Home Based Business: The Ultimate 3MM Guide

We’re about to show you everything you need to start your own home-based business that you can run in three months per year or less.

Leslie and I did just that, turning our summer vacations into a profitable business that we run out of our basement. (And we’ve got the time commitment down to just a few hours per year).

And we’re going to show you how to grow that business to a valuation of one million dollars without adding overhead or staff.

Time to dive in.

Let’s Start At The End

We want to be clear and upfront about what you will learn on this website:

If you follow what we teach here at 3MM, you will end up with a business that is worth more than one million dollars and can be run in less than three months per year (or two hours per day, if that’s more your thing).

We also want to be upfront and clear about one other thing: this won’t be easy.

This is not a get rich rich quick site. This is not the place for lazy people.

But it is the place for anyone who works too hard, for too many hours, and has too little to show for it.

Our goal is to take control of our financial lives so that we can have more time for friends, family, charity, or whatever else makes us feel whole.

Bonus: by the time you are ready to retire from this business, the vast majority of your wealth will be in tax-deferred, inheritance-efficient assets so that you guarantee your children’s financial security as well.

How Is This Even Possible?

We’ll get into our personal story later, but for right now here’s the short version:

We’re going to model our finances on Warren Buffett and his company (and no, we don’t even need to pick stocks… unless you want to. We’ll show you how to do that, too).

As of this writing, Berkshire Hathaway is the 6th largest company in the world.

And do you know how many people work at their headquarters?

Twenty-six.

How is that possible and how do we adapt that for a small business?

The long answer is what the rest of this site is for.

The short is this: We take a three-pronged approach

1. We will dedicate a set amount of our earnings to be invested in growing what Buffett calls “look-through” earnings to maximize our rate of compounding.
2. We will use the best science-backed productivity systems to create an extremely efficient workplace
3. We will build our business around time-tested, foundational concepts that will allow us to make money and provide social good in any environment.

We think of it as the “Build Your Own Berkshire” system.

The Elephant In The Room

Let’s clear up one more thing before we get rolling.

This is not a “passive income” site.

You can’t go three feet in this space without bumping into someone peddling the hot new way to make passive income. Crypto, NFTs, P2P lending, rentals…

They all fall into one of two categories: either they aren’t actually passive, or they don’t work.

We absolutely believe that you can earn significant amounts of money for less work than you are putting in now…

But the answer is not going to come to you from TikTok.

We believe the only path to financial security is through business ownership (even very small businesses of just one person).

With a little work and the right tools, you can absolutely give yourself the freedom you want and deserve.

See It In Action

Here’s what a quick-and-dirty version would look like for your situation right now:

You probably already have a job. You might work too hard and you might hate it, but it’s there.

But instead of thinking about it as a “job” thinks of it as your business.

For example, I am a teacher. My business is teaching. I am paid a salary (which is my revenue) out of which I pay the bills (my expenses).

Everything left over at the end of the month is profit.

No here’s the magic:

Instead of throwing that profit into a bank or a savings account, I’m going to reinvest in my business. Maybe I pay for further education that will get me a raise. Maybe I use it to pay down debt and save money on interest payments.

Or maybe I invest it.

When you buy shares of a company, you are buying a piece of that company. People, by and large, have forgotten that simple truth.

That means you are buying the rights to a piece of their earnings. You can predict how much your investment will grow by googling the ‘earnings yield’ of a stock.

But I don’t want to pick stocks. So I buy the S&P 500 hundred instead. It’s just like buying a share of a giant conglomerate that owns 500 other companies.

And I have just bought the rights to a percentage of their earnings. And I can predict the amount my investment will grow with that earnings yield I mention a moment ago.

That means, on average, your investment grows at least dollar-for-dollar with earnings of the S&P 500.

And that means that you can count on the earnings from your investment the same as you would from any other business or rental property.

This is literally the closest anything comes to “passive income”.

Berkshire Hathaway does exactly this. As money comes in from their core business (in our case, it’s our jobs or small business) they reinvest it to grow their “look-through” earnings.

Look-through Earnings = Income + Earnings of Investees

The whole thing becomes a game. Grow look-through earnings by increasing investments until the amount of earnings from your investments is greater than your cost of living.

At that point, all work becomes optional.

So let’s get started. Whether you want to keep your job as your “business” or start a new one from scratch, here is what you need to get started on the 3MM path.

Introduction to Starting a Home-Based Business

The absolute best place to start your Three Month Millionaire journey is right at home. Creating a home-based business will keep your expenses low, and maximize your profits.

Can I really build a million-dollar business that I run from home?

Absolutely! Here’s how:

It Isn’t Knowing A Lot That Counts

It’s knowing a little and how to use it.

What you’ll find here is a list of the timeless truths of running a 3MM-style business. These are simply stated. We are doing away with industry jargon (as much as possible anyway) and condensing ideas.

Because we are building lightweight, flexible businesses here, most of the fancy words and ratios you might have heard don’t apply anyway. 

We don’t apply GAAP to our logic, we don’t stress over CAPE, EBITDA, or TEOTWAWKI.

We’ll just explain simply. Clearly. Logically. 

See Also: Turn Your Hobby Into a Business

Low Effort Home-Based Business: The 3MM Culture 

Before we get into this there is something you should know. We have a very specific culture here, and we believe that for you to become a Three Month Millionaire, you will have to be (at least mostly) aligned with that culture.

Here’s what we mean:

This is not a place for workaholics. If your plan is to work 80-hour weeks and brag about the sacrifices you made to launch your own business, you will not be happy here.

We’re not disrupting industries or revolutionizing paradigms. We are not out to buy flashy cars or status symbols. We’re not hoping for angel investors or planning for a “strategic exit”.

We are building humble, predictable income streams. If you think that’s too boring, you will not be happy here.

We are willing to read, listen, and learn. We are not afraid of hard work (though we will not spend an unnecessarily long time on it). The whole point of building your own home-based business is not to be lazy, it’s to increase your freedom. If you are not prepared to do the homework, you will not be happy here.

If, on the other hand, you are willing to read and learn, if you want to spend less time working, and if freedom means more to you than things, we think you will be very happy here indeed. 

The All-Time Best Business Books (For Home-Based or Small Businesses)

Throughout this guide, we will be referencing several books. We will have a full list of all the referenced books at the end of this guide. Most of these are optional but highly recommended. 

We read a lot, and the ones chosen for this guide are the absolute best-of-the-best for 3MM-style businesses. You should read them all in the coming years, but you certainly do not need to read them all now.

However…

These are the three that you should read as soon as you can.

The E-Myth Revisited by Michael Gerber. This was the book that inspired this whole site and made our 3MM journey possible.

Profit First by Mike Michalowicz. The simplest and most sustainable guide to handling the money of your new business anywhere. (It really helped with our personal finances as well).

Marketing Made Simple by Donald Miller. It took us years to piece together a marketing philosophy on our own. If we had had this book from the beginning, we could have done it in less than a week.

We will cover the parts of these (and others) that relate to our version of a small business. To really set off on your own path, you will need to read these.

The Fundamental Principles of a 3MM Home-Based Business 

What makes a 3MM business different from any other? Here are our most important business philosophies.

Our Most Important Metric

You are about to learn a lot about creating and running a small business. You will have a lot of new ideas thrown at you. 

But…

Through it all, you must remember this one metric above all else. Everything that follows must work to improve your…

Dollars Earned per Hour Worked

Write it out as a fraction: ‘Dollars’ [over] ‘hours’. We can improve this metric in just two ways:

Increase the numerator (the top number)

Or

Decrease the denominator (the bottom number)

Everything we do must either increase the amount of money we earn, OR it must decrease the amount of time we work. Preferably both.

You would be amazed at how often even very large businesses mess this up. They take on projects that increase hours worked and decrease dollars earned. 

