40 years ago I entered into the moped (think motorized bicycles, motor scooters) rental business on Nantucket Island, Massachusetts. This was the application of my business plan in my “Entrepreneurship” class at UVa’s McIntire School of Commerce. It was also the only “A” I ever achieved in my very short 1-year college career. lol
I also pulled in $55,000 in cash in those fateful 10 weeks as my freshman summer “job,” which I quickly hypothesized that I actually made more than the President of The University of Virginia… if I extended out my ten weeks into a year. I reasoned…”why did I need to stay in college to earn a living?!” So I took an “extended leave of absence (read 42 years!)” giving back the remaining 3 years left on my “Full Ride” Army ROTC Scholarship and leaped into my 4 decades (and counting) career in “never, ever, having a job!” Ha!
So…here’s yesterday’s (really 40 years ago!) lesson applicable to today. I started my moped business on Nantucket, moving at the end of the first summer season to Sanibel Island, Florida, opening my 2nd of what would be 100 locations…over the next 2–3 years. How could I do that after being just out of my teens..making me a multi-millionaire by the tender age of 22?
Well…as other entrepreneurs caught the moped rental craze following my success… they started opening up wherever tourists gather around the country’s resorts and making “bank,”…just like I did. I knew the market was WAY bigger than I could ever hope to capture a fraction of…but was it? 🙂 Landlords started getting a little anxious about the perceived liability of renting their commercial space to moped rental operators. You see, mopeds were so new to the US scene that they were neither “fish nor fowl” to insurance companies. They were neither bicycle nor motorcycles and renting them to novice drivers just seemed like it would be a risk that must be thoroughly vetted by the insurance companies. Therefore…there was zero liability insurance to cover the moped rental operations, naming their landlords as “also insureds.”
Before you could say “do it myself” I was on my way to Bermuda, securing a renowned Barrister’s services adept in the “Captive Insurance Markets” and for $50,000 in “moped cash” I had my very own “Captive.” Guess what(?!) I also had the ONLY moped rental insurance policy in the U.S., becoming its own client first and then… letting the word filter out that my “Captive” (no one knew it was actually me, of course, lol) could write insurance policies to cover the operator as well as the landlord.
I was slammed…in a very good way. I knew the risks firsthand. I had all of the details of accidents and damages from my own operations. There was virtually zero risk of significant loss. If a moped renter was hit by a car…the car’s insurer paid. The units only went 25 mph and I was located on islands (for my own operations) and other resorts for others had very slow roadways because of the nature of a resort locale…there wasn’t going to be any major losses, I was betting. I set the “premiums” to my clients (moped rental agencies) at 11% of the gross sales (subject to audit monthly, of course) and at a 50–60% net profit…I would in actuality be every client’s 25% (or more partner)! By reviewing the premiums rolling in…I actually saw the best locations for my business already researched and put into operation….so I opened up right next to them or across the street. My competition did my R&D, I already collected 25% or more of their business and could make off very well in the same resort. I ended up buying out select commercial buildings for my own portfolio, further appreciating my wealth and protecting my “cash cows.” Ever price out the commercial real estate in the heart of Nantucket, Sanibel, Key West and fee simple Maui property? It is very costly but my might little mopeds threw off 20% of their gross sales to debt service so…I scored again!
I covered the first layer of coverage and acquired a “Reinsurance” policy from the venerable Lloyds of London for catastrophic losses that started coverage in the millions. On a little $319 moped from Steyr Daimler Puch (Mercedes)…that was NEVER happening but…Lloyds was on my Captive policy’s letterhead, of course. 🙂
Anyway, over our “Crypto Summit” on Saturday, I realized I could do this again…this time with cryptocurrency mining machines that I was buying or loaning money for others to buy to put into service. I could be the first to create a comprehensive insurance policy to cover “business interruption,” theft, non-performance of the unit to pay the debt and everything else..to go with my financing package. There was an insurance broker from one of the world’s largest commercial insurance brokers at our table…a new friend and a very, very sharp fella. One of the young “Turks” at the table who was borrowing $250,000 to buy our machines asked me if there was any coverage for the debt incurred by him if the machines did not do as “advertised” to cover his potential liability to my lender. I looked at my insurance broker and we both said…”Now there is!” In literally 2 more days, I will have indications of interest from the world’s largest insurance companies and like Lloyds of London as a Reinsurer, just like before, if needed.
Follow the “Adventures in Capitalism” of Peter J. Burns III at http://www.peterjburns3.com
Note: Previously published by Peter J. Burns III on Medium (2018)