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I want to share with you something new that I am trying on a very small scale, and something I know that has a lot of potential for making money – the Ticket brokering business.

No you don’t have to become a big ticket exchange house, nor do you need to invest all the money you’ve got. This industry is highly fragmented and there is room for all kinds of participants, big or small.

I will explain the reasons I am trying this out, but by no means do I intend to develop this into a large business – although it could become one option down the road for someone interested in this type of business.

I feel this experiment is relevant to share here because it is one that you can participate in during your pockets of availability, and one that takes a relatively small amount of time and investment to get started with.

Similar to what I’ve repeatedly said about a web based business, or any other for that matter, the same principles apply to this in that you can reinvest your profits back into your business and grow it over time if you choose to turn it into a long term business rather than a one time opportunistic transaction.

So this is how it all started that got me thinking about this initiative…

I am a big college basketball fan and have attended the last two Final Four tournaments. The last tournament was particularly special because my Alma Matter – The University of Michigan Wolverines made it this far.

Having experienced two Final Four weekends now purely as a fan and from a consumer’s perspective, I wanted to capitalize on this year’s event and profit from it as the event will be hosted in Dallas at the Cowboys (now called AT&T) stadium.

What I wanted to do was invest some of my own capital purchasing event tickets well before the event. I thought to myself, as the event gets closer and demand builds up, I can sell my tickets in the secondary market for a handsome profit.

While the potential returns are north of 100%, I am not doing this just for the profits. I thoroughly enjoy this particular annual event and all the festivities that come with it during the weekend it’s held. For me, it is more about being part of the event as well with my friends who enjoy college basketball, and fortunately, I will be in a situation where I can do that.

Previous Experiences with Big Events and Overpaying for Tickets

I don’t remember the last time I attended a big entertainment event where I had planned it well ahead of time. My trips have always been last minute, literally just days prior to the event. A lot of this has to do with not knowing which teams will be participating or the unpredictability at times of my own schedule.

The fact is that most people are likely not in a situation to pre plan well ahead of time as far as events go. Schedules change, commitments arise, and there is just too much unpredictability for many to risk committing to an event that far out.

Having said that, as you can guess I have never paid face value for tickets to such large events that I have attended in the past. There is almost no way you could if you decide to attend the last minute. This experience has proven true again and again. Here are some of the other larger events I have attended for which I have grossly overpaid:

• Popular Broadway shows with no availability like the Lion King
• NBA playoffs and finals tickets and similar tickets to other sporting events
• Concerts like Sting and Dave Matthews
• Pre-sold-out film premieres
• Super bowl

I am sure I am missing some from this list, but the point is that there is always some type of event that interests someone. You may not be interested in sports, but you may jokingly be a die-hard Justin Bieber fan. You may not enjoy Sting, but you’d pay any price to see David Copperfield do magic tricks that you know are fake.

If you don’t plan well ahead of time to attend whichever events you’re interested in, if the event is a popular one that is likely to sell out, chances are that you will end up overpaying for tickets through a secondary market. This has been true for me for any popular event I remember attending.

The Market Opportunity and Value Proposition

Some enterprising individuals recognize the possibility that people (fans) will be scrambling for tickets at the last minute to attend sought after events. In anticipation of this, they purchase several tickets to the event in advance at face value directly from the original seller. In many cases the original distribution is done through a ticket exchange partner such as Ticket Master.

The opportunity for the entrepreneur is of course the likelihood that people will want to attend the event and thus willing to pay a higher price as the event gets closer and they become more desperate to secure tickets. The value proposition to the consumer is the flexibility to not commit to and plan ahead of time and still be able to attend the event at the last minute if they want and are able to.

The Investment Perspective

There are countless ways to make money, and one of my goals on this blog is to introduce alternatives that can produce extra income for you in your spare time (those that do not require full time involvement). Ticket brokering is one such alternative, on a small or big scale, and whether as a one-time transaction or an on-going business initiative.

While I often write about several low start-up cost and passive business models mainly based online, I don’t want to ignore viable businesses models that require up-front investment. In fact, if you’ve heard the phrase “money makes money”, it is true and possibly the fastest way to make more of it.

It is no accident that the rich get richer. A lot of this has to do with the fact that the rich have capital set aside ready to be deployed at profitable opportunities. Capital leverage is the best and quickest way to magnify financial returns, especially from a tried and tested business model that we know has worked repeatedly in the past.