Think about your own jobs. How many times has a boss thrown some project at you that increased the amount of work you or your team had to do, but did not earn a single net dollar for the company?  

According to a report at Businesswire 10% of all business spending is lost to ineffective strategies, amounting to $1 million lost every 20 seconds.

We don’t go down that road. 

Everyone knows that time is money, but few also realize that money can buy time.

The real goal of this site and your home-based business is to buy as much time as possible.

Always remember: Time is your greatest asset.

Don’t waste it.

Our Second Most Important Metric

Intrinsic Value

For our purposes, we define it as:

In short: The Intrinsic Value of your business is directly linked to the earnings growth you achieve.

(For a full run down, check out Investopedia’s article here)

We don’t need to get too fancy with it. We use this calculator. We type in our earnings, a reasonable prediction of our earnings growth. We change the “Return available on appropriate benchmark” to 8% and leave everything else unchanged.

Why is this so important to us?

It gives us a tangible, actionable goal.

Leslie and I have a long-standing goal of increasing the intrinsic value of our business by 15% per year. 

That means that business earnings and investment earnings each need to increase by 15% per year. 

and that means that on January first of any given year, I can look at how much I earned in the previous year, and know exactly what my goal is for this year. 

Here’s an example:

Let’s say we earned $50,000 last year. To meet our goal this year, we need to find $7,500 more income ($50,000 x 0.15). 

We don’t care where that money comes from either. Maybe it’s a new product we will sell. Maybe it’s increased ad revenue from a new series of articles. Maybe we bought an investment. 

We don’t care, as long as we meet our goal without increasing the hours we work.

We Want Small a Home Based Business Run By One or Two People

Paul Jarvis really helped us articulate our business philosophy with his book Company of One.

It’s a sort of love letter to truly small businesses. Jarvis was our first role model for the sort of life we wanted to live (he built a single-employee company to enough wealth that he pseudo-retired and moved to a bucolic town on the west coast of Canada).

At the time, Leslie and I had just started our first side hustle and it seemed like everything we read was glorifying rapid growth and venture capital (and I swear if I heard one more story about ‘These two millennials are disrupting a billion-dollar industry’ I was going to lose it). 

So Company of One was a breath of fresh air. And still is. 

His argument is now our argument: There is no shame in staying small. In fact, we argue that small is better.

I read a lot about companies, small and large businesses, and startups and I keep meeting these young men and women who talk fast and move fast. They smile at me from Forbes and Business Insider and they look so confident, but…

I look at their balance sheets. I look at their work culture.

They’re in debt to their eyeballs. Everything they do is for their investors. The whole team is working day and night.

And none of it is sustainable. 

Yes, they got an article in Forbes. Yes, they are media darlings (for now). 

But our little home-based business, built on our front porch during our summer vacations, is literally worth more than theirs. 

How did this happen?

We stay small. Our expenses are minimal. Our time investment is minimal. We have never used outside money and we don’t owe anyone anything.

Not only does this keep our blood pressure down, but it also allows us to stay flexible. When the economic landscape changes, we can pivot.

But if we had leased some fancy office space and hired a dozen employees and accepted a million dollars from investors, we would sink.

Why?

The employees we hired are trained for one job and now we’re asking them to do another.

The investors bought into one company, and now we’re trying something different. 

A small, flexible, low-overhead business, run from home with one employee can make more than enough money to support you and your family. There are many more silent millionaires in the world than there are flashy unicorn startups.

So…

Stay Small

Stay Lean

Stay Flexible

But Ben, you said your goal was to grow 15% per year!

The goal of a 3MM business is to grow actual, in-your-pocket profits by 15% per year. That is NOT the same as growing your business by 15% per year.

What do I mean by that?

By the end of this year, our profit will be more than 15% higher than it was at the end of last year. BUT, we added no employees. We leased no new office space. We still do our work on the porch and our shipping in the basement. 

In the traditional sense, our business did not grow at all (it still has just two employees).

But our Intrinsic Value has increased substantially.   

We Value Hard Work

So, we want to maximize the dollars we earn while working as little as possible. We have no interest in growing. We don’t want to work for more than two hours per day.

We must be lazy, right?

Wrong. 

Work, hard work, is one of the finest things in life.

But only if it is meaningful.

I’m willing to bet that you have felt this too. When was the last time you went all-on on a project because you loved it? 

When was the last time you collapsed into bed exhausted but happy?

This happy state occurs when you get to demonstrate your mastery, your autonomy, and your creativity. And you could demonstrate it in a way that made a real and meaningful impact.

Most people find fulfillment in that kind of hard work, us included. The problem is most people also have bosses who micromanage, who stifle all freedom and creativity, or worse, just pile you under so much pointless busy work that you want to scream.

According to Harvard Business Review, 90%of people are willing to take a pay cut to increase the meaning of their work. (We did).

But why not have both?

When you create your own business, you create your own meaning. You add value to the world (even if it’s just a small corner of the world).

And with the 3MM system, you can give yourself a raise to boot.

So we are not averse to hard work. But we ARE averse to pointless unfulfilling work. 

And do you know what we’ve realized over the years? When we work two hours per day, we really are not working any less than anyone else. 

We just spend less time at work.

I mean, how much actual work do you get done in a day? Once you tally up all the time wasted on busy work, gossip, emails, meetings, or what have you, I’m willing to bet that you are already working about two hours a day.

And the rest is pretty much wasted.

So we just got rid of the waste. 

This isn’t about laziness. It’s about efficiency.

We Can Build A Better Moat Than The Big Guys

All enduring and successful businesses have one thing in common: they have a strong moat.

What’s a moat?

A moat is made up of the characteristics of a business that cannot be easily copied by others. 

You see these in the biggest, wealthiest brands. Let’s look at the best example in the US, Apple…

Think about what makes Apple Apple. Think about what Apple means as a brand. What does it say when you see someone using an Apple product? What is the feel of its styling? What do people believe about Apple?

Think about how much money you would need to spend to build the reputation and brand awareness of Apple. It would probably be cheaper to just buy Apple than it would be to compete with it.

That’s a moat. 

Ben, you expect me to believe that I can build a better moat than Apple?!

In many ways… yeah. 

Don’t get me wrong. You (probably) are not going to start a big tech company and break a $1 trillion market cap. 

But you can, easily, build a moat that even Apple cannot cross.

How is that possible?

Because we are small. Because we are ourselves. Because we have a unique and valuable perspective. 

No matter how much money Apple throws at the problem, it cannot build the website you are reading. They can’t go back in time. They can’t share our experience in this space. 

When you build your business based on your voice, your perspective, and your experience, no one can cross your moat. Your audience will rally to you because they see something of themselves in you. 

And no one can compromise that. 

Apple might have the widest moat in the US, but it will always be a giant corporation.

Give Your Customers 10 Times What They Give You

Your job is to give your customers all the value you can. Here at 3MM, we want to make other people rich, free, and happy. If you give us $100 dollars, you’re going to get at least $1000 in return. If you give us an hour of your time, we’re going to save you ten hours down the road. 

Your ‘give’ will be different. Don’t limit yourself to thinking only in terms of dollars or minutes. That’s just our model. 

Your multiplier will be different as well. 10x works for us because we deal with tangible, measurable units (dollars, minutes). 

Start low (but never lower than 2x) and work your way up. You want the highest multiple you can afford.

All good businesses increase their customer’s quality of life and/or the quality of society. You want to give away as much as you can for each dollar you earn.

We think you’ll be surprised what even a home-based business can add to the world.

Enthusiasm and Evolution, Always

Probably the most profoundly beneficial book I have ever read is Mindset by Carol Dweck. It’s not on our mandatory reading list because technically you don’t need it to create a 3MM business. 

