How to Create a Cash Flow Business to Fund Your Dream Startup
You can use this strategy to become your own investor.
If you consider yourself an entrepreneur, you’ve probably had at least one big idea for a company.
Maybe it’s a passion project that won’t turn a profit for years to come. Or, perhaps you want to start a company that will require a massive amount of startup capital.
Either way, you may not have the ability to fund your dream business today. But that doesn’t mean that you have to go out and look for investors to make your dream a reality.
There is another option.
You can fund your dream startup by creating a “cash flow business” first.
What is a cash flow business?
Cash flow businesses cost very little to set up. They are typically profitable on day one or shortly after they are created.
You’ll see below that some cash flow business models can be automated, so they have the ability to scale without much time or effort (aside from the initial setup.)
These types of businesses have minimal risk and a moderate amount of potential upside. They may not as glamorous, profitable, or rewarding as your dream startup, but they can be a stepping stone to help you reach your long-term goals.
If you are currently employed and looking to make the leap to full-time entrepreneurship, you can start a cash flow business on the side and use it as a bridge to pay your personal expenses and startup costs while you are building your company.
7 Examples of Cash Flow Businesses You Can Start Today
Below are seven examples of cash flow business models that have a very low barrier to entry. Almost anyone can start one of these business types, and most of them require little to no startup capital.
1. Online Course Business
If you have specialized knowledge or skills, you can package your knowledge into an online course and sell it to an unlimited number of students.
Even if you don’t feel like you are an expert on your topic, you can still take advantage of this business model by partnering with someone who is and co-create a program together.
The key here is to find a topic that is in high demand or that solves a problem a fairly large group of people are dealing with. You can do this by assessing problems or challenges you have dealt with personally and overcome or by doing keyword research to discover what people are searching for online.
The costs associated with starting an online course business are extremely low.
You will need an online course software platform like Teachable or Thinkific — which you can start using for free or for a low monthly fee if you want access to advanced features.
If you want to learn more about the online course platform that I personally use, you can check out my in-depth Teachable review below.
You can create course slides and worksheets using Canva, which is a free graphic design tool. Course lessons, webinars, and other promotional videos can be filmed and edited using Tella — a free video creator and editor.
You can promote your course for free using social media or SEO. If you want to reach your target audience faster, you can use Facebook or Google ads to promote it.
All in all, the startup costs for creating an online course business are next to nothing, but the potential upside is massive.
If you want to learn more about this business model, here’s how I earned almost $80k in the first year of running my own online course business.
2. Affiliate Marketing
Affiliate marketing is simply the act of promoting other people’s products or services in exchange for a commission when you make a sale.
This is an ideal cash flow business because there are essentially no overhead costs. You don’t have to create your own products, and you don’t have to worry about providing customer support.
All you have to do is market products that already exist.
You can do this through content marketing. For example, you could create YouTube videos that mention or feature a product, then put your affiliate link in the video description. You could also link to products in a blog post or on Instagram.
The easiest affiliate program to get started with is the Amazon Associates program. After you sign up, you can promote almost any product that Amazon sells.
The best part about Amazon’s affiliate program is that you get credit for any purchase that someone makes on Amazon within 24 hours of them clicking on your affiliate link.
Most major companies that you shop online have an affiliate program. While some bigger companies do have traffic requirements that their affiliates must meet before being accepted, I’ve found that many smaller companies and software startups have a very low barrier to entry for joining their affiliate programs.
There is one caveat to affiliate marketing that I want to warn you about. If you start looking into this business model, you may find information encouraging you to promote sleazy or spammy products that mislead consumers.
Personally, I don’t recommend promoting these types of offers. Sure, you may be able to make some money doing this, but you are likely to have a lot more success if you promote high-quality products that you personally use and love.
3. E-Commerce
Online selling tools like Shopify, Amazon FBA, and Squarespace allow anyone to start selling physical products online in a matter of hours or days.
The most popular models for selling physical products online today are:
- Dropshipping — this is where you advertise products on your own website at a markup but don’t order them from the supplier until a customer has placed an order.
For example, some drop shippers will source products from sites like AliExpress, a Chinese-based company that sells a wide variety of products inexpensively.
For example, you can purchase phone cases with a built-in loop on the back (a feature that is trendy) for less than one U.S. dollar and resell then on your own site for $7.99 or more.
Note: The screenshot above is for demonstrative purposes only. I am not claiming that Loops.com sources its inventory from AliExpress.
When a customer purchases a product, the seller places an order with AliExpress or their supplier of choice, who then ships the product directly to the customer. This process can be set up to run automatically using a service like Oberlo.
With dropshipping, the financial risk is low because you do not have to purchase inventory in advance. You are merely paying to ship the product to your customer and pocketing the difference between its original price and the markup you charge.
The downside of dropshipping is that it can take a long time for products to be delivered after they have been ordered. In a world where customers are used to receiving orders in just a day or two, long wait times can lead to unhappy purchasers and a high volume of refund requests.
- Private Label — this is where you purchase products directly from a manufacturer and ad your company’s logo or custom packaging to the product to build your own brand.
