small.
Right now, just renting out your car for 5 days a month can be all you really need.
Use your money right & apply the principles of leverage and financial discipline as I have explained in my other article HERE and in time, you will be able to add more cars into your rotation and build your business.
This is using “The Margin of Safety”… you start a business very slowly, at very little cost to you, and you keep your stress levels down, learn along the way, and make money while you do it.
This is the low stress way to building wealth for Black people.
You can build wealth safely if you understand the game and play it intelligently.
Okay, maybe you’re saying: “That all sounds great, but I don’t own a home, a car, a building. I’m broke, brah”.
But look again…
Don’t you know you’re royalty? You have gifts to give the world…and the world is willing to give to you in return.
Maybe you’re a creative-type. You like to draw, make comics, create music, create podcasts, write poetry or blogs (like me), create animations, whatever.
Websites like Patreon allow you to create content, music, poems, blogs, etc. and asks your fans to pay support you to create more content.
You create the content for free and others pay you so that you can focus more of your time creating the content they enjoy.
You can check out more information on Patreon Here.
Here’s how it works:
You sign up as a “Creator” for free.
You decide if you want to be paid per-project or per-month. With Patreon, you still own 100% rights to your work. You can take your work down or put it up on other sites without penalty…you are not selling your material to Patreon.
They take a 5% fee of all processed payments.
When you create on Patreon, you are given a page that you can promote and upload your creative projects.
Ok. Since Patreon is also free to fans, what if people just want that “$free.99” and don’t want to pay you?
That’s cool because you can offer free content when you want people to get to know you, then offer “Patreon-exclusive” content to your dedicated fans who are willing to pay for it.
“Patreon-exclusive” content means that your fans have to pay to get it.
I recommend having both free and exclusive content, that way you attract new fans and treat your established fans to even higher quality content.
Again, you still own all your content and you can decide when and where something becomes free or exclusive.
So how much money can you make?
That depends on your fans & the prices you set for your exclusive content.
Fans pledge dollars when they see something they WANT to support.
So if I like your podcasts then I can choose to pledge $1 or $10 or $100 per month or per creation.
If however, you create content that is only for pledging fans, then you can set the price at $5 and everyone will pay that.
I found a dude on Patreon with 756 fans, making over $5,000 per creation. These results probably aren’t typical, but you can see there is some money to be made. There are people on Patreon making over $32K a month for podcasts…
I’mma let that sink in…
That means people are making over $364,000 a year with monthly podcasts. Charging $10- $15 for exclusive content.
You get the point.
You might be asking: How is Patreon different from Youtube?
Youtube is video-content.
It is difficult to get paid for blogging, for poetry, for painting, for creating Games, etc. on Youtube.
So yeah, you have a lot more freedom to express yourself and get paid directly from fans instead of through ads on Patreon.
So how does this connect with “The Margin of Safety”?
Same line of thinking… To create on Patreon is free, therefore, there is no risk to you to put your content out there.
You do not over pay in capital to start your business.
But there is more: You also don’t overpay in time.
You will quickly learn if people like your content and are willing to pay for it… or not.
At that point, you can figure out how to create even better content that people want to support or you will move on to another business.
Never spend too much time and money on anything…This is the “Margin of Safety”.
This does not mean we don’t work hard, spend enough Time and enough Money on what we believe in. But if we do not see an adequate return, we do not keep investing. Period.
That’s like jumping into an endless pit because you think “it’s probably not that far down to the bottom”. Crazy.
We have to know when it’s time to pivot.
To sum it up: Look for businesses that are low-cost to establish and maintain and that can generate a return given an appropriate level of work. Always remember the principle: NEVER OVERPAY.
As Daymond John put it, “You’ve got to keep it real, people- and you can’t keep it real in business today if your strategy is to simply throw money at whatever roadblocks come your way, because chances are, money alone won’t get you past them…”.2
The Margin of Safety works for investing in stocks, too.
Margin of Safety for Investing in Stocks:
So you keep hearing investing in the stock market is important but don’t know where to start.
Do you just buy stocks of companies that you know, like Burger King, and call it a day?
You know diversification is good but when do you know you’ve done it right?
Do you need advanced degrees in mathematics and poly-physics in order to understand the market?
Where do you start and what if it all goes wrong?
Warren Buffet and his favorite billionaire, Benjamin Graham, think of stocks as pieces of a business.
You are actually buying a piece of a company when you purchase its stocks.
As a shareholder, you gain rights to votes to decide the direction of the company.
Also, any stock can become a good stock if the price is low enough (Within reason, never invest in a dying company).
And any stock can be a bad stock if the price is too high, it doesn’t matter if the company is McDonald’s or Apple.
So what to do?
Apps like ACORNS allow you to invest your spare change in the stock market.
Here is how it works:
You go to Acorns. You will link your Acorns investment account to your debit, credit, or checking account. Acorns will provide you with a diversified portfolio. Acorns will charge you $1 a month to use their service.