But honestly, I almost feel bad for anyone who hasn’t read it. I make it sound like some new-age heartwarming fluff, but Dweck’s research changed the psychological world. This book is that powerful.

Especially when you combine it with The Alchemist by Paulo Coelho. The two make a great pair. 

Here’s a bonus assignment for you: Read The Alchemist first. Then read Mindset. Then read The Alchemist again. Do that and everything will suddenly make sense.

The Alchemist, written back in the 80s, is a fable about a boy who is looking for his Personal Legend. Throughout his journeys, he learns the importance of Evolution and Enthusiasm.

How does this all come together?

Dweck’s Research helped define a fundamental difference in the way people view their lives. You can either believe that your talents are static, god-given, and unchangeable. OR you can believe that you are capable of constant improvement. A growth mindset.

Her book deals with how to cultivate a growth mindset in yourself and your family, but for now, let’s just assume you were lucky enough to have been raised to have one (we sure weren’t).

The growth mindset lets you reframe everything that happens to you as a chance to improve and grow. You no longer blame yourself for being stupid or careless or whatever, because next time you will be better. 

Once you start viewing the world in such a light, you begin to feel enthusiasm. The Alchemist treats enthusiasm as a sort of divine experience.

And it sort of is. Once you really start feeling enthusiastic about your business, you feel mighty. You can change the world. Every day is a chance to improve and make the world a better place.

And once you start experiencing the world in those terms, you begin to evolve.

3MM businesses don’t look to grow in the traditional sense. We want to evolve instead. Growth means you just become more of what you already are.

Evolution means you become something different and better than what you were. You begin banking skills, looking for opportunities. You fear nothing because everything is a chance to learn more skills. You experiment. You pivot. You adapt. You end up building something you never expected, but it is so much more than what you had planned.

There’s a famous line from Henry Ford that sums this up:

If I had asked people what they wanted, I would have built a better horse.

Growth is just building a better horse. 

Evolution, fueled by enthusiasm and a growth mindset, is inventing the automobile.

We Don’t Work In Just One Industry

Almost every company on earth gets mired in their ‘industry’ or their ‘niche’. 

They think of themselves as ‘tech companies’ or ‘insurance companies’. 

But because we are small, flexible, ever ready to evolve and pivot, and because we are open to investment in any and all opportunities, we work in every industry. 

All of them. 

One of the most dangerous aspects to small business is something called sector risk. It means that your niche could evaporate.

This can happen at any time and is completely unpredictable. You might think you have a bulletproof niche, but you can never predict the future. There is always a chance that everything will slip out from under you

Case in point: On August 5 1991, you opened the doors to one of the best small business models anywhere:

An arcade.

It was brilliant. You would have an endless stream of kids and teens dumping money in your lap. The news constantly ran stories about the video game craze (by then already well-established). Everyone thought you had made a brilliant decision. You were set for life. 

On August 6, 1991, the internet went live to the world. 

And here’s the scary part: no one noticed. There was no fanfare. Only the nerdiest nerds cared.

But your business was already dead. 

Ben, are you trying to scare me away from business forever?!

Arcades, and many small businesses, have some serious problems that we, with our 3MM businesses, don’t have to worry about.

Think about that arcade. You had to buy or lease those machines up front. You had signed a lease for floorspace, probably in the mall. 

You had to lay out huge amounts of money months before you opened your doors. 

AND you worked in only one industry.

Here at 3MM we much prefer starting our businesses at home. We keep overhead low. We spend as little as possible before earning our first dollar. If sector risk hits us, our losses are minimal.

Here’s our personal example:

Leslie and I started our first 3MM business, our Amazon storefront, for less than $500. (It actually could have been much less… we didn’t know what we were doing).

Had some sector catastrophe struck (maybe Amazon decided to cancel its FBA program) we would have lost $500 and time served. 

Actually, the lessons we learned during that first $500–inventory management, B2B communication, licensing, the list goes on…) were actually far more valuable than the $500 anyway. It certainly would have cost us more than that to learn those lessons from business school.

And right now, if Amazon were to cancel the FBA program, what would happen to us?

We would lose some income. Our intrinsic value would decrease. 

But we would be fine because we have been funneling profits into other investments. Investments that are now making us more money than our Amazon storefront.

Sector risk is still there, but if it strikes we will pivot, learn, grow, and evolve.

We Constantly Focus on Being Antifragile

In his book Antifragile, Nassim Nicholas Taleb proposes a new addition to the fragile-resilient spectrum. 

In the conventional way of thinking, an object is either fragile or resilient (or somewhere in between). 

The example he uses is a ceramic coffee mug. Ceramic coffee mugs are fragile. If you apply a destructive force (you drop one on the floor) it breaks. 

But if you make that mug out of plastic, it becomes resilient. You drop it on the floor, and it does not break. 

Now here is where things get weird. Antifragile things do not simply stave off breakage. They become stronger when the destructive force is applied.

So an antifragile coffee mug somehow becomes more coffee mug-ish when a destructive force is applied. 

Ok, so it doesn’t work well for coffee mugs. 

But it does work well for businesses. Especially 3MM businesses.

What do we mean? 

We have structured our business so that when things go wrong in the world, we have more opportunities not less. 

There are many ways to build Antifragility into your business, and they will vary based on your business model but the method for finding them is the same:

Simply take the time to maintain a list of things that could go wrong, and how you might spin them to your advantage. Check in with that list a few times per year. As long as you keep an eye out, ideas will present themselves to you.

One way that all 3MM businesses can find antifragility is through our investments. We’ll cover this more in the investing section but for now, think of it this way:

When major things happen, like recessions, burst bubbles, or inflation fears, the stock market tends to take a dive. 

This scares a lot of people but is wonderful news to us.

When the market sells off, we can add to our investment earnings cheaply. We can buy more earnings for less money. That increases our intrinsic value and builds generational wealth. 

Over the last ten years, Something like 70% of the increase in net worth has happened immediately following market panics. It would be hard to untangle the numbers, but I suspect we have made more money from adversity than from smooth sailing.

That’s Antifragility. 

3MM Home-Based Business School

OK, now you have an idea of the core values, principles, and philosophies that inform our business decisions here at Threemonthmillionaire.com. Remember, we are starting a small business that could be run from home.

Everything up to this point has been meant to get you into the proper mindset for following our business path. So far, this guide has been built on our subjective beliefs and experiences.

But now we are moving into more concrete territory. These are the nuts and bolts of creating and running a small business. 

There is still some subjectivity here. After all, not every business in the world can be managed in 2 hours per day. But many of the lessons coming up are universal.

One thing is not subjective, however. Before you actually create anything, you need to… 

Get Legal, Get Protected

This was probably the single biggest mistake we made, and we don’t see nearly enough people talk about it online. 

You need to legally form your business as an entity. We didn’t do this for way too long and for years we were breaking the law and putting ourselves at risk. 

Why didn’t we do this?

For a while, we didn’t know we had to.

Once we learned we had to, we thought it was too hard. It felt like the end of the world. Such drama.

(We weren’t very antifragile back then)

The good news for you is that we had to go sifting through a dozen different services and options to find the right one.

We now recommend ZenBusiness for this. It couldn’t be simpler.  For our full comparison and review, check out our Best Small Business Tools page.

Full disclosure here: we used Nolo, which we still like and recommend. It is just no longer the easiest or cheapest option.

But Ben, I don’t have any idea what business I want to start.

That’s ok! You don’t need to know exactly what you’ll be doing and will probably change anyway. Just a vague idea is fine. 

And if you need help getting started, our List of 3MM-Worthy Business Ideas might get you started.

Begin With the End in Mind

Ok, so now we’ve come to the first must-read book of this series, one of our all-time best business books, The E-Myth Revisited by Michael Gerber.