Here are some examples. Opening up a McDonal’s franchise in an emerging market (new country), investing in a dying brick and mortar business you know inside out which you know you can turn around and sell for a profit, or investing in the stock market in significantly undervalued equities, taking advantage of depressed real estate valuations like we saw in 2008 or currencies when they are at their rock bottom. The examples can go on forever. The point is – it is most always easier and quicker to take money and multiply it rather than to create it from scratch.

When I first started this blog, my goal was to discuss various alternative methods to generate some extra money, which are mostly and traditionally methods that require start-up capital.  But fortunately because of the time we live in today, the internet has made it possible to create income streams from a relatively low capital investment perspective.

This caused a shift in my focus. While the focus of many articles on this blog weigh more on the online platform and passive income streams based online, I certainly don’t want to ignore the more traditional, tried and tested methods of making money. These methods worked back then, still work today and will likely work forever in the future. There is a reason why there is a Starbucks on every corner.

Learning to mobilize your excess funds so that you can earn a handsome return on investment (higher than the rate of inflation and other alternatives you are comfortable with) is just as important in my opinion, if not more important, than learning how to create new passive income streams online. Why? Because starting a profitable online business may be a far-fetched reality for many for various reasons, but saving part of an active income and investing it is rather the common norm given that most people in this world work for a wage.

An Important Lesson to Realize is that Sometimes it Has to Take Cash to Make Cash

One of my property managers once told me:  “Sunil, stop worrying about every darn small little thing. It takes money to make money. I’d gladly hand your property back to you to manage”.

The message rubbed me the wrong way when I was scrutinizing the rehab invoices he was sending me. He had spent over $5,000 turning over a property and getting it ready for the next tenant. He changed the carpet, repainted the whole place, fixtures, caulking, etc. I wasn’t very happy about this – at least initially.

But when I took a step back to think about it, I realized that the previous tenant was there for six years. The next one will likely be there for another three or more, and the rehab job we did is going to last at least six years.

When the cost is spread out over time, the return on investment significantly outweighs the money I had to shell out. I can lease the unit quicker, attract better tenants, a longer lease and demand more money.

The whole thing totally makes sense. Just like we are putting in the hard work now to build a better, strong future, the same can be said about investing. You sow the seed today with your investment dollars to see the growth of your investment down the road.

This was of course years back, however still very vivid in my memory. These days, $5,000 turn-around jobs are routine and I am rarely bothered by them because I know they are a necessity and that the investment will produce far greater returns down the road.

Another VERY Important Lesson is that Cash will Rot if Not Utilized

Another reason to consider initiatives that require investment of cash is that your money will lose value if it sits around doing nothing. It’s one thing to have it working for you in high interest rate vehicles, but cash most likely loses its value over time as we experience inflation. The cost of milk today is much higher than what it was 10 years ago.

While it is important to balance the return potential to the risk and your comfort level with a particular investment, it is also very important to diversify and have fun when possible. If you enjoy picking stocks, then pick them. If you enjoy working with real estate property, buy them. I find sporting events and the activities around the events fun as well – and if I can find a way to profit from it, then I will definitely pursue the initiative.

The Competitive Landscape in the Ticket Brokering Industry

It is very important to thoroughly research and understand your competition whenever engaging in a profit generating initiative. I am aware that the ticket brokering business is dominated by few online giants such as Stub Hub and Fan Snap, but there are countless other specialty online brokerages and smaller players as well. This is a highly fragmented and very local market.

In addition to online avenues, there are also several individuals like myself who are doing this both at local and national levels. Professional ticket brokers travel city to city and State to State depending on the event they are working on.

With that said, my goal is not to become one of either. My goal is to carve out my own little niche around specific events I know and am comfortable with, in markets I am very familiar with or want to get familiar with. In fact, depending on how this particular experiment goes, I might just call it a one-time transaction and never do it again. Time will tell how much I enjoy this process and how financially viable it turns out.

I definitely want to start with the upcoming NCAA Men’s Basketball Tournament, and if that goes well I want to extend this activity to the Super Bowl as well and other handful of high profile College Football Bowl games. If things go especially well and I find myself enjoying the process, I may pursue other one off events like a big boxing match or a highly sought after concert.

The Ticket Brokering Business Model

As I started researching and learning more about ticket brokering, I realized this “business” is one of the simplest forms of businesses. It is really not much different from a retail company. If you think of how a retailer like Home Depot works, it’s pretty simple.

The business first deploys capital to buy products at bulk / lower prices and then resells them to its customers for a profit. It takes its profits and reinvests them back into the business. It does this over time until it snowballs into several locations across various markets.

