The business plan described here is outlined the book the "4 hour work week" by Tim Ferris. I'm adding my personal experience in succesfully implementing it.
Creating a muse
A muse is an automated business that provides a passive source of income. Will it makes us rich? Probably not. Will it gives as a steady monthly cashflow with minimum management time that allows us to do other stuff? You bet.
I'm gonna describe one type of muse; the one that ships products.
The most important thing is to start with the end in mind; we have the model, then the prize range, and only then we find the product.
The model is simple; we want to sell something trough internet. Production is outsourced, and distribution aswell; we are an online retail.
Prize range is anywhere between 50-300USD. Why? Smaller prizes require us to sell too much and future competition will cut down ur margins too fast. Higher prizes make customer require to talk with someone on the phone before buying. We want to avoid that.
The math is simple; say ur sales prize is 150 USD, and you profit 80 USD per unit. Selling only 20 units a month grants you a net 1600 USD. Not bad huh?
Finally, you need the product. To find it, you need to find a niche market, and make the product for them. It's easier to satisfy a need than creating it. A usefull tought process is to think in every group that you have belonged, and stuff you could use. Brainstorm and start from there.
Your niche market must be really specific; appealing everyone is appealing no one. Making a product for cars is way too broad; on the other hand, something for Ford Ranger users is a good niche market. A smaller group will also aloud you to advertise cheaperly and easily.
Your advertising will be trough either google ads or facebook ads. Both means are ridicously inexpensive and effective as you can target your niche market and avoid wasted clicks.
For my muse I use only facebook ads; chilean males aged 20-40. Does that mean other groups don't buy from me? Not at all. I have lighter bells for woman and older people, but I believe they purchase mostly cause they know the product beforehand.
Comercializadora Kettlebells Chile Ltda.
How the idea was concieved can be seen here. After creating the website, and succesfully testing there was enough demand, I contacted a chinese manufacturer to build me 4 tons of kettlebells. Had there been no demand, I would have shut down the website, moved on, and tested the idea for only 40 bucks.
It is critically important to do real sale tests BEFORE purchasing anything. Setting up a website is effortless and inexpensive. Getting merchandise and not being able to sell them is as fun as playing a Zerg vs Terran with Flash in a 2 player map.
The process is simple; people find my website, make and order (trough credit card or checking account) and I ship the product through a third party agent. Shipping is payed by the customer when product is recieved. My job is very simple; answer emails, drop packages at the post offices and tax declarations (I go to business school so I know how to do them).
On the future I plan to have automated pickups at my door from the post office, which is zero cost but currently suspended until January; I could also hire an accountant (40 USD month) and have as only responsability answering emails. I could even outsorce that, but don't want to for the moment.
Taking each 16kg bell from china to my door costed me 29.08 USD, while my sales prize is 79.2 USD. This yield me a net profit of 50,12 USD per unit with a 172% ROI. Other bells have the exact same ROI, though margin per unit varies according to weight.
I understand this guide is very general, but the fundamentals are here and this is the first of many entries. For a list of other succesfull muses check Tim Ferris blog:
http://www.fourhourworkweek.com/blog/2010/11/28/4-hour-work-week-case-studies-muse
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