The benefit of selling private label products versus dropshipping is that you have more control over the product's quality and delivery times.
Private label products are typically ordered in advance and packaged according to the seller’s specifications. While you will need to invest in inventory upfront, you can take advantage of programs like Amazon FBA, which will store and ship your products for you.
- Retail Arbitrage — this is where you purchase products from one retailer and sell them at a profit on another.
For example, you could purchase household items or toys marked down for clearance at your local Walmart and sell them for the full retail price on Amazon or eBay.
The key to being successful with retail arbitrage is researching the price points consumers are currently paying for the products you are selling. For example, how much does an item regularly sell for on Amazon? What has the item recently sold for on eBay?
If you can purchase the item for less than the going rate, you can flip it for a profit.
4. Print-on-Demand
If you are creative and have a good eye for design, starting a print on demand brand could be the perfect cash flow business for you.
Printify, Printful, and Amazon Merch are all companies that specialize in print-on-demand services.
With print-on-demand, you upload your artwork and choose which products you want to sell — from t-shirts to phone cases to coffee mugs and even shoes.
When your customer places an order, the print-on-demand company creates and ships the product in exchange for a percentage of the sale.
Here, you don’t have to pay for inventory upfront; however, since the entry barrier is so low, your designs will need to stand out, and you may need to do your own advertising to attract customers.
If you want to start a print-on-demand business but lack artistic or design skills, you can outsource the design to creators on Fiverr, 99Designs, or find an independent freelance artist online.
5. Publishing
Whenever I mention publishing as a cash flow business idea, many people think it involves writing books on their own. However, unless you are a prolific writer, this may be an impossible task.
As a freelance audiobook narrator who routinely works with small publishers, I’ve been able to get a unique glimpse into the publishing business model.
What I’ve discovered is that most publishers don’t write books themselves. Rather, they hire freelance writers to produce books on nonfiction topics that they believe will appeal to a broad audience like trending diets, productivity tips, and so on.
As a publisher, your job would entail sourcing a cover for the book, ensuring that the finished product has been properly edited, and marketing the book by paying for ads on Facebook, Amazon, or Bookbub.
If you maintain an email list for your publishing company, you can also promote your books to your existing readers.
Increase Your Profits Exponentially with Audio
Publishing doesn’t stop with creating a Kindle or paperback version of the book. You can increase your profits exponentially by having your book narrated and turned into an audiobook.
This can be done inexpensively using sites like ACX, Findaway, or Fiverr.
Once your audiobook is completed, you can submit it to Audible, Amazon, and iTunes via ACX. If you want wider distribution for your audiobooks, you can submit them through an aggregate audio publisher like Author’s Republic.
The main reason why audio is so profitable is that it is relatively inexpensive to produce, and it commands a much higher price point than electronic or paperback books.
For example, the average price of a Kindle book on Amazon is around $2.99. In contrast, the average price for a 3-hour nonfiction audiobook (roughly 28,000 words) on Audible is $14.95.
To make this most of this business model, you’ll need to publish a moderate to high volume of titles across the ebook, paperback, and audio formats.
However, once you get your publishing business up and running, you can invest a percentage of your monthly profits back into the business to create a snowball effect where you are releasing titles faster as time goes on.
6. Coaching or Consulting
If you have knowledge or skills that can help businesses or individuals solve a specific problem, you can start a cash flow business by coaching or consulting.
What makes this an attractive business model is that there is minimal setup or costs involved. You will likely want to create a website to highlight your expertise and offer your services.
Most coaching and consulting can be performed over a Skype or Zoom call. Alternatively, the Teachable software platform now offers a coaching feature which makes it very simple to start selling coaching or consulting services online.
Coaching doesn’t have to be complicated.
It can be as simple as creating an offer to allow someone to “pick your brain” for an hour, or you can create long-term custom coaching plans based on the client's individual needs.
If you are already offering online courses or selling books, offering one-on-one coaching as an upsell is an easy way to increase your income without much additional effort.
7. Freelancing
Finally, I wanted to include freelancing on this list because it’s the fastest way to start earning income online. While you need to have some marketable skills that you can offer to others, you don’t need to be an expert.
You don’t even need your own website to get started as a freelancer (although it’s helpful.) You can create an account with one of the existing freelance sites like Fiverr or Upwork and start bidding on jobs.
Networking with people in your niche on Linked In or in Facebook groups is also a great way to get referrals for freelance projects.
The downside of freelancing is that it’s not as scalable as some of the other cash flow business models mentioned on this list. The amount you will earn will be limited by the time you have available to work on freelance projects.
However, freelancing is still a great way to make extra income to help fund your dream startup.
Takeaways
- Just because you can’t afford to start your dream company on your own today doesn’t mean that you need to seek out investor funding.
- You can cover your living expenses and startup costs by creating a “cash flow business.”
- Cash flow businesses are characterized as easy to start, require little to no startup capital, and in some cases, they can be scaled up exponentially using automation software — freeing you up to work on your dream startup.
