7 Effective Business Strategies From A Successful Panhandler

7 Effective Business Strategies From A Successful Panhandler

Not long ago, in the lobby of a hotel near Harvard Business School, I noticed a slightly disheveled man in a black ski jacket, singing softly to himself. I couldn't help but look, and I realized he was counting a wad of dollar bills from a beat-up coffee can.

My curiosity got the better of me.

"Whatever you do, you must do it well," I told him, and I asked if he drove one of the taxicabs lined up outside.

"No," the man replied. "Panhandling!"

We talked for a few minutes, and I soon realized I was in the presence of a sales strategy genius.

He told me that his name is Eugene, that he's been panhandling for 30 years, and that he brings in as much as $200 a day. That could add up to as much as $50,000 a year on the high end -- all tax-free, as we'll see below. According to the folks atPayscale, which pulled its data on the Boston area for me, if he's telling the truth, he's taking home more than a lot of teachers, nurses and even law enforcement officers.

I told Eugene that I write for Inc., and peppered him with questions. I don't doubt that many panhandlers are truly struggling, but here are the surprisingly transferrable tactics used by Eugene and others at the top of their game. They all boil down to some pretty impressive sales techniques and entrepreneurial strategies.

1. Satisfy a compelling customer need.

This is most important -- for panhandlers or any business. Eugene literally does not offer any tangible product, so why do people give him money? I suspect it's mostly because they want to help others, but maybe for some it satisfies other deep-seated need. Regardless, customers act for emotional reasons at least as often as they do for other reasons.

2. Project the right image.

Most panhandlers are in fact struggling, but a surprising number of professional panhandlers claim mid- to high five-figure incomes. While Eugene wore a pretty nice ski jacket, he was unshaven and unthreatening. He might be doing okay financially, but he dressed the part of someone who wasn't. He also had a quiet, gentle demeanor.

3. Choose a tax-favored business.

You can't get more tax-favored than panhandling. The U.S. Tax Court has held, ironically, that if you sing or perform in exchange for tips, that's taxable, but if you just beg for money and give nothing in return, that's tax-free. (I verified this with a tax lawyer and former colleague of mine, Igor Drabkin, a partner at Holtz, Slavett & Drabkin.)

4. Location, location, location.

Eugene told me he's been panhandling in the same area the entire time he's been at it. It's common sense that some areas would be much more conducive to panhandling safely and effectively than others. In fact, I found quite a number of articles about panhandlers coming to blows with each other over prime territory.

5. Communicate a simple message.

A panhandler who is also a blogger maintains a list of effective signs he's used. In general, he says funny signs work best. As for Eugene, he told me his secret is, "knowing how to talk. Proper, common sense, tell the truth. I don't ask them any [questions]. I just tell them to have a good day, and good luck."

6. Keep overhead low.

This is an obvious point, but it's important. How many times have you heard about entrepreneurs who grossed a lot less than $50,000 a year, and whose profits were eaten up by unforeseen costs? In Eugene's business, there is no cost of goods sold, no customer service department and no overhead.

7. When you find something effective, keep doing it.

"After a while, you learn what works," a panhandler in Florida named Robert Couch told the Tampa Bay Times. Eugene told me he'd been doing the same thing on the the same stretch of road near the Charles River for three decades. Like any business, once you've developed a process that works, you should either continue doing it, or improve it.

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Los Angeles
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Proportion of low-price tracts that gentrified 2000-2007: 23%Source: Federal Reserve Bank of Cleveland
9
Tampa
AP
Proportion of low-price tracts that gentrified 2000-2007: 24%
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Portland
AP
Proportion of low-price tracts that gentrified 2000-2007: 28%
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Chicago
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Proportion of low-price tracts that gentrified 2000-2007: 28%
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Atlanta
AP
Proportion of low-price tracts that gentrified 2000-2007: 31%
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Washington, DC
Getty Images
Proportion of low-price tracts that gentrified 2000-2007: 35%
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San Francisco
AP
Proportion of low-price tracts that gentrified 2000-2007: 42%
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New York City
AP
Proportion of low-price tracts that gentrified 2000-2007: 46%
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Seattle
AP
Proportion of low-price tracts that gentrified 2000-2007: 55%
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Boston
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Proportion of low-price tracts that gentrified 2000-2007: 61%
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