For example, in my Acorns portfolio 14% of every dollar I invest goes into Vanguard’s S&P 500 Exchange Trade Fund, which gives me exposure to over 500 of America’s largest companies. 20% goes into Emerging Market stocks (Stocks markets in other countries like China & Brazil), 30% is invested in Real Estate companies, 6% in Corporate Bonds, 5% in Government Bonds, and 25% in small U.S. based companies.
Every time you spend money at the movies, the grocery store, or anywhere, Acorns will invest to the nearest dollar.
So, for instance, if you bought a $4.30 salad for lunch, Acorns will use the additional $.70 and put it into your stock market portfolio.
It’s a nice little way to get started in investing for beginners. Of course, you can go to Acorns and see how much money you are making.
The best part is, you are investing the money without having to think about it. You’re building good money habits on the low.
Investing simply becomes a part of your life, like breathing.
Of course, you can cash in when you need to, but why?
With your money accumulating and compounding over time, you will be building wealth through compound interest alone.
If you do not know about the secret art of compound interest, see our other Financial Health post HERE.
Again… Acorns chooses your portfolio so you don’t have to think about diversifying yourself.
If you’re like me and like choosing your own stocks, Acorns should be a secondary strategy. Treat it as a convenient way to invest just a bit more.
Find out more about Investing with ACORNS HERE.
So how is Acorns connected to our principle, The Margin of Safety?
You are investing spare change.
You are not making wild bets on that hot new stock…
You are making consistent, small investments in a broad range of equities, in large companies, small companies, emerging markets, real estate, and bonds.
This is diversification without having to do all of the research.
Acorns saves you time and you can always retrieve the capital you invest at any time and you can stop at any time.
You do not overpay to use ACORNS.
It cost $1 a month. $12 every year. You can handle that.
If you are investing with Vanguard, every time you purchase a stock, you pay over $20.00 in transaction fees for each stock purchase.
Even on sites like E-trade, you are paying $6.95 for EVERY stock trades and an extra $25 to have a stock broker assist you in a trade.
Now, that’s not really a problem for people who know what they’re doing.
But what if you don’t?
You can eat up cash just trying to get into the market.
ACORNS is a way to get your investment feet wet first.
You do not OVERPAY in Time, Money, or Stress. You’re in the Margin of Safety.
If you click this link, you and I will receive $5 to invest for free HERE. Now, that’s growing Black wealth.
Margin of Safety for your Psyche
When you think about all the reasons you are afraid to invest or begin a business, you will find that it all comes down to what is happening in your mind.
Remember that list of fears?
I just don’t have time to start.
I can’t think of a business idea.
I want to start a business & invest, but I’m terrified it won’t work out somehow. What if I put all this work and effort into something and it doesn’t work out?
What if I can’t make a lot of money?
I don’t want to sell anything, I’m not good at selling.
The Margin of Safety will put you at a huge psychological advantage…if only you use it.
How can you use the Margin of Safety to stop anxiety?
Like this: Build a Plan & Take it Slow.
If you are afraid, for example that “Creating a business is too difficult”, remember this: You can start a business with the spare time you do have and with the money you do have.
Starting a business or investing is only stressful if you Overpay in Time & Money: Never Overpay.
Say you have a 9 to 5 and you really want to build up your Car rental business but you know that you only have 1 hour a day during the week to spare for this…That’s just 5 hours a week.
It’s better than nothing, right? You decide that you will use your first week and dedicate all 5 hours to one simple step…Gathering information.
You get information on how to sell on Turo & other similar websites (Won’t take long), how to advertise for your cars online at a low cost, where you want customers to pick up and drop off (will it be your house or some other location?).
You look up details on car rental insurance for your business and you calculate how many people need to rent your car to make a real profit.
You identify total startup costs.
You use your next month & dedicate your 5 hours each week to reading the information you gathered.
You know you will never have enough information…but the point is just to build a plan of action.
When you have identifiable first steps, you begin to enter the Action phase.
You decide to donate your 1 hour a day, 5 hours a week, to executing your first step.
Placing a lovely description of your car or (cars if you want to bring family & friends into this early) onto available online platforms. Dedicate an entire week to doing this the right way.
Your next week, you begin to generate ad campaigns through social & other media at a very low cost.
You just spend 1 hour a day getting the word out.
When people begin to reach out to rent your car(s), you begin collecting checks at a low cost to you and with only 1 hour of TIME invested… You just started a business, Black love.
The business is small. Not enough to quit your 9-5…Until it is.
Maybe you see that family and friends are willing to contribute vehicles to your new Limited Liability Corporation (LLC).
With their help, you are able to generate cash faster to acquire more vehicles. When it is time to quit your job, it will be obvious.
This is using the Margin of Safety. You do not Overpay in Time, Money, or Stress.
If you are still stressed out after having broken down your goal into small steps…at least the stress only lasts for 1 hour a day. That’s manageable stress.
Eventually, this hour will just become a part of your natural rhythm. You will have built up a habit…and the stress will naturally subside by itself.