Ticket brokering is no different. I reached out to several family members and friends and requested them to enter the lottery through which each can secure up to 4 tickets to the games at face value. This is roughly $195 per ticket for the all session pass which includes two Final Four games on Saturday and then the final game on Monday.

I had several folks enter and I ended up with 22 who were granted tickets.  I now have 88 tickets in my possession for a total investment of $17,160. Think about this as Home Depot spending $17,160 to purchase inventory.

If you are wondering, most events generally have an early bird window within which you can pre order tickets to an event. This is how you secure tickets at face value.

Business Risks and Considerations in Ticket Brokering

As with any for profit initiative or investment, this has its own set of risks to consider. We all hear about the glorious stories, but we don’t always hear about brokers losing money on events. If brokers are not able to sell all their tickets, they may lose money on the event. Many times they recover their investment and simply break even, but it is not uncommon to lose a lot of money.

Full time brokers deal with a lot of unpredictability, uncertainty and chance all the time. For example, weather can impact an event’s turn out.  Local, political and economic events can also interfere with various events. Similarly, many such unpredictable factors are involved that can impact an entertainment event’s turn out.

I wouldn’t say this is a complete gamble because brokers don’t go into this totally blind. This is a calculated initiative that carries its own set of risks similar to any other. And like any other initiative, it is important to study and understand everything related to the business.

For example, by starting out with the Final Four, I know that the event will be held in Dallas at the Cowboy stadium, also known as Jerry’s world. I know that the stadium itself is an attraction and a place many sports fans want to visit. I also researched that prior major sporting events in Dallas have always been profitable and turned out record crowds and fan participation.

At the same time, I also know that places and activities are more spread out in Dallas unlike Atlanta where the last event was. There are going to be commuter challenges involved, and it’ll be interesting how visitors from out of town deal with this. It is always more attractive to have all activities taking place centrally whenever attending a big event – whether that’s a sporting event or a business conference. Unfortunately, the Dallas metro plex is not quite consolidated. It’s a very wide spread out region.

Learning From Experience and Doing Your Homework

I cannot emphasize enough the importance of doing your homework, especially when high stakes are involved. The more success an individual experiences, the easier it is to impulsively get involved with something because the individual fees he or she can’t do anything wrong.

This is a big trap that even the best fall into, which take them back to reality and remind them that each business initiative stands on its own and should be approached accordingly with adequate due diligence. This is referred to as business hubris.

After going through two Final Four experiences, I realized that I wanted to become financially involved in this event. My friends and I purchased tickets for well over 100% of their face value. I almost fell into this trap after my first Final Four. But thanks to short term memory and some other things that distracted me away from the past experience, I didn’t get involved right away. The experience after the second Final Four trip however tipped me over the hump.

Few weeks after the event, I set aside several hours each week to study the previous Final Four events. I researched the venues, participating teams, attendance, local vs. out of State attendance, impact on the local economy and several other attributes which I logged into a spreadsheet. This helped me understand the marketability of the event, or the potential demand that may exist for tickets.

I reached out to my network to get connected with several ticket brokers, part time and full time. I spent hours talking to each about the business, how it works, how they got started, the pitfalls they fell into, the “secrets” to big successes they’ve had and just the business overall.

This was time extremely well spent. It was not only knowledgeable but also fascinating. Even if I were not to move forward with this initiative, the conversations educated me so much more about the business than I learned on my own. Nothing beats personal experience, thus the value in personal one on one coaching. Many of my thoughts in this article come from my discussions with brokers.

Where to Buy and Sell Tickets for a Profit?

A full time ticket brokering business is a much broader discussion, but the points below are some important considerations to take into account if this is a business model you are interested in.

Many of these points can be applied to one time initiatives, as well as a part time ticket brokering business. Many brokers focus on just one team near where they live and do this on the side.

Here are some things to consider:

One of the keys to a full time ticket brokering business is building relationships (isn’t this true for every business?). You build a network over time of suppliers, customers and allies who can connect you to the customer. For example, if you have a good relationship with a concierge associate at a hotel, they may refer hotel guests looking for event tickets to you. It’s smart to build many such strategic relationships and even incentivize your contacts to send you business.

Similarly, connecting with human resource personnel, corporate marketing departments, secretaries who work for high profile bosses, professionals like lawyers and CPAs who deal with clients all the time helps tremendously. Focus on building a rolodex of connections who will either buy directly or connect you to the buyer. Treat them well, especially those who are sending you business consistently.

