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Building a Profitable Home Based Business
There are effectively three models that you can choose from when building a home business. I call these the 1) income model, 2) annuity model and 3) hybrid model, because as you will see shortly, one generates immediate income, one generates future income, and one does both.
The Income Model
The income model effectively means that you are displacing selling your personal services to “the man” in a job, for selling your personal services to a client, and removing the middleman (your old company) – perhaps making more money in the process. When someone is “a consultant,” this is what they are doing. They have a skill, and they outsource that skill to make money.
People that fall into this category tend to be from fields with a somewhat standardized skill that is always sought after for short bursts of time. Website design is a great example.
For those that need immediate income (a sudden unplanned loss of job, or unplanned retirement) this is the way to go, because the relationship between effort and pay is direct, fairly quick, and often really profitable because you are no longer covering a portion of the CEO’s salary, your bosses salary, office rent, IT systems that you may or many not use, or shareholder returns, to name just a few.
The Annuity Model
Now let’s assume that you have all the time in the world to plan you exit from the workforce, and you could design a business that would pay you a constantly increasingly stream of revenue as long as you continued to give it a minimum amount of work? That is the Annuity model.
People that fall into the Annuity Model category tend to be those that don’t need the money now, but know that someday they will. They are what I call “Five Percenters,” because unlike the other 95 percent of the workforce, they think about their work-life three, five even 10 years in the future, not just this year (or even this pay-period!). If you’re a Five Percenter, I salute you! If you’re not, don’t worry, I will discuss how to achieve a similar outcome with the Hybrid Model
The Annuity Model effective works like this: you put a lot of work in up front or over a period of time, but in return you receive cash-flow long into the future by doing very little or even nothing.
Writers of a blog 🙂 tend to believe in the annuity model;
As do developers of educational material;
As do inventors;
As do insurance agents;
The list is long, but you get the point. You build it once and it pays you well into your golden years, perhaps to your heirs as well.
For most people that want a home based business, this is the goal and it is utopia. This is where they are checking their constantly increasing funds going into their bank account while that are traveling to Fiji, Australia or some exotic location; they laugh and go back to enjoying the “juice” in life for decades to come. While their friends labor away at a “job.”
The Hybrid Model
Then there are those in the middle. Those that need to put in the hard work, but in return they get an annuity, for a little while. However they can never really fully stop working because their business would eventually fold. Businesses that rely on the reputation of the owner fall into this category. The Rolling Stones, Anthony Robbins and a self employed, ultra technically competent marketing representative in say the scientific equipment /replacement parts field, would all fall into this category.
These self employed folks make the initial sale through a lot of hard work, but the follow on sales (records, additional education material, a custom designed replacement part, etc.) come effortlessly because of “raving fan” customers. But if they stop touring, teaching or selling big equipment that needs parts, eventually their business withers away.
Which model you choose depends on a lot of factors, but invariably, if you are an Income focused self employed person, there is massive scope to run a hybrid model over a period of time.
How do you do this? Easily as it turns out: write a book or report that you can sell online and then do it again and again; if you want to fly below the radar screen then build a network with you as the irreplaceable hub and then NEVER share how it works with anyone (watch people become really agitated that you won’t share); there are dozens of ways to build a personal monopoly. Post a question below and I will help, I actually love this stuff!
In our next post we’ll explore how to build a personal monopoly with your home based business. How do you build a business that is protected for the long run. Not surprisingly I’ll call this next one Building a Personal Monopoly.
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Until Next Time,