You still get to spend time with your family, friends, go to work, cook dinner, play on Facebook etc. But you will also be building an empire in your spare time.
Here’s the truth: Gathering information isn’t hard.
Learning the information isn’t hard.
Building a simple plan isn’t hard.
Doing what you planned isn’t hard…They only look that way when we think about ALL the steps at Once.
Stay within the Margin of Safety and you will always be…alright. When you rush ahead, you can run into problems that you no longer have the energy to solve.
This here is a marathon.
You don’t need to set out to build the next Snapchat.
Even the guys who actually built Snapchat, (Evan Spiegel, Bobby Murphy & Reggie Brown) built it on-the-side while enrolled in college.3
They didn’t set out to create a billion dollar company, they planted a money seed, unbeknownst to them, and it grew.
Snapchat was valued at over $24 billion dollars back in March of 2017.4
The founders were simply aware of the possibility of growth and jumped on the chance.
Why can’t you?
Start small, limit stress, limit time, and limit money. It may take longer…but it was going to take time anyway.
You may be thinking: What if I build something and no one wants to buy it?
You need to learn to provide Value. Value. Value. Value. (Did I mention value?)
Never ask people to support your business in order to help you fulfill your dream.
Ask people to purchase your product to help them fulfill their dream.
You sell Value only.
For me, this is the only way I can do what I do.
I don’t want to get involved in investments and businesses that are not providing value to someone.
When I rent out property (homes, cars) I will make sure I have all amenities in place for renters.
They need to have a great experience.
This keeps me from feeling like I’m tryna sell snake oil and make a quick dollar.
I simply provide value.
When I help someone solve a health concern, physical, financial or mental, my job is not done until my clients see results.
Anything I produce ought to help you generate a strategy that serves you. I can only do this if I provide value.
Your hypothetical car rental business, for example, helps people safely explore a new city at a lower cost.
People will ALWAYS purchase what they perceive as VALUABLE.
You & I buy what we think is valuable. Think about Jordan shoes…People line up for ‘em because they believe they will be more liked for buying them. The shoes are cool.
Think about the newest iPhone…People can’t wait to get the newest applications.
New iPhones are valuable.
When you constantly concern yourself with Value, you don’t need to worry about people buying from you. If the price is right and the value is high enough, they will buy from you.
This is using the Margin of Safety.
You do not overpay in Time, Money, or Stress.
By focusing on value, you can feel at peace with what you are selling & what you are promoting because you know you are serving people.
You make money and you leave people with something they actually want or need.
Financial Health is dependent on our ability to provide value and stay within the Margin of Safety.
Learn to provide value to others in your sleep.
They will reward you for it.
Lastly, You can access the Margin of Safety if you love what you do.
People build brands all the time based off of little funny videos they make for their friends.
Remember FUBU? That brand got started because Daymond John wanted some hats, but couldn’t afford to buy them at the store…So he made them. When he saw others found Value in his designs, he started selling them.5
Point is: Do what you love or love what you do it for. You may not have dreamt as a child to start that property management company, but you now know how important it is to build generational wealth thru business.
You start the business because you know it is a way to give yourself and your children a future. That’s enough. Sometimes it’s not about us.
It’s about the people who will never see our sacrifices.
When you are driven by something other than money, you will be able to survive the hard times when the money isn’t coming in.
Believe it or not, you are in the Margin of Safety.
By doing what you care about or doing it for those you care about, you can continue PASS your current struggles and into a new reality.
I encourage you on your journey.
As you can see, the Margin of Safety is a powerful concept. It is one of the only ways to take the fear, stress, and costs out of investing and starting a business.
It is a tremendous resource…and it always lies within you.
Never let anyone tell you that you can’t build something great…
People like you are the only ones who ever have.
*Let me ask you: What other low-cost business or investment ideas can you recommend? Let me know in the comments section.
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Hi, I’m Shawn, a Health researcher and writer deeply dedicated to the personal enhancement of Black Bodies, Black Minds, and Black Bank Accounts. I’m also the Founder of Black Health HQ. I created Black Health HQ to be a research driven platform for the development of Black physical, mental and financial health. Black Health HQ works toward the extreme well-being of Black people, offering free content along with services and products to assist you on your journey to maximum Black Living. Together, I believe we can build a vibrant and thriving Black community by strengthening what is most precious: our health and wealth.
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- Graham, Benjamin, and Jason Zweig.The intelligent investor. New York, USA: HarperBusiness Essentials, 2003.
- John, Daymond.The Power of Broke. New York: Crown Business, 2016: 9
- Gallagher, Billy. “”Evan Spiegel And Bobby Murphy Say Alleged Snapchat Co-Founder Never Had Equity.”Techcruch, July 31, 2013
- Berger, Rob. “Snapchat IPO–Don’t Confuse Popular With Profitable.”Forbes, March 7, 2017
- John, Daymond.The Power of Broke. New York: Crown Business, 2016.