Build a rolodex of sources to get tickets from at face value. Many times, the box office will leak them out to their personal contacts. This is how many brokering sites have tickets to events before the tickets go on public sale. Yes, I don’t necessarily agree with this practice but the reality is that it happens all the time.

In addition to larger institutional supplier contacts, also maintain a list of individuals (like I did) that you can reach out to who will buy tickets on your behalf. A single buyer is usually allowed to buy a certain number of tickets during a pre-sale, a lottery system or the day the tickets go on sale at face value. Incentivize them for their time so they are more inclined to do it the next time around.

You can’t sell something you don’t have. Identify and record sources from where you can buy. This can be organizations and individuals. Maintain a rolodex of contacts and consider an email newsletter system to manage communications.

Identify key events that you know are going to be a hit, especially in your immediate area. It helps to be a local here, particularly if you happen to live in a place like Los Angeles or Atlanta where several “big events” happen year in year out. Always research the event’s past history, performers and venues. The more information you gather, the more successful you are likely to be as you can more accurately estimate demand and potential for profitability. Over time, the better you get to know a recurring event, or a recurring performer / performance in a recurring venue, the better your chances of success will be.

Now that we have the purchasing side covered, let’s talk selling.

When you have a hot commodity in possession that everyone wants, selling becomes that much easier. All you need to do is find a platform that makes your commodity visible. For example, if you have an inventory of branded products, you may post them on Amazon or Ebay. Similarly, avenues exist specifically for entertainment even ticket sales. Stub Hub and Prime Sports are two examples of these.

In addition, there are always auction sites like Ebay where you can auction off your tickets. You also have local classified sites like Craigslist where you don’t have to pay to list or sell your tickets.

Finally, you have the social platforms involving human interaction. For example, you can strike up a deal with a local hotel who can buy your tickets from you and offer them in a bundle package when they sell their rooms.

You can make contact with a hotel concierge and tell them that you have tickets in case their guests are looking to buy them. Of course you want to offer some incentive like a small finders fee in return.

Professionals like lawyers, accountants and financial advisors are always looking to entertain their clients. Build a network of these folks and keep them informed of your inventory. There are countless other examples of people, places and platforms that you can tap into to expand your reach and sell as much of your inventory as possible.

Ideally, you want to unload everything prior to the event so that you can also enjoy the event without the stress of unsold inventory in the back of your mind. Unlike products which can be sold at another date, tickets to events have a very limited shelf life.

Other Tax Advantages and Upsides of Ticket Brokering

All brokerage fees and costs are tax deductible. If you travel for this business, you can deduct travel costs, part of your meals and entertainment, mileage, etc. By doing this, you will lower your effective tax rate and thus increase your overall take home returns. Read this article for more clarity on this topic. You can also incorporate your business if you plan on doing it long term, truly maximizing your tax and legal protection benefits.

The more I researched and the more thought I gave it, the more ticket brokering appeared as a really interesting trade to get involved in. You can definitely earn several thousand and tens of thousands of dollars doing this in your spare time alone, even if you were to focus just on local events. The key is to establish the necessary relationships over time. Your network will grow over time and word of mouth alone can bring you consistent business. This statement can be true for any business.

The other nice thing about this initiative is that many sought after events are held on weekends. If you are a working professional who has weekends off from work, you can use some weekends and holidays to travel to local events which you plan to profit from. You don’t have to, but you have the option to.

Before I conclude with the tax benefits and upsides, I do want to state that it is important to start on a small scale when you are first trying this out. In fact, I’ll go as far as stating that you should only use capital you can afford to lose in a worst case situation. In addition, it is also important to recognize that you will have your capital tied up until you are able to sell your inventory of tickets. It is only then that you will realize profits that you can reinvest back into your business.

Considerations Around Ticket Reselling Laws and Regulations

This business is interesting from a legal and regulatory perspective as well. Scalping has a very negative connotation, but the reality is that it happens every day everywhere.

If you are going to participate in scalping, referred to cleanly as “ticket brokering”, you must be aware of the local laws where you are doing business. Scalping laws vary broadly from one jurisdiction to another.

Some States may have their own laws, whereas cities within those States may have their own. Furthermore, event sites have their own laws. For example, some event sites (i.e football stadiums) will allow you to resell tickets at the gates, while others don’t allow it within 500 feet.

What makes things even messier is the determination of the origin of the seller. Where were you when you bought the ticket originally, where were you when you sold it, where and how did you physically sell it and execute the transaction, etc. The capability to trade over the internet makes this a very confusing topic from a legal and regulatory perspective. You also brokers who locate themselves at the border of certain jurisdictions so the more favorable laws apply to them.