This really is a must-read for any small business, not just home-based businesses. Much of the site you are reading came from E-Myth.

How so?

While Company of One validated our beliefs about staying small, E-Myth gave us a tangible path to follow, and guidelines for avoiding common pitfalls along the way.

Here we will discuss the parts of the book that will absolutely pertain to you as you build your own 3MM business. Much of the rest of the book, however, will need to be applied differently based on what you choose as your core business model.

So yes you need to read it. It will light your path for whatever business you pick.

Alright, here we go…

When most people set out to start a business, they fail. 

They fail because even though they meant to make a business, they made a job. 

Gerber points out that most people create their businesses because they were frustrated with the way they were being managed at their old job. 

They think, “My boss is an idiot. I can do better.”

So they make their business and they still have the same job they did before. 

But now they also have the job of their former boss. 

We don’t want to own a job. We want to own a business.

AND we don’t want to work in our businesses. We want to work on our businesses.

For example: Today is a writing day. Today, I am writing this guide. I am creating something that tangibly grows my website and will help my audience. I am working on my business. 

I am not answering phone calls or dealing with customer service or filling out TPS reports. I am not preparing financial reports or gathering documents for taxes. That would be working in my business.

I don’t do those things. I pay other people to do those things. 

Gerber says that the first thing you must do when you start your business is begin with the end in mind. 

Know exactly what you want your business to look like when it is fully mature. 

Every bit of work you put into your business should move it one step closer to that final product. 

If the work in front of you doesn’t (like the maintenance tasks I listed above) then get someone else to do it. Or better yet, find a way to eliminate the task entirely. 

So what does ‘The End’ look like for us? 

(You should know, this is one place we disagree with Gerber. We’ll talk more about it in a second)

Our goal, when we are old and grey, is for work to be completely optional. For the work to be so low-effort that we can keep up with it well into old age. AND for our investments to earn enough each year to cover our living expenses.

We don’t want the work to end. This is something we picked up from Warren Buffet. He has tailored his work so that he spends all day doing exactly what he wants to be doing. So why retire? He loves his job.

Besides, studies have shown that keeping intellectually active and having a clear sense of purpose well into old age are two of the healthiest things we can do. So, bonus!

Gerber, on the other hand, is more of a ‘make a quick exit’ sort of guy. He believes the point of starting a business is to sell it. 

We disagree. Our business is an economic asset that throws considerable cash our way. We just don’t see a long-term benefit to selling.

Where we do agree with Gerber is his definition of ‘franchising’. 

Gerber advocates that as you build your business, keep a record of everything you do. Organize it into repeatable steps. You create a system for others to follow. Instead of selling off your business, you sell the system.

You get to keep your asset. Others get to benefit from your experience. Win-win!

And that is exactly where this site came from. You are reading our codified system. You will be able to do everything we did (and you’ll probably be able to do it better). We want you to make every dollar we make.

We love this idea because it creates a huge economic benefit for everyone. We get to add another income stream to our business. You get to hop into the fast lane. You get to learn from our mistakes and our successes.

Under this model, each generation of businesses gets stronger and more efficient. That is a societal good. Not just an economic one.

So begin with the end in mind. What will your perfect mature business look like?

Business Value

Ok, so we are going to stay small, work just a few hours per day, and carefully manage the different hats that an entrepreneur must wear. 

Great. 

But so far this has been all about us.

And successful businesses are never about us.

For any business to be successful, you must benefit others. 

Determine what value you can give and then give tons of it. 

Think in terms of return on investment. With this site, we try to give you a 10x return on your investment. If you spend $1, we want you to make at least ten. If you spend an hour reading this site, we want to save you 10 hours of time.

But the value you give doesn’t have to be time or money-related. You can solve problems, ease pains, increase happiness, or reduce stress. Think in terms of quality-of-life improvements.

And don’t worry if you don’t know what your multiple will be. You won’t until you get well underway with your business. Just keep it in the back of your mind that you are trying to…

• Make money for other people, or
• Save time for other people, or
• Reduce pain for other people, or
• Reduce stress for other people,
• Calm fears for other people, or
• Anything else that would make life better for other people, not to mention….
• Any combination of the above
  

The 3MM Business Structure

One of the keys to the 3MM strategy is the way we visualize the structure of our business.

Please keep in mind that what follows is a philosophy, not a legal definition.

But the way we envision our operations is vitally important.

Even though your business is small in nature, it will be a conglomerate in structure (again, only philosophically speaking).

Conglomerates? Ew.

I know, I know. The word conglomerate has a bit of a tarnished reputation. We grew up in the 80s and 90s. Evil faceless conglomerates were forever killing people and polluting rivers in our movies. It’s hard to shake that image.

And I don’t even think we should shake it. I still feel like there are more bad conglomerates than good.

But don’t worry. We aren’t actually going to be a conglomerate. We are going to follow the way they handle money, though.

See the thing about conglomerates, the part we care about at least, is that they are really a collection of smaller businesses. Each business carries on its day-to-day operations, then sends all profits to HQ.

HQ then decides on new ways to invest that money. 

Want a real-life example? Look no further than the model we used for our own business:

Berkshire Hathaway.

Berkshire Hathaway is the company that is run by Warren Buffett. It is the vehicle he used to become America’s greatest investor. 

Buffett’s job is to decide the best way to spend the profits that come in from all the (I think 50 or so) businesses Berkshire owns. 

His businesses make money. He uses that money to buy more businesses. And the cycle repeats.

Your 3MM business will follow exactly that same philosophy. 

So start thinking about the various income streams you have. Start thinking about them as ‘businesses’ within your ‘conglomerate’. All profits are flowing to you. 

Now it is up to you to decide how to distribute that money. 

(Don’t worry. There is a detailed guide in our investing section.)

Business Zero

Let’s give this conglomerate philosophy a try.

Let’s think about your very first ‘business’, your first income stream. You probably already have one of these in place, even if it is taking too much of your time.

We are, of course, talking about your job.

From now on, think of this as Business Zero. 

Business Zero sends profits (in the form of a paycheck) to HQ (your bank). You use that money to pay your expenses.

And you’ll use what’s left to start increasing your profits month after month as you build your home-based business (slash) philosophical conglomerate.

So your job (or whatever form of income you have) is Business Zero. It is your first source of funds.

Now let’s start building Business One.

Know Your Hats

Here’s another key point from The E-Myth Revisited: know your hats. 

Gerber says that each new entrepreneur has three roles to fill (or hats to wear):

• The Dreamer
• The Planner
• The Doer

The Dreamer is the visionary. They are not bound by realities. They care only for what could be. They dream up new products or new systems. Don’t tell them they ‘can’t’. They don’t care. They feel they are the ‘real’ business. They think everyone else serves The Dreamer. 

The Planner plans. They are the logistics. Their job is to forge the path. They make the step-by-step, day-to-day. The Dreamer thinks the Planner is boring and lame. The Planner thinks the Dreamer is a free-wheeling hippie.

The Doer gets things done. They have to follow the Planner’s path and make the Dreamer’s dream a reality. The Doer is in constant conflict with the other two.  Dreamers are clueless idiots. Planners are control freaks. No one really knows what it’s like down here in the trenches. 

You will need to wear each of these hats. And if you are like most people, you will favor one or another. 

But you must be disciplined and give each hat a share of the time on your head. 

AND you must be disciplined enough to control the conflict between them. 

Being able to picture these as separate entities gives you an outside, objective view of how your business is doing. It has been priceless to Leslie and me.

Our 3MM system gives each of these hats a predetermined amount of wear time, spread out over the month. 

We cycle through them so that our business is balanced between creativity, logistics, and action.

That’s great Ben, but how do I actually come up with a business idea?

First of all…

Focus on What Won’t Change

Don’t chase fashions or trends. Look to solve timeless problems that will still be here in 10 years. 

