Engineer Earns 7-Figures from “Crowd-Purchasing” Project

This transcript was generated from the episode audio and may contain minor errors.

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You've heard of crowdfunding. What about crowd purchasing or crowd buying? It's kind of the opposite, essentially, where buyers rally to purchase something for a bulk discount, even though each individual buyer only wants one or two of the items. You can think of it as the Costco of side hustling, how to start your own online Sam's Club, and the engineer you'll hear about today creates just such a thing. It turns into a huge success.

He begins with $5,000 in startup capital, and it goes on to earn seven figures. Apparently, that's not just one time seven figures, but seven figures a year. Is this guy a full-time entrepreneur? Does he go all in? Does he risk it all to start his business?

Well, if you've been listening to the show for a while, you can guess he does not. He does all of this while working a busy day job. In fact, he's still working that job, even as this project has become fabulously profitable. So good for him, you really can do it all, or at least you can do these two things, or at least he can do these two things. I'll tell you all about how he got the idea and made it happen in our featured story following this message.

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Back in 2013, Ron Justin was in need of a specialized electronics item that was only sold in lots of 1,000. Ron didn't need 1,000 of them, he only needed one. In search of a crowd purchasing platform, he was shocked to discover that no such thing existed. The major crowdfunding sites at the time were only for new product ideas, not things that were already made. So he convinced his friend, Kurt, to help him build the site, GroupGits.

Usually, when an item is bought in bulk, you can pay a lower price per unit. Think about when you buy a large pack of toilet tissue or paper towels. You pay less per roll than if you purchased just one roll. Now, through GroupGits, people can have the same type of purchasing power for all sorts of items. Each group member buying something gets their one item at a better bulk price because they are part of a group.

The site presents its benefit as hack bulk pricing. And Ron and his business partner aren't selling toilet paper. Their group buys are mostly for new and high-end electronics. Naturally, these items have higher price points, which makes sense because people are looking for deals on them. So if you wanna buy something that is typically only available in bulk or is cheaper if buying in bulk, you can start or join a campaign on GroupGits to purchase the item.

Others who might also be interested in purchasing that same item can join in, and then the items are bought in bulk by GroupGits at that lower price. The business then divides up the units, collects the money from individual buyers, and ships to those buyers. Now, here's an example. The ZubiFlyer, an educational toy with a retail price of $130, is listed on the site for $65 with a target of 50 units. So in other words, they're looking for 50 buyers before GroupGits can put in that bulk order.

When they reach 50, they can order those units and ship them out, and each buyer pays $65 for their item instead of $130. Also, this is fun. If someone is the engineer of a campaign, in other words, the person who starts that campaign and puts it forward, and that campaign is successful, GroupGits gets them a kickback. They can actually earn 1% of the total campaign. So who knows, this could be a possible side hustler for some listeners out there.

And the company's income is generated from a percentage of sales. When a manufacturer ships directly to the buyers, GroupGits takes a 10% cut. If they do the shipping themselves, they take 20%. Now, if you imagine some high-end items and a lot of people buying, you can understand how this really adds up over time, 10% or 20%. Startup costs were just $5,000, and since inception, the company is making seven figures in profits.

GroupGits also sells custom electronic accessories and software in its own store. If a product does well on their group by site, they'll stock it in that store. Now, as mentioned, there are some pretty low startup costs here, Ron invested just $5,000 to start what has become a multiple seven-figure business. However, of those costs, $4,000 went to hire a contractor to handle the site's payment system. His thinking was that he really wanted to invest in e-commerce.

If he had a reputable payment logo on his site and everything worked well, then that would work to build user trust. So no cutting corners there. In the past few years, they've had some interesting products for sale. A notable one was the Verado Electric Drift Tike. They describe it as the big wheel you may have had as a kid, but on a whole new grown-up level.

The company's campaign was the only one to purchase the Trike Factory Direct at almost half of its debut price. They've also enabled a production of a device called the Audio Moth. This item is an audio logger that is put in trees to listen for bat migrations and monitor any illegal poaching and foresting. Those are just two examples of many. Ron continues to work his day job, which he admits can be a challenge since this business has grown so much.

But still, he says, "This is how I'm wired. I don't want to choose between one or the other, so I don't." Well, I had never heard of crowd purchasing before myself, but it makes perfect sense. What a fun concept. And I'm gonna be taking a look at this site on my own just because I love the idea of getting a deal. I'm sure some of our listeners do as well.

I had some other notes from Ron. He gave us some really great intel in our little survey form. He says, "Even though this project has been really profitable, money is not the only metric of success for a side hustle. You will meet way more interesting people than if you don't do one." That was when we asked him if he had any advice for anybody else out there who wanted to do something similar. And I thought that was cool because I often talk about all the different benefits of having a side hustle.

And I talk about how it can help you just to feel more confident, to have more security, to have options in your life, to have a different creative outlet, all that kind of stuff. But here's another benefit courtesy of Ron. You will meet way more interesting people than if you don't do one. And I suppose that also makes sense because if you're only in your job, if you're kind of staying in that lane, if you don't know a lot of people who are starting businesses or different money-making projects, then your experience is gonna be kind of limited. But once you go off and do something like this, then it's only natural that you're going to then be exposed to different people with a different mindset.

Some people who might be doing this full-time. And whether that's your goal or not, just having access to a different perspective can only be helpful. Now we also always ask people like, what is the hardest thing about this? What has been difficult? What is challenging?

Just because I don't want you to think it's all easy all the time. It's not easy, it's worth it. That to me is kind of how that equation balances out. It's not hard versus easy. It's, is this worth investing in?

And in Ron's case, he said, the hardest thing is the long nights on top of giving 110% of my day job. I feel pressure to work extra hard at my day job because of the side hustle. I don't want my team to think that I can slack because I have another company. So just to provide that balanced perspective, I know not everybody wants to go all out for both their day job and their side hustle. So it really is all about understanding your goals, understanding your personality, your current situation in life, how much time and energy and attention you can devote to a different project.

But that said, I really do believe there is a project for you somewhere. So if you have not found it yet, don't stop searching. Keep listening because every day I'm highlighting a different story, a different kind of story, a different person, a different model perhaps. And maybe something will speak to you and kind of get you going and think, you know what, if that person could do that, maybe I can do something too. That is my hope for you that you will not only be inspired because inspiration is good, but inspiration with action is better.

I hope that you will take action. I hope that this will kind of motivate you and push you in a good way. In a good direction and a good way, let's say. Today's show notes, including links to this fun website, group gets, are at sidehustleschool.com/698. That is episode 698.

We're almost all the way to 700. Oh my gosh, can't wait. And of course, the best is yet to come. Be sure you're subscribed. Do come back tomorrow.

My name is Chris Guillebeau. This is Side Hustle School. [Music]