That said, you will learn the ropes of the trade once you immerse yourself in it. The internet makes all this information very much accessible. When in doubt, call the local police station and ask them about what the laws are in their area. You will learn a lot of this from practical experience as you gain experience and spread your geographical participation over time. I am amazed at how much I have already learned about the ticket reselling laws and regulations of Dallas and Arlington, TX (where the stadium is) in just a short period of time.

What you will quickly realize is that the laws and regulations are not very clear or granular. They vary broadly, and are applied and enforced differently everywhere. Lawyers are good at convoluting this matter even more, and this is why we see the gorillas like Stub Hub who have their own corporate lawyers who have managed to get away with all sorts of things in the ticket reselling business. An individual on the other hand has to be more cognizant of the law and its applicability.

My Game Plan Going Forward – Here is What I Plan to Do

I’ve had everyone mail me the tickets and I’ve reimbursed everyone through online banking, plus an additional $50 for the 15 minutes of effort they’ve put in on my behalf ordering the tickets. The tickets are listed on two major ticket exchange websites. These sites normally take a 5% hair cut on the selling price.

I have reminders set up on Google Calendar to monitor prices weekly and make adjustments as needed if they have not sold. We are still a bit early so I will leave them untouched for now. I also have a hotel room booked close to event and plan on staying there for accessibility reasons over the weekend festivities. Being there in person helps especially if you plan on selling hard tickets on the day off the event. It also helps if you are selling through platforms like Craigslist. Many utilize these sites because they are free and involve no cost to sell.

While one may hope to sell as many tickets through Craigslist (in person transaction) to avoid fees, large ticket brokering sites have a much broader reach and are likely quicker to sell the tickets. Buyers also feel more comfortable buying through reputable sites as Craigslist is well known for scams (and killings) of all sorts.

If I sell every ticket through a brokering service and pay the brokerage fees, I am anticipating at least a 180% profit based on my experience at the last couple events. I thoroughly studied ticket pricing and monitored the movement in prices from two weeks out all the way to the hour prior to the games. Based on these figures I am approximating roughly $30,888 in profits if I can sell all the tickets.

I’ve calculated the total time investment at roughly 15 hours (super aggressive) between emailing/calling people, ordering, organizing, posting, etc. On the surface, this is a pretty good return on investment. Of course, I anticipate this number increasing as the event nears and I continue to monitor and modify my listings. This number will also increase if I decide to sell in person during the event itself.

Even at 30 hours, I am looking at a profit of $1,029.60 PER HOUR. Of course there are several assumptions I am going with here, but even if I were to discount that by a whopping 50%, I am still looking at a $500+ per hour net return on investment.

This is exactly what I meant when I stated that money makes money. When you have capital saved up ready to be deployed, all you are then doing is waiting for the next opportunity where you feel comfortable enough to take the plunge and where the returns are enough to satisfy your requirements and risk appetite.

It is important that we realize that such opportunities exist everywhere and all around us.

Concluding Thoughts

So there you have it, my plan to profit from ticket brokering from the next Final Four weekend. I’m anxious to find out how this turns out.

If you are interested in ticket brokering as a business, understand that like any other, this business requires just as much learning. I thought I could just jump in and make money, but not to my surprise, there is a lot more to learn once you roll up your sleeves and get dirty. Financially speaking, the brokerage business is a longevity game. The longer you do it the bigger your snowball (profits and investment capital) will grow. The more capital you invest the more potential return (and also risk).

If you’d like to give something like this a shot, pick an event you are comfortable with and learn everything you can about it before getting into the ticket brokering business. Like anything else, TAKING ACTION after gathering the knowledge you need is what will drive results.

This last point is important. If I didn’t do my research and talk to enough ticket brokers, I probably wouldn’t have been comfortable putting $17,000 at risk on a brand new investment.

And even if none of this interests you at all, if you have cash sitting around, make an effort to learn about other wealth building alternatives and diversify into methods and vehicles you are comfortable with and those you understand. Utilizing cash to make more cash is the quickest way to make money. This is why the rich get richer. They are able to timely capitalize on opportunities.

If you need tickets to the 2014 NCAA Men’s Final Four, you know where to come J I will write a follow up post to report the results of this experiment after April. For now, let’s hear your thoughts…

Would you ever considering doing something like this? Why or why not? Are you interested in reading about similar ways to make extra money where an investment is necessary, or would you rather read more about purely internet based, free or at best low cost methods to generate extra income such as publishing ebooks, creating iPhone apps, websites and blogs?

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