The three methods of generating revenue we’ll cover over the next three chapters are:
- Client Work
Can you truly make a living working for yourself or is that just a dream? A common assumption is that all your money will come from one stream. The key to sustainable self-employed income is diversified sources of revenue. Don’t think in terms of getting all the money you need from one place. The way you will sustain yourself and thrive is by creating multiple flows of income.
While having multiple flows of income is the ultimate goal, don’t start by trying to build them all at once. If you try to do many things at once, all of them will most likely fail. Focus on one source of income at a time and build it up to something sustainable. Once it’s stable, move on to creating the next source of income.
To start many businesses, you need capital. Capital is the money you have up front to invest in your business. Different businesses require different amounts of capital to start. If you’re starting a large construction business, you might need hundreds of thousands of dollars just to purchase the heavy machinery necessary for your first job. If you start a lawn-mowing business, you need only one mower. You may even have your own mower already, which removes the need to buy any equipment to start. As much as possible, start small with what you have. Don’t let a lack of equipment keep you from starting. Be creative! If you have only a small amount of money, look for ways to start small and build up. Use whatever you have on hand.
No Resources? Start a Services Business
While some businesses require up-front capital, you can still start a business even if you have no existing resources! What kind of business is that? A services business. A services business is where you do some kind of work for clients. What is something you’re good at? What skills are you currently building? How can those skills save people time or make them money?
For instance, let’s say you know a thing or two about dogs. Pet owners spend billions of dollars a year on their pets, so you know there’s an existing market. A dog-walking business does not require you to purchase any equipment. Assuming the owner of the dog you’re walking already has a leash, you simply grab hold of that leash with your bare hands and start walking. After a few jobs, you might even ask the owner if they have an old leash they don’t need anymore. You could then use that leash to walk a second dog at the same time. Because this is your side business and you’re already paying your bills with a day job, all of the money you make is extra. You can save every penny you earn and put it in the bank to establish your New Zero. Every job you do creates profit. You do the work and you get paid. When you do more work, you get paid again. Repeat this, and over time you will create financial padding.
Have Capital? Consider a Products Business
Selling products is a whole other story. Like with the heavy-machinery business, a products business also requires a significant up-front investment. If you’re an artist, let’s say you decided to make custom-designed T-shirts and sell them. What would it look like for you to make an extra $1,000 a month? Most T-shirt printers require a minimum run. Let’s say you want to have one hundred quality shirts printed, and your plan is to mark up the price by 100 percent.
First, you must have the cash on hand to invest in a minimum product run to purchase your initial inventory. For the sake of this exploration, we’ll assume you have a few thousand dollars already and that’s not a problem for you. Since your starting profit margin will be 100 percent, you decide to offer free domestic shipping to make your apparel line appealing. This gives you an edge on the competition. Instant money, right? Not so fast.
Free shipping costs you 10–15 percent of your margin. More and more, people are offering free shipping anyway because customers expect it. This means it’s not that much of a differentiator for your business and you’ll need to find another way to stand out. You decide to make custom tags and include a sticker and button with each order. These cost money and require yet another large minimum order. You also want your customer to get excited when they see your package in the mail, so you order custom-printed packaging—again, a pricey investment. You also have payment-processing fees, and let’s not forget the time it takes you to package and ship each order. In a best-case scenario, you might be left with a 50 percent profit margin. Your profit on a T-shirt may be only a few dollars if you’re trying to stay within a competitive price range.
Big companies can get better margins because they mass-produce shirts by the tens of thousands. At that volume, they have no trouble profiting, but they’re dealing with millions of dollars’ worth of transaction volume and operating on a whole other level. In your case, we’re talking about just getting started by purchasing a minimum run of one hundred shirts. At that volume, you can’t expect super-cheap rates or high margins.
Let’s be generous anyway and assume your profit margin on each T-shirt was $10. To make an extra $1,000 a month in profit, you’d need to sell one hundred shirts. That’s three to four shirts per day—not an easy thing to do when you’re just starting out. We’ll assume you don’t have a physical store yet and are selling online. Average conversion rates hover around 2–3 percent. Assuming your site is doing well and converting at 3 percent, to sell four shirts a day you’d need 133 visitors a day, or nearly four thousand visitors per month. That’s a lot of visitors for a brand-new business.
You may have made a thousand dollars in profit, but you had to spend a thousand dollars to make a thousand dollars. With scale, this can work, but you must be operating at massive scale to support yourself. The amount of work you need to do to maintain inventory, accounting, shipping, and customer support at those volumes also means you will likely need staff, and that staff will have to be paid a salary, which further cuts into your cash reserves and profit margins.
Something else to consider is the fact that whatever profits you make from products will need to be immediately reinvested in the business if you want to continue generating revenue. You will need to continue funding the purchase of additional inventory. It can easily take three to five years before a products business becomes sustainable as a reliable, income-producing asset. Products are almost always a long-term investment. They require a lot of up-front capital, and the profits you make in the first few years need to be reinvested for the business to grow.
