The following is a guest post by Darwin. Darwin takes an evolutionary approach to money, investing and career opportunities. If we've learned anything over the past few years, it's that we need to be constantly adapting to changes in technology, the workplace, investment opportunities. Read more at Darwin's Money.
For those of you that are even vaguely familiar with stock options, you're probably aware of how you can essentially turn a small sum of money into a sizable payoff if things go the right way for you.
As an example, if you bought out of the money call options on Apple a few years ago, the return would have been over 1000%.
What if you could apply this concept to your career and earning power?
Here are a few real-life examples (including my own endeavors) where side projects can either fizzle out or succeed beyond expectations:
Starting a New Business
If watching Shark Tank doesn't get your creative juices flowing, perhaps consider just re-assessing your skill sets and how you might build a business around it. Here's an awesome example of something I'm involved in.
My old college roommate called me out of the blue last year with an idea he had. He's a civil engineer and he knew I had a fair amount of online/blogging experience. He knows that in engineering and design firms they normally pay AutoCAD drafters anywhere from $30-$75 an hour depending on the complexity of the work. Through some Facebook exchanges with his cousins in the Philippines (also CAD drafters), he discovered that they were creating the same level of quality and volume that a US-based drafter does, but at a fraction of the cost.
He called me for some ideas, we got to collaborating and a business was born. We each put up some money, I managed the initial online activities and he managed the operational aspects of starting up and hiring personnel in the Philippines. We're now at over 20 AutoCAD drafters, 2 US-based Account Managers and we've landed our first six-figure client. Our CAD drafting services business is really taking off. This is an example of a potentially huge payoff.
More from GFC, Below
Our business is less than a year old and we've already attracted more capital by way of another great partner/investor, and we could conceivably bring in over $1 Million in revenues by next year. In terms of the stock option theme, this would be one of those long shots, an “out of the money call option” which requires very little upfront investment, but can have a huge payoff.
Real Estate Investing
This is another example of a great side business where people can become extremely wealthy. I have a co-worker who started with a single purchase at a college campus 8 years ago and he's grown it into several properties, a large apartment complex, and we've just partnered on a 5 property purchase at another university. This is all while we both maintain pretty demanding full-time jobs.
The up-front investment was it – from there, the income from the properties and equity pay down from the mortgage payments fund future purchases. For a corollary to stock options, this would be the equivalent of a “deep in the money option” since there is a sizable up-front investment required to get started, but it grows pretty steadily and in a leveraged fashion from there.
Be an Entrepreneur at Work
While the examples above involved activities outside of work, there's no reason you can't break out in your own workplace or industry. If you're in the type of role where you have the ability to affect change or have some latitude in your responsibilities, you could morph an idea or concept into an entirely new business unit.
For instance, someone I work with started in on a new product line and he is now the “Managing Director” for a multi-million dollar business in a medical device firm. Here's another one that drives my co-workers crazy. Our company recently laid off a lot of employees.
Shortly thereafter (ironically), our company realized the need for several engineers in another group and started hiring up contractors like there was no tomorrow. One of our colleagues that had been let go saw an opportunity and formed an LLC and contacted all the laid-off employees. He acted as their Temp agency and got many of them back in (including himself) as contractors and consultants, while shaving some off the top himself for placing each person. It may sound a bit fishy, but there was a need and he filled it.
I suppose the company may be OK with the arrangement because they want to cut out fixed assets (things like pensions, healthcare, bonuses, etc) and go to a more flexible model. He saw the need, incorporated, and leveraged his network. Sometimes you can parlay being in the right place at the right time into a leadership role of an entire organization or act as an “agent” to fill a need and collect a premium for doing so.
These are just a few of the examples of people looking at an opportunity right under their nose to create value, scale a business, and realize leveraged returns.
Has the Concept of Career “Options Contracts” Spurred Any New Ideas for You?