Also, look into the past. If you are looking for a market, look for one that is established and proven. 

Startups like to talk about the ‘first mover advantage’, but if you look at the really long-term successful companies, almost none of them were the first in their market. 

The ones that last and last came late to the game, once demand was already established. 

Then they took a look at the products offered and improved them.

People who race to jump on every new trend are playing a losing game.

Here’s a good recent example:

Fidget spinners. 

Remember those little spinning things? One of my students showed up to class with one. So I googled it, and found nothing.

A couple of weeks later, my daughter brought one home from school. “Everyone has them,” she told me. So I googled it.

And found like a hundred new Shopify stores. Seriously high-quality sites too. I’m talking about custom videos, professional soundbites, and hired actors. These things must have cost a fortune to throw together that fast.

A couple of weeks later and what do I see? A bargain bin at a local store with hundreds of spinners for 25 cents each. 

Another quick google and the shops are gone. 

Don’t get me wrong. Someone made a lot of money on those things.

But it wasn’t those small business owners. It was the distributors that flooded the markets. 

So stick to time-tested. Stick to things that weather storms. Better yet, pick something that does better in bad weather (antifragility).

You Need to Become an Asset to Other People

We define an asset as anything that earns money. That’s pretty easy to accept. It’s also easy to accept that you need to be an asset. I mean who doesn’t want to earn money?

But this might be a bit harder to swallow: You need to earn money (or something worth more than money) for other people.

Many of you might have felt a little twinge at that. But I’m starting a business to make money, I don’t want someone else to get rich! I want to get rich!

That sort of thinking ends today. If your plan is to get rich without enriching others, you will inevitably lie, cheat, and scam your way to cash. 

Aside from being morally corrupt, that’s not sustainable.

When people use your service or buy your product, they are making an investment in you. If you want repeat, sustainable business, and happy customers, you need to offer a decent return on that investment. 

And the higher that return, the better your competitive edge.

The beauty of the 3MM way is this:

Because we run small, cheap, flexible businesses, our costs are lower. We can charge less and deliver more.

Your goal as a 3MM business, as any business, should be to see how much (not how little) you can give for each dollar.

Sometimes, you simply can’t. We get that. In our Amazon storefront, we can’t change the prices of the things we sell. Those prices are set by the brand owners.

With a service that we create (like this guide), we can. Even though this guide is free, we are constantly thinking “What can we add to that guide that will improve our audience’s quality of life?”

You Need to be a Guiding Light

We all see ourselves as the victim from time to time, but that needs to end now. 

It will take a conscious effort for many of you (it did for us) but you need to practice changing the way you think of events and situations in your life. 

Successful businesses solve other people’s problems. You (and your business) need to begin viewing yourself as a solver of problems. 

You are a guiding light to people who are struggling.

OK, I know that sounds are warm-and-fuzzy, but it’s true, even in a very down-to-earth and humble way.

Take our Amazon business for example.

Our Amazon storefront is not changing lives or shaping souls. No one weeps with gratitude after making a purchase from us.

But we specialize in hard-to-find eclectic items. These are products that traditionally have been sold to the public from small shops in the neighborhood. 

20 years ago I would head to my local shop, and grab what I want. 

But times have changed. Those shops still exist, but only in densely populated areas where the demand is still strong enough to pay the rent. For many people, to get to those kinds of shops would take more than an hour of driving, each way, into heavily trafficked areas. 

Or, they can buy them from us on Amazon. 

They had a problem (especially our older customers who find it more and more difficult to drive into cities). They were facing the problem of losing access to a hobby they cared deeply about. 

We helped them solve that problem.

How did we know about this market? 

Because we are into those hobbies too. We would have to commit an entire day to drive just to stock up on things. 

We could have played the victim and complained (which we did for a while) or we could become a guiding light for others in our situation.

Look at this website. We want to be a guiding light for people who are working too hard and too long for too little. 

How did we know about this market?

Because we worked too hard and too long for too little. We fought tooth and nail to find a way out of that mess (and complained a lot along the way).

But one day (after our third consecutive 5-figure month) we realized we had found the way. We want to light exactly that same path for you.

Everything, every struggle, every setback, every pain point is an opportunity. Once you view yourself as a guiding light for others, you will see opportunities everywhere.

Sell Your By-Products

Now that you are in the proper frame of mind for finding business opportunities (that is, you are looking for ways to increase the quality of life for people who need a guide within a time-tested niche) you will start to notice something… strange. 

Within a week or two, once your brain adjusts to this new psychological framework, you will start having spontaneous ideas.

They will just flash into your head.

And they will be dumb. And that’s OK!

But whatever you do, don’t throw these ideas away. No matter how dumb they are. Cherish them. Tell your brain you love even the dumb ones. Encourage your subconscious to keep slinging ideas at you.

In fact, you should write them down. All of them. Especially the really dumb ones. 

Get yourself an honest-god journal. And physically write those down. They are worth so much more money than you think.

Why?

Those ideas (yes even the dumb ones) are by-products of the creative process. And as you build your creative muscle, you are going to look back and realize that you can sell those ideas.

Ben, you can’t expect me to sell dumb things to people. That’s not cool.

Here’s my favorite story about this whole phenomenon. It comes from one of my personal favorite books Rework by Hansson and Fried:

While Henry Ford was making cars, he started to accumulate piles of excess hardwood chunks left over from making the cars. (Yea, cars were made of wood. Bizarre, right?).

He had been paying someone to haul that wood away. 

But then he had a dumb idea. I’ll burn the wood halfway and sell it to people so they can burn it the rest of the way!

He called his new company Ford Charcoal. 

Which you know today as Kingsford Charcoal.

In Rework, Hansson and Fried say you can’t make just one thing. Every time you make something new, there is waste, and byproducts (like leftover chunks of hardwood).

But sometimes, if you keep your mental eye open, you can find a way to repackage the byproduct (partially burn the hardwood) and turn it into a new income stream. 

In a sense, this whole website is a byproduct. It is a collection of all the bits and pieces we have learned as we built a successful business from home.

We Make It Once, Then Sell it Forever

There’s one other thing you should keep in mind as you start looking around for business opportunities, especially 3MM opportunities:

We only want to do the work once. 

Most of the effort and time is tied up in creating the thing. Try to find ideas that you only have to make once, but then can sell forever with minimal invested effort.

This is why we love ebooks and online courses so much. Make it once, and sell it forever.

Most of the ideas that go into my byproduct journal fail this simple test. Even some of the really good ideas, like product designs that I could totally patent, manufacture, and sell… they’ll stay in the notebook forever.

Why? I don’t want to invest time and money and stress into it. It would take away from the stuff I actually like doing. Remember, I don’t want to have a job. I want to own a business.

How to Find Ideas for Home-Based Businesses

A quick recap for generating business ideas:

• Focus on timeless, proven markets
• Improve upon things other people have already invented
• Solve problems for people and be a guide to improving their life
• Keep a journal of random ideas and creative byproducts
• Give special attention to anything that you can make once and sell many times

I have also used a few mental exercises over the years to come up with ideas. These should be treated like a daily workout for your brain. They won’t necessarily procure anything directly, but they will help keep you creative and in the right headspace.

10 Ideas per day

James Altucher advocates writing down 10 ideas (no judgment on the dumbs) per day. Every day. It helps get your brain used to the idea-generation pattern. 

I personally did this in the early days of 3MM. It absolutely works to rewire your brain.

Why don’t I do it now? Basically, I already have more ideas popping into my head (and going into my notebook) than I can handle. I literally have more than a lifetime’s worth of ideas banked. 

Also, I bet I do have more than 10 ideas. I just don’t count anymore.

