The ultimate dream of just about anyone today is to build a passive income stream. Historically, this has been done through real estate investments and other rather risky business ventures. Thanks to advances in technology, it is now incredibly easy to build a passive income business online.
In 2012, my fiancé and I started an online business that earned us enough money to buy a brand new car within two years. Our business is hardly a full-time venture for us, and we certainly don’t boast huge profits on a weekly or even monthly basis. But over time, our business has become a reliable stream of income without demanding much of our time.. In this week’s post, I’ll tell you a bit more about our business and how we’ve built it up to where it is today.
How It All Started
My fiancé first met over a mutual love of travel photography. He had just returned from a trip to Belize where he stumbled upon a family-owned farm that was a popular destination among travelers in the 1980s and 1990s. While indulging in the farm’s signature horseback riding tour to Mayan ruins, my fiancé chatted with the owner, Santiago. He learned that it was Santiago’s mission to revitalize the business, beginning with horseback riding tours and eventually expanding to re-opening the lodge for guests.
After snapping some pro-grade photos of the trip and realizing that Santiago that he was on the market to build up his business further, Martin returned to Seattle with a business prospect on hand. Recruiting me as the sales and marketing focal, Martin dug into his software engineering skills and several months later, we had transformed Santiago’s dated website into one with a modern design. We also booked a trip back to Belize and by November 2012, we were in Belize working directly with Santiago and capture content and data to help sell his new services online. In fact, we were among the first official guests that stayed at Nabitunich cottages before it was officially opened to regular guests.
Identifying and Solving Real Business Needs: The Challenges
What we somewhat foolishly didn’t consider off the bat was how different doing business in Belize would be compared to in the Western world. It bewildered us that so many business owners didn’t have an answer to the question, “how much money did you make last year?” Upon arriving in Belize in December 2012, we quickly realized that we would be facing some pretty basic challenges, such as introducing regular and business management and accounting practices to business owners, and most importantly, big hurdles in the world of online payments and banking.
Challenge 1: Modernizing the booking process by putting it online.
Here in the United States, particularly in Seattle, we’ve become accustomed to instant gratification. When booking a trip, for instance, we expect to know within seconds if there’s availability at a lodge or on a tour, and book and possibly even pay for that service online without a third-party intermediary. These same luxuries of instant feedback and confirmation are largely non-existent outside of the USA, particularly in Belize, where the booking process for a prospective guest goes something like this:
Step 1: Fill out a guest inquiry form.
Step 2: Submit it online.
Step 3: Vendor on the other end receives the booking request and must manually check calendars and confirm availability (or lack thereof).
Step 4: Vendor confirms availability and quotes a rate to the guest.
Step 5: Guest receives rate and either accepts, counter-offers, or asks more questions.
There are many problems with this older model, such as waiting a long time for availability to be confirmed, and then having to make sense of email strings and unrelated forms to properly piece together and organize the guests’ final itinerary. It was shocking for Martin and I to realize our Western ways of booking a trip were not anywhere close to a reality in Belize, and we made it our mission to help change that. We did so by working with WordPress content management system and related tools including the wonderful e-commerce platform WooCommerce to facilitate online payments. This solution was very lean and cost-efficient with a price tag of just $150-ish a year to pay for hosting the website online.
Deliverable: Our resulting solution was a modernized website that was responsive (functional on mobile devices) and allowed vendors to sell services online with easy access to set inventory, and customers who were able to browse and buy services online, knowing instantly if the service was available. Most importantly, our new system also allowed guests to pay online, giving them piece of mind knowing the payments were taken care of, and giving the vendor access to the cash upfront.
Challenge 2: How to transfer money overseas
Almost immediately, we ran into another large issue. Our new system was collecting the full value of trips, tours, and vacation packages up front, meaning there were often thousands of dollars that we had to send to Belize. The banking services in Belize are such that online banking truly does not exist, and as a result we couldn’t do online wire transfers or even use PayPal to send money to Santiago. Any services we investigated tended to charge pretty high commission rates themselves for performing the service. We ended up doing our transfers through Western Union until they eventually grew suspicious of our frequent high value transfers to Central America and blocked us from doing any more transfers. As a result, we booked our next trip to Belize in January 2014 with the intent of speaking with banking officials in Belize to solve the problem.
Deliverable: After speaking to a number of Belizean banks, we hatched a payment solution that still works for us today. Guests are obliged to make a 15% online deposit to secure their reservation with us. That deposit is paid to our PayPal account as a form of our commission, and a paid deposit is added security that the guest will follow through with their reservation since they made a money investment. The remaining balance is paid by the guest to Santiago when they arrive, thus eliminating the need for wire transfers.
Challenge 3: Calculating our value in another part of the world.
As creative professionals in Seattle, Martin and I price our services very high when conducting business in the United States. In Belize, however, we had to adjust our expectations in accordance with what small businesses in the Central America could realistically afford to pay us for our work. Per capita income in Belize is significantly lower than in the USA. Many Belizeans can live in comfort on just a few thousand dollars a year, which was easily what Martin and I should be charging for this project.
Deliverable: Our final solution was to take a commission-based approach where we would take 15% of each future online booking generated on our platform. We thought of it as an investment that would eventually pay us back over time, making it easier for Santiago to agree to work with us without paying a huge amount up front.
Challenge 4: Simplifying the online booking process via Vacation Packages.
Instead of giving guests the sole option of buying services a la carte, we created vacation packages that bundled accommodations, transportation, and tours into one. Packages made it easier to sell higher overall services and thus make more money per transaction. Also, they made the booking process smoother so there were less long-winded emails being exchanged to create a custom itinerary. Overall, it was a win-win-win situation.
How we retain our value
Based on our 15% commission model that started nearly three years ago, we’ve definitely earned back our investment and then some. We retain our value to Santiago and his business by handling the online aspects of his business, such as expanding his reach by placing him on online booking services such as Airbnb and Hostelbookers. We then handle any online inquiries from business partners or guests, and doing basic accounting and bookkeeping for him. In the end, this leads to another big point to our business: there are very basic business needs in most other countries, particularly Central America and Belize. It doesn’t take a huge investment of time or money to help small business in these regions flourish.
What about that car?
And finally, we get to the brand new car. We initially invested in Hanna Stables never expecting a large return, and to be honest, we didn’t know what to do with the extra profits we were making. Running the business was extremely cost-efficient, again only costing us in hosting the website online, so we were left with a huge amount of savings. Eventually, we waited until we had saved up enough cash and reinvested those funds into Gemini Connect by buying a company car to replace my first car: a brand new Subaru Impreza Sport. The car will be playing a large role in our next level phase for Hanna Stables and other tourism businesses here in the USA. That project is still very deeply in the works; more to come!
The bottom line: sometimes, slow and steady DOES win the race.