Discovering the power of an age-old economic principle.
Arbitrage is a word that holds a special place in my heart. It’s the concept that allowed me to make over $200,000 while I was still in my early 20s. In simple terms, arbitrage involves buying something for a lower price. Then, selling it elsewhere for a higher one turns a profit from the difference.
My journey into arbitrage began with a Bowflex commercial. Like many others, I was intrigued and wanted one for myself. Craigslist was gaining popularity around this time. I quickly found a Bowflex listed at a price well below market value. I decided not to keep it. I tested the waters by placing an ad in the Arizona Republic. I offered the Bowflex for $1,500.
This simple experiment turned into a business. I began scouring Craigslist for more Bowflex machines, typically purchasing them for around $600 each. Then, I’d sell them for a profit. This rinse-and-repeat strategy led to me selling five or six Bowflexes per week, earning an additional $3,000 to $4,000 per month for several years.
But what makes arbitrage such a powerful business model? Here are three key ways to identify and capitalize on the best arbitrage opportunities:
See more: 5 Simple Ways to Start a Side Hustle and Why You Should
1. Information Arbitrage
In today’s fast-paced world, many people don’t take the time to read and educate themselves. Yet, a single book or idea can completely transform your business and your life. That’s why some of the most successful people are avid readers.
I’ve personally gained insights from books that have earned me tens of thousands, even hundreds of thousands of dollars. The return on investment is incredible when you consider that a book usually costs only $15 to $20. For example, reading The E-Myth Revisited by Michael E. Gerber taught me the importance of delegation, a skill that has made me exponentially more productive. When you calculate the hours saved by delegating and multiply that by my hourly rate as a CEO, the impact is enormous.
2. Relationship Arbitrage
You’ve likely heard the saying, “Your network is your net worth.” It’s a cliché because it’s true. The right relationships can open doors to opportunities you might never have encountered otherwise.
You don’t need to know everyone, just the right people who can elevate your business to the next level. Take Joe Polish, for example. He’s the founder of Genius Network and Piranha Marketing and one of the best networkers I know. His success is largely due to the relationships he’s built with top entrepreneurs like Richard Branson and others.
See also: Work from Home Best Online Jobs in 2024
3. Skill Arbitrage
Whether you’re in the home service industry like I am, or in another field, skill is the foundation of arbitrage. If you have knowledge in something, you’re likely to be compensated far more than the average person. This is especially true in complex areas like installing commercial garage doors or performing heart surgery.
For business owners, this means that if you develop a system to train your employees to be top performers, you can create skill arbitrage. You can achieve this at scale. This becomes a lasting competitive advantage for your company. That’s why I’m a strong advocate of the 10x Practice Rule. Consistent practice and improvement can turn ordinary skills into extraordinary ones.
By understanding and leveraging these forms of arbitrage, you can find lucrative opportunities that others might overlook. I did this with my Bowflex side hustle.