Create Multiple Types of Income StreamsWealth Principles
There are so many ways to make money other than working 8 hours a day for next week Friday’s paycheck. Relying only on a single income stream is highly limiting and restrictive to wealth gain over the long term. Mastering and implementing multiple types of income, or diversifying your income, will greatly accelerate wealth gain. There are multiple types of income, both active and passive, and we will cover them all here.
Develop a Product
The most obvious way to create another income stream is by creating a product. Literally, everything you buy is a product. The process is pretty simple. First, you create something that is physical that people want. Then you produce for as little cost as possible. Then you sell it as often as possible for as much as people will pay for it, as long as it is in excess of the cost to develop. You’ll also need to fill future orders and maintain enough product to meet them.
Develop a Service
This is the second most common way to make a new income stream. You simply find a need someone needs to be filled and complete a task in exchange for payment. You need to have a skill set that others either don’t have or are willing to pay to avoid doing themselves. You have to do this for a payment that is greater than what it costs you to complete the service, and with a quality level that is worth payment. It is best that this service has a recurring need so you don’t need to convince new customers to constantly buy, but have a recurring customer base and recurring payments.
Create a Subscription Service
A subscription charges a recurring fee in order to utilize a service with a specifically defined benefit. Fees are collected until the subscription is canceled, as long as the service is delivered into the future. To create a subscription, you need a physical or intangible good that can be provided on an ongoing basis. You convince others to sign up while regularly providing them the promised benefit in exchange for an equally regular fee. Then simply bill them until they cancel. You must do everything in your power to convince them not to abandon their subscription. Note that the subscription can be filled using a physical product or using a service. Physical magazine deliveries are a subscription service, but so are online newspapers.
Buy Wholesale, Sell Retail
This is the approach you see taken in the high majority of retail stores. Most retail stores do not manufacture the product they sell, they instead buy goods in bulk and sell them at a higher price. You can easily emulate this model by buying goods cheaply, then selling it at a significant markup that is still cheaper than the reasonably accessible competition. The good must maintain the same quality and you should sell the good quickly. The difference between the purchase and sales price is your profit. Repeat infinitely as long as the profit is reasonable.
Create a Commission Based Agency
An agency is a group of people who transact on behalf of others in exchange for a flat or scaling fee (also called commission). You can transact on either the buy side or the sell side, and collect a commission from either side, but the fee is usually charged against the seller who is receiving the payment. First, you must find someone who wishes to transact. They must give you power on their behalf to engage in purchases or sales and allow you a realistic budget to purchase or target realistic target price to sell. You then find a buyer (if selling on behalf of a client) or seller (if buying on behalf of a client) willing to transact within the target price range, or for a negotiable and reasonable fee. Note that a good Agent will negotiate the price higher if selling or negotiate the price lower if buying. On completion of a transaction, you collect a scaling or flat fee from both transacting parties.
Charge to Use an Object
This is similar to renting, but not the same. You purchase an object or set of objects and then you charge people to use the object itself. First, you must build the base of objects, be it a single object or multiple. Then you charge others to use the object for a temporary time period and return it or cease to use it. Then you use their payment to maintain the object or increase the amount of objects, and keep the rest as profit. You have to be able to attract enough users to earn a profit, and keep the quality of the products high, simultaneously.
If you have a substantial following, you can always sell advertising to other people who are allowed to present their products and services to your audience. You receive a fee in exchange for allowing them to present their goods. The first objective is to build the audience. It is best that the demographic is very specific and relatively uniform. You must repeatedly get that group of people to pay attention in a recurring and measurable way. You must be able to prove their existence using subscriber count or visitation statistics. Once you’ve proven the amount and demographic of people who visit, you can charge people who want to advertise to that group for presenting products and services to them. While they advertise, you must maintain or grow the amount of people within that demographic group who continue to visit.
Insure Against Low Probability Situations
When you act as an insurer, you’re basically taking on the risk of someone else’s actions in exchange for a recurring payment. If a specific pre-defined bad event happens to the person in question you pay for their recovery from the event or pay the cost of the bad event. In exchange, they pay you a premium. You first have to decide which event you want to insure against. This should be a relatively low probability event which is highly undesirable. You create a legal agreement that states you will pay for the costs of losses in that event, and in exchange receive a monthly payment. If the event legitimately occurs, you pay the costs associated. Your chance of the event happening must be very low probability, relative to the amount of people insured. You only make money if the total premium income exceeds the payouts for losses.
Invest in Others’ Businesses
Investing comes in many forms. The goal is always the same: Either earning a regular dividend payment from ownership or sell the equity or entire business for more money in the future than you invested. At first, you need capital to invest above your needs. You also need a business to invest in. You can purchase a stake in a local business, seed other people’s business ideas, or purchase equity on the stock market. You also need a system that determines the risk of capital loss versus potential reward, and the minimum level below which would cause you to reject an investment in the business. If reasonable, you acquire an ownership stake in the company.
Lease or Rent
When leasing or renting, you purchase an asset and let other people use it for predefined repeating periods of time in exchange for a recurring payment. The asset needs to be able to last the usage period and must be non-perishable. Start by finding things that other people want or need to use. Charge them a fixed recurring payment to use it for a very specific period of time. After they’ve used it for that period of time, charge them again to continue using it. Note that you will need insurance provided by someone else in case the person using the asset damages, steals, or loses it. Additionally, make sure that the income from the lease exceeds the costs of maintaining leased goods while providing you a profit.
It’s possible to loan money to others to create an additional income stream. To create this income stream you simply let others borrow your capital and repay you with interest. To lend to others you must have money you do not need. Then you have to find others who want to borrow that money and are willing to pay back more for the privilege of using that money. The interest rate between the two of you must be agreeable but worth your effort. Then you collect the repayments they are willing to pay. You also need to be able to accurately predict the amount of people who will fail to repay, the risk of each individual loan and take legal actions in the case borrowers cease to repay. You might also consider requesting collateral from borrowers.
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