New Room New Business

As far as I know, Leslie and I invented this one. The rules are simple:

When you find yourself in a new room (preferably one that is boring) you just pick a random object and do one of two things: 

You either…

Make up some ridiculous marketing line or sales pitch about it (we originally did this to poke fun at those RonCo inventions. Remember Spray-on Hair, or my favorite-named product of all time, ”The Cap Snaffler.” It’ll snaffle any cap!)

Not only is this good for a laugh, but it trains you to start looking at the marketing tactics companies use. Many successful products began as a marketing soundbite, and then something was invented to physically sell. 

I’m willing to bet Ron Popeil started with the phrase ‘cap snaffler’ and then thought about what that would be…

The other option is to take any two objects in the room and combine them to make a new product. 

I see a chair. I see a lamp. Chair Lamp! 

Come up with slogans and names for your invention, bonus points for being ludicrous (The Shine-N-Sit, The Slamp, “The lightest chair known to man!”)

Now for the hard (and most beneficial) part:

Make the stupid thing into an actually viable product. Could this thing actually make someone’s life better? Could it solve a pain point? 

I actually do get frustrated trying to read at night because overhead lamps cast a shadow on my page. AND the on/off switch is hard to reach. AND the stupid thing is so hard to adjust. 

Could I solve those pain points?

Now, you’re never going to build the Slamp (please don’t) but what you’ve done is exercised the main skills in business creativity. You looked for pain points, you’ve thought of selling and marketing, you even used something called ‘combinatorial play’ which is basically your ability to mix and match unrelated things in new ways.

And you probably had some fun along the way. Win-win!

By the way, if all this sounds like a stupid waste of time, just remember the Snuggie (or its evil twin, the Slanket). To date that one product alone has made half a billion (BILLION) dollars for its parent company. 

Making Negative Avatars

I’ve seen many books and coaches recommend making ‘avatars’ for your customer base.

These are simply brief descriptions of the types of people that use your product or service. Give them a name, and make them a great big cliche. The idea is to have a shorthand word for whole demographics that you sell to.

Which sounds great, but it has never been much help to us.

The problem is that these avatars lead to an oversimplification of your customer base. Pretty soon you’re underestimating your audience, targeting the stereotypes you have created rather than real people with real problems. 

What has worked for us, though, has been negative avatars.

These are exactly the same thing (imaginary models of whole types of customers) only now we want to leverage the negative aspects of the exercises.

These avatars are not our customers. They are the people that will never, no matter what we do, come over to our way of thinking. And that’s fine. But we can use those people as examples to our audience of how not to behave.

Here’s an example:

Tightwad Terry: This guy (based on people we actually know and the things those people actually do) is the cheapest, most tight-fisted person imaginable. I mean this guy composts his paper waste (ok, that’s fine) and burns his plastic (NOT FINE) so he doesn’t have a trash bill each month. 

When we make content, Tightwad Terry is in the back of our minds. And if he likes our content, we delete the living hell out of it. 

Having avatars in mind for the wrong customers lets you know when you start to veer off the path. We believe in being careful with our spending, sure, but when we start to edge into Terry’s realm, we know we need to step back a bit.

Also, It’s useful to think of the sort of content that Terry would hate. Do you know what Terry would hate? A post arguing why your house is not an investment. Let’s write that!

Even if you don’t have a customer base in mind yet, you can still make negative avatars.

Just make them for the types of people that really frustrate or annoy you. Then think, what sort of product would that personal hate?

Alright, so we’ve got an idea of what a business should do, and a few good methods for generating ideas. 

It must be time to write our business plan!

Plan In Pencil

Well… no. 

Business plans are highly orchestrated documents that entrepreneurs need to write. They need a detailed plan to give to investors or bankers or whatever. This document is important because it shows those investors that you’re not just making it all up as you go along. That you actually do have a plan.

Only, we aren’t going after investors or bank loans. 

And we are going to sort of make it up as we go.

Don’t get me wrong. We need to plan. We’re just going to plan in pencil.

Even then, I mean that metaphorically (we’ve never actually written our business plan down).

So what do we mean? 

Plan in pencil. So you can erase it and rewrite it. Be open to change. Be flexible. 

Personally, we plan one project at a time. We’ll cover more about projects in our productivity section, but we basically don’t look much further ahead than the project at hand.

The exceptions to this are our guiding principles and philosophies. They stay put and we pivot the business around them.

Financial Management for a Home Based Business

“My Hand Is Usually In My Pocket at the Right Time”

This is one of my favorite quotes of all time. Its Letters From a Self-Made Merchant by George Horace Lorimer.

I love it because it echos so much advice from so many people I respect. Charles Munger, Vice Chairman of Berkshire Hathaway especially comes to mind.

Basically, Munger, Buffet, Lorimer, and many many others are saying that when it comes to money, you can achieve above average results simply by avoiding mistakes.

So we keep our hands in our pockets. We spend as little as possible. We are lean and careful (without becoming a Tightwad Terry).

When investment opportunities come our way, we almost always say no… unless we are nearly certain of success. 

Our greatest financial fear is the permanent loss of buying power. As we manage our money, we will strive to make the chances of that happening as close to zero as possible. 

How do we do that?

Slow and Steady Wins The Race

We want a slow and steady rate of growth. For Leslie and I, we shoot for 15% per year spread as evenly as possible over the months. This is a comfortable number for us based on years of experience (eventually it will become untenable and we will reduce our goal–that or we’d end up owning the whole stock market).

Your goal will depend on you, your business, your niche, luck, or any number of other variables. Start very low, maybe 5% earnings growth year-over-year and ratchet it up as you get more and more confident with managing your cash flow.

It’s tempting to go from 0-60, but fast growth means large investments of cash. And that can lead to a cash flow crisis, which we’ll talk about more in the Finance section. In the early stages, the most important thing is to operate within the cash you generate both from your Business Zero and the business you are building now. 

Define Our Terms

Alright, let’s define our terms. We use vocabulary you have probably heard before, but we define things differently than what you might expect.

Our goal here is to simplify as much as possible. The world of finance is hopelessly complicated, and it needs to be for big businesses.

But for our small 3MM businesses, we can trim 98% of the jargon and focus on the few things that really matter. 

• Earnings
• Income
• Profit
• Expenses
• Overhead

Earnings

We define earnings as all the cash generated by all aspects of our business that we are entitled to (but might not actually get in hand). This includes certain amounts of cash that are generated by things we have invested in. 

If I own a share of Apple, I am entitled to a share of its earnings. If Apple earns $3 per share, I am entitled to that $3. Apple might only send me $1 of that as a dividend payment, but the other $2 goes to increasing Apple’s share price.

The trick with earnings is to understand that some of the money is abstract (like the Apple example above). But that makes it no less useful. 

Many, many people struggle with this concept, and we’ll cover it more in the investing section. Just be prepared to look for abstract earnings. They are often more valuable than tangible earnings. 

Income 

We define this as all the money that actually flows into your pocket. At my bank, they highlight it green on the statement page. It is tangible and real and I can transfer or spend it right away.

There is nothing abstract here.

We don’t care where it comes from. Some of it (most of it at the beginning) will come from your current job (Business Zero, remember?).

We have our paychecks, deposits from Amazon, Paypal, individual affiliate companies, dividend payments, interest payments. They are all money transferred to us. They are all green in the ledger. 

What’s the difference between earnings and income? Income is what most people think of when they think ‘payday’. It’s all real. Earnings are stronger, more important, and less understood because some of it is abstract.

Profit

We define profit as the amount of money you take out of the business for personal consumption. 

Your business will require a certain amount of your income for expenses. 

You will spend another certain amount on growing your investment earnings. 

The rest is profit and goes to you as a reward for providing a benefit to society. Spend it as you wish. Take a trip. Buy a Tesla. Throw a party. 

