EARN MORE WHILE YOU WORK LESS

There is a saying in the corporate world: ‘’don’t make yourself irreplaceable. If you can’t be replaced, you can’t be promoted’’. As an entrepreneur, this is still true. Let’s think of ‘’ being promoted’’ as earning more and working less. You can raise your prices, but until you can remove yourself from being directly involved in doing the work that generates the income, there’s always going to be a limit to how much you can earn, and it can only increase very slowly.

Passive income on the other hand, is the income that does not require your direct involvement. Some kind of passive income you may be familiar with include: Owning rental property, royalties on an invention or creative work, and network marketing. If you want to earn more, work less, and have a decent retirement, you have to start creating income streams that do not require direct involvement. Whether you’re just starting your business or you’ve been running it for a while, the sooner you start thinking about how you’re going to shift your business model to create more passive income, the sooner you can achieve personal financial freedom. Let’s look at two basic types of passive income, and a third type of income that, while technically not passive, is a key strategy for earning more and working less.

RESIDUAL INCOME

Residual Income is revenue that occurs over time from work done one time. Some examples include: An insurance agent who gets commission every year when a customer renews his policy; a network marketer’s income or direct sales rep’s income from her direct customers when they reorder product every month, An aerobics instructor who  produces a video and sells it at the gyms where she teaches; A marketing consultant who creates a workbook and sells it in e-book format on the internet, A photographer who makes his photos available through stock photography clearing house and gets paid a royalty  whenever someone buys one of his images; A restaurant or retail owner who has grown to the point of hiring a trust worthy manager. As you can see, there are many different ways to generate residual income across a wide variety of businesses. It may be recurring income from the same customer or the sales of a product to new customers. It may require no personal involvement whatsoever, such as an e-book sold on a website, or it may require some personal interaction such as the insurance agent calling the customers to remind them about their renewal and ask them if they want to change any of their coverage. Often, it’s something that you can delegate to an assistant. Note that this is different from merely recurring income. Recurring income may still require your involvement to earn the income, e.g., a coach or consultant on a monthly retainer, or a caterer who delivers lunch every Monday to the local school board. While this ‘’Active recurring income’’ offers welcome stability, it also tends to tie you down, and you still have limit on your earning capacity based on your own personal production capacity.

LEVERAGED INCOME

Leverage income leverages the works of other people to create income for you. Some examples of leveraged income include: An e-book author selling his book through affiliates who promote the product; A network marketer who builds a downline and receives commissions on the sales made by people in his downline; A general contractor who makes a profit-margin on the work done by sub-contractors, Franchising your business model to other entrepreneurs (the ultimate leveraged income). Again, there are many different models in many different businesses. The key is that you are making money off other people’s labour rather than primarily your own. Note that leveraged income may or may not also be residual income. When you combine both, that’s better.

ACTIVE LEVERAGED INCOME

This is a term I use to describe income that requires your direct participation, but that you can make more money by having more people involved. This generally involves a one-time event, such as: A seminar or class; a conference or convention; concerts and dance recitals; raves and other parties. Although these require your direct participation, your earning potential is much higher than if someone were just paying you a direct hourly rate. Fill a room with 1,000 people paying you $5,000 each and you can cover your facility cost, promotional cost, and staffing fees and still have a nice chunk of change left over.

APPLYING IT

Now is the time to think about how to apply this in your business. Can you create a product that people will buy over and over again? Can you engage others to sell your product? How could you make money off the works of others?

                            This article is culled from The Guardian’s Executive Brief.