Investing in LEGO and building an e-commerce business requires a huge amount of discipline. It’s unlikely that you’ll have that discipline right from the start, so it is crucial that you build it up over time as you grow your business.
What do I mean by ‘discipline’?
I am talking about the ability to make logical strategic decisions. The ability to avoid getting too emotional. And the ability to stick to a plan that you outline, regardless of how many temptations are thrown at you.
Discipline is critical for all manners of investing, including real estate, stocks or other equities, crypto currency, gold, or any other investment you can imagine. In any situation where you are allocating your hard earned money to an asset, emotions and adrenaline can quickly take over. Assumptions can be made, and hype is often everywhere.
The world of LEGO investing is no different.
Outline a Clear Business Model
Like with all businesses, you need a plan. Since LEGO investing is both e-commerce and investment management, you need to be even clearer on your plan, because you are acting as both a business owner and an active investor. You are managing both an ‘inventory’ and a ‘portfolio’ at the same time. This requires a lot of planning.
We won’t go into detail on how to draft a business model here. We’re not saying that you need to draft a fifty page document, or anything like that. But you do need to have a solid understanding of exactly how you will fund your business, the stakeholders involved, the networks you will sell through, how you will source inventory, your expected profit margins and ROI, and a rough outline of your 3 – 5 year expectations for the business.
By making sure you outline your business model early on in your venture, you can focus on having discipline while sticking to the plan.
That does not mean you shouldn’t change and adapt for new opportunities – of course you should. No business sticks entirely to a plan that they outlined when they first started. You will learn how to do things better, and you’ll adjust. But at least by having the plan, you will have some ideals or expectations for yourself and your business that you can hold yourself accountable for.
For example, if you outline that you want a minimum ROI of 50% on every investment you make, you now have a hard number to hold yourself accountable to. No matter how many opportunities you get to buy large quantities of flippable sets, you won’t see them as good opportunities unless they meet your minimum ROI threshold. As a result, you’ll make better buying decisions.
So the point here is not that you need to have a rigid document that you follow down to the letter. The point is that you should have a solid understanding of what you want to achieve, and how you plan to get there, and use that plan as a guiding light while making decisions in your business.
Avoid the Hype
We talk about this a lot, and we will continue to talk about it. Be weary of hype in the LEGO reselling world! This is the enemy of discipline.
It’s easy to get excited about a set based on some chatter you saw on LEGO forums, or the Brick Bucks Facebook page. Be careful here. Everyone has a different business model, and some people may be excited about a set or theme that really doesn’t work with your model. Someone else may be selling on Amazon for example, and the sets they are excited about may not necessarily be the ones that you should be looking to sell on eBay (there are some differences in demand from platform to platform).
Some LEGO investors like to buy sets as soon as they hit the shelves. Although there are some benefits to starting to buy a set early, in the beginning you should focus more on sets that have been around a while. This makes sure that your money won’t be sitting on shelves for too long. At the start, you need to make sure you are turning over your money quickly in order to grow a sizable portfolio.
So be careful about hype over newly released sets.
The hype you see online can also often be speculative, and not based on data. Look for cold hard numbers in every decision you make. If other investors are excited about a set, challenge it. Ask them for the data. If the numbers look good, then perhaps you can start to get excited too.
The key point here is – don’t get excited about a set just because other people are excited about the set. Which brings us to the next (related) point.
Stick To Your Own Due Diligence
Do your own due diligence!
There is no substitute to doing your own research. Even if you trust a fellow LEGO investor, don’t buy sets just because they say it’s a good buy.
If you base your buying decisions off of someone else’s research, there is much more of a chance that you will make mistakes. Furthermore, when those mistakes happen, you will begin to blame other people. This is not the mindset that any entrepreneur should build for themselves. You need to feel responsibility over your buying decisions, so that you can analyze past decisions and get better over time. This is impossible to do if you didn’t make your own buying decisions to begin with.
If you investigate and research sets on your own, you will get great at doing it over time. I promise – this is one of the most important aspects of growing your business over time.
Every time you research a theme or set, you get a little better. Over a few years, you will develop an amazing intuition for buying winners. Don’t cut corners on this!
Learn to Identify Your Emotional Decisions
You will make some bad decisions. And you shouldn’t worry about it, either. It’s best to accept that it is inevitable. No reseller makes all-perfect buying and selling decisions.
The important thing is to learn how to learn from them.
When it comes to building discipline, pay particular attention to whether or not you made a poor decision due to emotion.
Perhaps you got caught up in some hype. Or perhaps you saw a great sale, and you bought some sets you shouldn’t have bought because they were 50% off. You got overly excited when you saw the discounts, and you let the emotion and adrenaline get to you. You didn’t use logic and stick to the themes and sets you had in your target list.
This can happen in a number of different ways. For example, perhaps you saw a label on a set that said “Hard to Find”. You suddenly start to get “FOMO”, or ‘fear of missing out’. What if the set doesn’t get discounted at all because it’s hard to find? What if the LEGO Shop at Home store runs out of inventory, and I can’t find any of the set now because it’s not sold in other retailers?
My question to you is – so what?! If you miss this set, there are others. Don’t overpay, and don’t rush into a buy because of FOMO. Identify the times in the past that you did this, and learn from it.
When it comes time to buy, choose carefully and have the discipline to wait to purchase them. As of this moment I have capital that I’m ready to spend and I currently have no inventory of Creator Expert Winter Village Fire Station 10263, but I’m not going to pull the trigger on it just yet. Historically this theme can be discounted between 15-20% off RRP in October so I’m not going to sell myself short by purchasing this set not and losing potentially hundreds of dollars that I can be spending on other sets.
When it comes time to pull the trigger on that Winter Village theme there is a good chance that I may not meet my expectation of having a specific quantity, but that’s okay. There are other very popular LEGO set that should be retiring and that are discounted for me to purchase.
There are plenty of popular sets that are getting ready to retire, being offered at a discount, and have large quantities available to order. Those are the sets that you should be focusing on.
Trust the Data – Not Your Intuition
Before you more experienced LEGO resellers get mad at me, let me mention that this point is mostly for the beginner and intermediate LEGO reseller.
Over time, you will build up a great intuition for buying winning sets. After a few years of doing this, you could probably make buying decisions without looking at the data.
But that’s because you looked at the data for those few years!
If you analyze the data at the start, you build the ability to not have to analyze it so much down the line. But when you’re first starting, you really should be going deep on data. Break down the themes you are interested in, and go through the major sets in those themes. How did they perform over time? What was the supply and demand like on the major reselling platforms? What factors may have contributed to its success (or failure)? What is the likelihood for a repeat of that success or failure in the future?
There’s a lot involved, I know. But at the start, this is the only way you can make good buying decisions. You may think you have an intuition for what will sell well, and sure maybe you can make a good buying decision or two on a whim. But you’ll make tons of mistakes, and waste time and money.
Avoid going with your intuition or instinct for the first few years. Data, data, data!
Go out there and get it!
Discipline is crucial in LEGO investing. Learn to avoid making emotional buying decisions. Learn to have patience, avoid hype, and analyze your past mistakes. Focus on the data, and use your plan and business model as guidance.
I hope you found this insightful. If so, make sure to check us out on YouTube, where we give tons of more experience and strategies for LEGO reselling and investing. Also, we have a free Facebook group – join if you would like to learn from like-minded LEGO investors.
Do you think discipline is important in LEGO investing? Post your thoughts in the comments below!