**Please Note** This is one of the biggest places we differ from the ‘normal’ viewpoint. We’ll talk about this more in ‘Pay Yourself First’ but we put profit at the forefront of all decisions.

Profit is what allows you to have more free time and increase your quality of life. It comes first in these money decisions. 

When we talk about the value of our business, or if you read our income reports, you are seeing our profit numbers. Lots of people online will brag about their ‘six figure side hustle’ but what they are actually showing is a six-figure revenue (a number we don’t even acknowledge here).

But when you look deeper, yes, they had six figures in revenue. But they also had five figures of expenses.

You can’t eat revenue, so we don’t use it. It’s too easy to mislead with revenue numbers.

Expenses

The cost of doing business/staying alive. Because we are a small, home based business, we include in this number our actual home expenses as well. 

There’s no point in trying to build a small business if it isn’t going to pay for food and utilities. 

So for Leslie and I, expenses include our domain and hosting costs, our Amazon fees, but it also includes our mortgage, insurance, electricity bills, trips to the dentist, or anything else that we had to spend money on. 

We could easily inflate the value of our business by ignoring these costs. Watch this:

Last month Amazon sent us payments of $10,000. Last month we spent $3,000 on inventory. 

“Look world! We made $7,000!”

But we also had to not starve or freeze or be bored to death. Ignoring the actual costs of living is shady at best.

So for your 3MM business, you need to (at least philosophically) count your lifestyle as an expense. 

Don’t go doing that at tax time. The government will come for you. 

But do it each month as you tally up your profit and expenses. 

Overhead

Overhead is a slightly more specific version of expenses. Because we are combining our actual lives with our businesses, we need some way to think about just the business expenses.

That’s overhead. 

That is the rent you pay for office space. It’s the cost of hiring and outsourcing. It’s service fees and subscriptions and whatever else you need to run your business.

It is not the cost of your groceries or life insurance.

But beware. Overhead is dangerous.

It is the number one killer of businesses. Let it get out of control and nothing will sink your ship faster. 

That is why we regularly (on hard-scheduled, non-negotiable days twice per month) look at our overhead and try to reasonably trim. 

It is also why we prefer 3MM businesses that can be done from home. Rent can be one of the largest and most toxic expenses you will ever face (I mean, it just goes up every damn year).

When we say “Reduce your overhead!” We are not saying you need to eat ramen and stop buying starbucks.

Reducing overhead should never make you give up something you love. 

But is should make you take a hard look at the services you are paying for. Are you earning at least two dollars for every two dollar you spend? If not, you should see if you can live with out that service.

Pay Yourself First

Ok, we have our basic terms in mind. Now onto the best piece of financial advice we ever received:

Pay yourself first.

Simply put, when money comes into your bank account (income) you take your share of this first (profit).

You predetermine what you want your profit to be. You take it out, then you pay your expenses. You reduce your expenses to fit within the amount left over after you’ve taken your profit.

We started doing this years ago, way before we owned a business, and it changed our financial lives. 

It took us a very long time to really wrap our heads around it, and an even longer time to realize that good personal finance lessons are often good business lessons. 

And then, like five years too late, Mike Michalowicz writes Profit First which would have saved us a ton of pain and suffering. 

Thanks Mike. 

But seriously, Profit First is the second of our All Time Best Best Business Books. Leslie and I had figured out the philosophical side ourselves and we knew it worked…

But Mike lays out the psychology of why it works.

And more importantly, he has a detailed, step-by-step guide to creating the bank accounts, calculating how much you should allocate to profit, the whole thing. 

You want the physical book for this one. It has worksheets and charts that are really, really helpful.

If I could go back in time and hand my younger self a book, it would be this one. That and a Sports Almanac, of course. 

For us, as 3MMers, we start with a manageable profit target (Profit First will help you find the number that is right for you, but err on the low side). Just remember that Mike assumes that you already have a small business.

Which you do! Business Zero.

There Are Only Two Ways To Increase Intrinsic Value

Because the intrinsic value of our business is directly determined by profit and its growth over time, there are just two ways to increase it:

Increase Earnings.

Decrease Expenses.

We think of these as the High Road (Increasing our profit) and the Low Road (reducing our expenses).

If we take the High Road and increase our earnings by $1 per year, our intrinsic value goes up.

If we take the Low Road and decrease our expenses by $1 per year, our intrinsic value still goes up.

Sometimes we can only do one or the other. Sometimes we can do both. At the end of the day, what matters is that we are making slow and steady progress toward our goal.

This year, Leslie and I added new income streams to the business. Those income streams will increase our profit enough that we will meet our goal this year. 

But maybe next year we won’t find any opportunities. That’s fine. It happens. Instead of chasing after second-rate and risky opportunities (which even Fortune 500 companies do) we will instead focus on reducing our expenses. 

If we can responsibly reduce them enough, we will still be able to meet our goal. 

The Heart and Soul: The Low-Overhead Home Based Business

This High/Low approach is why it is so important to keep overhead costs as low as possible. It’s why we don’t take loans or investor money. 

We need to be able to take whatever action we feel will get us to our goal without any input or influence from anyone (looking at you investors).

So no matter which business you choose, always remember:

Nothing sinks a small business faster than overhead costs.

This is the main reason we love running a small business from home. We’re already paying to live here! (And if you organize your space right, you can even write off a piece of your home as a business expense–talk to your tax professional about it).

A Real Life Example

Alright, let’s take a look at how this all actually fits together for our actual home based business. We’ll walk through exactly what Leslie and I do each and every month.

Twice per month (we designate two days per month, the 10th and 25th, per Profit First) we carry out a specific set of actions that we call PAYDAY.

(These are our two favorite days of the month.)

We have a checklist we use to make sure each step is carried out exactly the same way each time.

So here’s Payday:

• Open up the websites for each affiliate, advertiser, investment bank, and money transfer system that we use (this is where the checklist comes in handy) and click whatever button we need to send our income from those companies to our bank.
• Go to our bank and open our ‘Income’ account. This contains all the cash that moved into our business since the last Payday
• Transfer at least enough of this cash to meet our profit target (see our Income Report For an idea of how we steadily increase your profit targets each month) from our ‘Income’ account to our ‘Profit’.
• We then transfer at least $500 of per month from ‘Profit’ to our investment account to meet our long-term goal of $1 million dollars by retirement (that goal is what started this whole business)
• Everything that is left in ‘Income’ is transferred to our ‘Expenses account’.
• From ‘Expenses’, we pay our bills: Most of these are on cash-back credit cards (we NEVER carry a balance from one statement to the next, it is paid in full every two weeks)
• Whatever is left stays in the Expense account as a protective buffer. There is usually enough extra cash here to cover several months of expenses. This protects against cash flow problems that we’ll talk about in a moment. 

Then, each quarter (on Jan.1, Apr, 1, Jul. 1, Oct. 1) we distribute our profits.

In a standard business, this is where you’d be paying a dividend to your investors and shareholders. But we get to keep all that profit for ourselves. 

What do we do with it? We could just spend it all.

But we generally divide it out like this:

• 1/3 is reinvested into anything that will grow the earnings of our businesses (maybe education, new web properties, advertising, new inventory.
• 1/3 is invested outside the businesses. We’ll cover this more in the investing section but we try to grow our investment earnings by 15% per year (same as our operating earnings). We usually invest in the stock market, but we are also open to real estate or bonds or whatever productive assets we can find for a sane price. Lately, the stock market has been the clear winner.
• And the last 1/3 goes to us. Remember, this is after all expenses have been paid, so it’s free-and-clear money. We can do whatever we like with it. 

Avoiding A Cash Flow Crisis

Overhead is the #1 killer of small businesses.

Want to know the #2 killer?

Cash flow problems.

What is a cash flow problem? Let’s take a look at an example that comes up constantly with our Amazon storefront.