Use Client Work to Fuel Your Products Business
Client work, on the other hand, is the easiest option to start with and the quickest way to begin sustaining yourself. Unlike with most products, you don’t need a ton of exposure, a large marketing budget, or a tremendous volume of units. You need to sell your services to only one person to make money. The money you make is pure profit. All that is required is your time. The only downside to client work is that, once you’ve done the work and gotten paid, typically that’s all the money you’ll make from that job. For the most part, you’re not going to be getting paid while you sleep with client work. They’re paying you to solve a problem for them.
With client work, you don’t necessarily need an audience. Having an audience will certainly help give you more exposure and can lead to more work, but the only requirement is that you have a body of work. The body of work is key: it attracts clients to you instead of leaving you with no option but to chase clients. This is absolutely critical and will be explained in greater detail in the next chapter.
Even if you want to get into products, client work is still a great way to start. The nice thing about your situation is that you won’t need the initial money you’ll make from client work. It’s extra. That means the money you make from your first clients can go toward investing in future product inventory. You can do this because you already have a day job paying your bills—that’s the beauty of overlapping.
When it comes to making investments, try to stay liquid. Liquid means you can get your cash quickly and easily. When you get paid for doing client work, that’s immediate money in the bank. Having cash in the bank means you’re liquid. You can take that cash and do what you want with it. When it comes to products, you have to invest a substantial amount of your resources in purchasing inventory in bulk runs. That inventory then sits on the shelf, and your capital is locked up in those items until they’re sold. You’re not liquid. You want to avoid locking up all of your resources in one investment. From an investment standpoint, it would not be a good thing to have all of your net worth tied up in products alone. Products can be a great investment, but again, seek income diversification.
Make Money Through Diversity
To diversify and profit, work the Trifecta:
- Client work
These are three great ways to make money. Client work is the easiest place to begin if you want to make money, but it’s not the only way to sustain yourself. You don’t have to do client work and trade time for money forever, but it’s a fantastic way to get started from nothing. As long as you have the skills to do work that solves problems for people, you can get paid.
It’s best to start with client work and then move to products and, finally, to teaching. Use client work to produce cash. Move from client work to products only when the amount of cash required to invest in a run of products is a small percentage of all your money. For instance, if the run of products you want to purchase will cost you $9,000 and you have $10,000 in cash, you should wait. You don’t want 90 percent of all your money to be locked up in products sitting on a shelf. Keep doing client work and keep generating revenue. When the amount you want to spend on something else is a small fraction of your total cash reserves, then make the investment.
The final method of making money is teaching. This method is one that will become more feasible further down the line, but we’ll touch on it briefly before going into more depth in a later chapter. Once you’ve reached a point where you have spent several thousand hours practicing, getting good at a skill, working with clients, and selling products, you will have a tremendous amount of experience. That experience is valuable.
If you know things others don’t know, you have the ability to teach. Teachers don’t teach because they’re teachers; they’re teachers because they teach. If you have skills, knowledge, and experience, you are qualified to teach. You don’t even have to be a master either. All you have to know to teach is more than any one other person. If you’ve spent any time working on a skill, you know more than the vast majority of the world about that thing. You can help beginners with the first step. They need to know only how to start. If Level 10 is a master and you consider yourself only a Level 5 or 6 in your field, that’s still more than enough experience to teach anyone at Level 5 or below.
What did you have to learn the hard way when you first got started? What do you wish someone had told you before you began your journey toward learning what you know now? What would have saved you time and made the process easier? These are all things you can teach others.
Teaching comes in a number of forms. You could lead a class or a workshop, write a book, produce an online course, or make yourself available for one-on-one consultations. Remember, you don’t have to see yourself as a teacher to teach. All you have to do is share what you know. It doesn’t matter if someone else knows more than you—they’re not your audience! You’re not teaching the masters. The fact that you may feel insecure about teaching because someone else knows more than you is just the imposter syndrome. You have valuable experience and knowledge. Use that to help people, and use that to generate income.
Teaching is just one method of making money. See it as a tool in your tool belt. It doesn’t have to be something you do full time if you don’t want to. The goal is to diversify your sources of income. If you produce an online course to teach people how to get better at a certain skill, it becomes an asset for you. You create it once and then you can sell it again and again. You can shift your focus back to client work or products at that point, but now you have an additional, revenue-producing asset.
- The way you will sustain yourself and thrive is by creating multiple flows of income.
- Don’t let a lack of money keep you from getting started. All you need are two hands and a willingness to work.
- Don’t think of selling products as a way to make a quick buck; products are almost always a long-term investment.
- Client work is the easiest way to start making money.
- If you have skills, knowledge, and experience, you are qualified to teach. Teach what you know.