When we buy inventory from our suppliers, we are often offered terms that seem great, but could get us into serious cash flow problems. 

They are called Net30 terms. 

Net30 means that we have 30 days after receiving our inventory to actually pay for it.

This is done to help the retailer (us). The way it is supposed to work is this: I order the goods. I get the goods. I sell the goods within 30 days, then pay for the goods out of the money that has come in for the month. 

I could (in theory) order $10,000 worth of widgets, even if I don’t have a single dollar to my name. I could then sell those widgets for a total of $15,000. Then I pay off my Net30 terms and pocket the $5,000 difference.

Like magic, I have created $5,000 of profit out of thin air. 

I hope you can see how tempting this is.

But there is serious danger here. No matter how confident I am that I will be able to sell that inventory, I can never be certain that it will all sell. 

Maybe I only get $8,000 in sales. Now I have negative cash flow. I can’t pay my Net30.

That is negative cash flow. Its dangerous because its so tempting. Its dangerous because it feels like you are doing everything right. 

And you can’t see it coming. It might seem obvious in the example I gave you, but there are a hundred other ways for negative cash flow to sneak up on you, all of them deadly.

So how do we avoid negative cash flow?

We pay cash. We pay up front. And we keep a safety-net reserve just in case.

Because, even as careful as we are, it still creeps up on us. We have one supplier that takes forever to cash our checks. I literally hang post-its and make reminders every so often I don’t forget how much money is just sitting in limbo.

Paying up front out of the cash we have on hand solves 98% of the cash flow problems that come our way.

I should warn you though, many business types would read this section and roll their eyes. They would say that you don’t need to worry, you just need a good accounting system.

And they’re right. 

BUT we are a home based business. There are only one or two of us working. The cost, of both time and money, of buying, hiring, or otherwise installing an accounting system just isn’t worth it. I’d rather pay cash.

And you know what else? We personally know two multimillion dollar businesses that folded because of cash flow problems (One was a toy brand, the other was a lumber mill, so it happens in all sectors).

Both had accounting systems. Neither saw it coming. 

Pay cash up front. Don’t use credit. 

One more thing: over the years, we have learned that the absolute best way to avoid a cash flow crisis is not buying inventory.

We started out as a retail business model. But more and more we are shifting to a make-it-once-sell-it-forever model.

Think blogs, ebooks, online courses.

You don’t run into a cash flow problem because you aren’t spending cash. You’re spending time (to make the original content.)

Online courses are an especially powerful tool to keep in your arsenal. They let you monetize skills you already have.

If that is something you’re interested in, we have reviewed and rated the top online course creation software out there.

Accounting for Your Home Based Business

No matter what you choose as your business model, you will need someone to keep your books (accounting, invoices, expenses, payments).

In a traditional business you would hire someone (or several people) for this. But we are 3MM businesses. We are lightweight and low cost. 

So we recommend FreshBooks. They do anything you would need in the accounting arena (they can even track mileage, which we think is cool).

What About OPM (Other People’s Money)?

The main financial takeaways so far are:

• You will make more money by avoiding mistakes than making brilliant decisions.  
• We want slow and steady growth. 
• We pull our desired profit out first, then make expenses fit what is left.
• We avoid cash flow problems by paying cash up front and never relying on credit.

One of the other phrases you tend to hear thrown around in the small business/startup world is OPM.

Other People’s Money

Angel investors, venture capital, bank loans, partnership shares.

This tends to be lauded, even celebrated. Sometimes you get the feeling that the whole point of starting a business is to attract Other People’s Money.

But that just doesn’t work for what we’re trying to do here. Other People’s Money brings Other People’s Agendas. You quickly end up working for the bank or the investors.

But we want to work for ourselves.

So this part can be short and sweet. Just say no. It won’t be easy, the temptation is very real,  I can promise you that, but our long-term happiness and sovereignty are more important to us than rapid growth.

Marketing Your Home Based Business

Here is another one of those examples of how we ran all over the place, spent god-only-knows how much time reading and researching dozens (maybe hundreds) of different resources just to figure out that we could have got it all from one book:

Marketing Made Simple by Donald Miller

This is the final required reading from out All-Time Best Business Books section. And it is Required with a capital R and in italics. 

Why?

There is a lot of information out there about different things to try in the marketing space. And we’ve collected the best of it below and given it the 3MM treatment (i.e. figuring out how to do it in the least amount of time possible).

But what you end up with (after researching those dozens-maybe-hundreds of resources) is a lot of what to do, with exactly no ‘why’ to do it. 

Marketing Made Simple gives you the best ‘whats’ but also the ‘why’. It is a psychological approach to marketing that builds on one of mankind’s most fundamental instincts.

That way, you know exactly how to apply all those ‘whats’ that are floating around in the world. More importantly, you know the best way to use them in your situation. 

It nicely solves the cookiecutter problem that you run into when trying to do the research yourself.

By the way, Donald Miller has been one of our best and most valuable finds in this journey. He has a gift for making many complicated aspects of owning a business clear and easy to understand. 

Other books by Miller that are optional here, but highly recommended:

Building a Story Brand

Business Made Simple

Types of Marketing 

Here are the best types of marketing for a 3MM business. Are there other types of marketing out there?

Of course.

But remember, we want to spend as little money as possible, AND we want to spend as little time as possible.

And don’t forget, we try to earn at least $2 for every one dollar we reinvest back into the business!

Email Marketing

Email marketing has to have one of the highest returns on investment of anything in your marketing arsenal. 

One recent study found that, on average, email marketing made $35 dollars for every $1 spent on it.

That is unreal. I mean, remember our goal over all is to earn $2 for every $1 we reinvest. 

That is why we put email marketing first on our list. You should do everything you can to leverage that earning power. 

So which email marketing service should you use? 

Our top pick is ConvertKit. Its far and away our favorite. We think it’s the most welcoming and easy to use for people with zero email marketing experience (like us!)

But maybe the most important thing about Convertkit is the free education they have available. I mean they cover the waterfront. That alone makes them worth it.

For more info on the different options available, check out our comprehensive review of the email marketing services available. We’ve reviewed 13 separate companies now, and we have a breakdown for specific business needs so you can pick the one that is the benefit for your business. 

Social Media Marketing

In many respects, social media marketing is marketing. Many 3MM businesses thrive on just one or two social channels.

Specific recommendations vary too much based on your business and situation for us to give you one easy recommendation here (with one exception we’ll get to in a moment). 

We do have a comprehensive comparison guide though. It will help you determine the best fit for you.

A quick note about Pinterest and Instagram:

We will make one cut-and-dry recommendation for managing your pinterest and and instagram accounts, though.

Tailwind

Tailwind has the market cornered when it comes to both ease of use and educational materials available.

Content Marketing

This is the words you write or the videos you make. The point here is simple: bring people to your brand.

People are out there, trying to solve a problem. They are so desperate for that solution, they ask for help.

Who do they ask?

Google.

Youtube.

If the content they find solves their problem, they will respect you. That respect is the first step to building the kind of relationship you want.

Use your content to solve small problems, then point to other solutions for bigger problems. Guide them to your email list, your courses, you ebooks, what have you.

Recommended Books

The E-Myth Revisited (All-Time Best Business Book – Required!)

Profit First (All-Time Best Business Book – Required!)

Marketing Made Simple (All-Time Best Business Book – Required!)

Company of One

Rework

Building a Story Brand

Business Made Simple

Berkshire Hathaway Letters to Shareholders

The Alchemist

Letters from a Self-Made Merchant

Mindset

Antifragile

Recommended Tools

ZenBusiness – legal formation your business entity

TermsFeed – Legal documents if your business will require a website

FreshBooks for accounting

Aweber for email marketing

Tailwind for Pinterest and Instagram

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