Create a Perpetual Income

Create a Perpetual Income

There are many reasons why you should consider starting a home based business. Beyond the tax benefits, I’m sure you’ll agree with me that it’s just common sense to have multiple streams of income flowing into your life. Prosperous people have always known this. If one stream dries up they have others to support them. Having only one stream of income leaves you vulnerable. If you lose your one stream of income it could wipe you out and take years to recover.

How much of an economic and emotional impact did your last layoff have in your life? If you’ve ever lost a job you know how totally exposed and vulnerable it can make you feel. So although launching a home based business may seem like a gamble, the risk of remaining strictly a W-2 employee may actually be worse.

I strongly recommend that you ultimately develop a portfolio of income streams – not one or two – but many streams from completely different and diversified sources, so that if one stream goes, you’ll barely feel the bump. You’re stable. You have time to adjust. You’re safe.

Although you could always go out and pick up another job, that’s really not the kind of income I’m talking about. You want the kind of income streams that you can own. Ideally, you want to create residual income, meaning a recurring stream of income that continues to flow into your life whether you continue working or not.

Unfortunately I’ve heard too many small business owners report that they’ve gone five years without taking a vacation. I feel there’s something wrong with that picture. Don’t misunderstand me I don’t have anything against hard work, but I also believe that after a few short years of hard work, you should be free to have your income forwarded to your mailbox in Tahiti. Get the picture?

Not all streams of income are created equal. Some income is linear, other income is residual.

If you are currently paid hourly or on a salary, your income is linear.

Income from a salary is linear because you are only paid once for your effort. When you don’t show up for work, neither does your paycheck, does it?

With residual income, you work hard once and it unleashes a steady stream of income for months or even years. You get paid over and over again for the same effort. For example, an author will write a book one time and yet be paid over and over again on that book for years to come.

Although it might take years to write before the money starts to flow, it’s worth the wait.

You’ll find that the ultimate benefit of those who are truly wealthy is that work is optional and leisure is affordable. This is because most of their income is passive and residual. Therefore, they can spend their time doing whatever they want.

When you start to view people’s lives through a filter of residual income, many groups of people aren’t really as wealthy as they may otherwise appear. For example, Doctors and Dentists have a limit on their income potential. They can only see a fixed number of patients in a day. And they have to be there for every single one of them. That’s linear.

The same holds true for many top sales people, chiropractors and attorneys. Most of them don’t enjoy the benefits and power of a perpetual income. They may appear to be rich, but they’re on the same treadmill as most individuals. Can you see that?

To drive this concept home even further, let’s compare it to an escalator. Have you ever walked up a down escalator?

When you walk up the down escalator, you have to walk at a fast pace just to stay in the same place, and to get to the top, you have to walk at double speed. By contrast, people on the up escalator don’t have to work hard at all, they just stand there holding the hand rail and the escalator takes them to the top.

I feel the up and down escalators give you a good visual perspective of the two kinds of income you can earn: linear income vs. residual income. Our economy creates a down escalator each of us must climb. You work hard for your money, but with inflation you have to earn 3 to 5 percent more the next year just to stay in the same place.

But this puts you in a higher tax bracket. The more you make the more they take. You seem to work harder and harder without making any kind of progress. Your bank account balance might earn 2 percent if you’re lucky, while your credit card balance may cost you 20 percent.

Consequently you’re going in the hole 24 hours a day. Is it any wonder you can never catch up?

And if you stop, the escalator takes you right back down to the bottom.

That’s what it’s like to earn linear income. What you want is up-escalator income, or in other words perpetual or residual income.

Right now, what percentage of your income is residual?

If you’re smart, you’ll start shifting your income streams from linear to residual. This will give you the time freedom to do whatever you want, when you want. And that starts with turning on at least one new stream of residual income.

So, as you begin considering different home based business possibilities, make sure that it can ultimately develop into an inexhaustible, generating stream of cash flow that requires little or none of your presence. In order for this to occur, you must be in a position to create, control, and own that stream of income. You may still remain in your current employment position, but on the side, as a way of protecting your long-term financial security you need to create additional streams of income – ASAP.

Realize that working for someone else, unless you own a piece of the profits, is not security. It’s just the illusion of security.

Your primary objective is to develop something which has the potential of creating a lifetime stream of income, not just a dead end business that earns a few extra bucks and then fizzles out.

The business you select should also be a source of more than just one stream of income. It should eventually become a source of multiple streams of income all by itself.

For example, (even though this is not a home based business it will illustrate my point) suppose you’re considering buying an existing restaurant. What is the potential for growth? Can you add more shops?

Could your idea be franchised? Can one of your food entrees be sold nationwide as a frozen item? Can you license your special cooking secrets to other restaurants? Is there a cookbook possibility in there somewhere? What about bottling and selling your special sauces? Get the idea?

Don’t even consider a business that doesn’t have expansion potential for additional streams of income.

In order for your source of income to survive the next 10 recessions, you must select a product, service, or source of information that has the possibility to be permanently and perpetually profitable. When times get tough, people gravitate to either price or quality. Don’t get stuck in the middle. That’s a sure formula for disaster. And don’t try to compete with the rest of the world on price. Make sure the quality is outstanding… the best you can offer at a fair price. This will give you a good chance of succeeding in the long term.

Another factor to consider is the money required to start the business.

Suppose you want to buy into a hot franchise. It might cost $100,000, and that’s just for the franchise rights. Then you need to purchase inventory and special equipment. And what do you get? For most franchises, you get the right to be tied to a business 12 hours a day, to manage a bunch of under-educated, under-motivated employees in order to make a steady paycheck for yourself. In a sense, you are just buying yourself a job. Why spend tens of thousands of dollars of your own money just to buy yourself a job… with a lot of risk?

And, you don’t want employees. Employees are dangerous! Eventually they begin to feel entitled to their jobs. And the rapid increase in employee/employer litigation should be enough to convince you that you want to find a home-based business that you can do yourself, with a very low employee-to-employer ratio. Try to find a business that doesn’t require any employees. If you need help, outsource.

Make sure to choose a business that is in line with the trends. Starting a business against the trends is like swimming upstream. The secret is to be in front of a trend and ride the wave. The biggest trends of our generation are being led by the baby boom generation – the 76 million people who were born between 1946 and 1964. This generation is four times the size of both the previous generation and the Gen-X generation.

As this mass of humanity rolls forward through time, it creates a huge demand wave. Picking businesses at the leading edge of this age wave has created thousands of fortunes. I recommend that you make sure that your new business is leading this trend and not following it. It can make a huge difference in your lifestyle.

Whatever home-based business you start, try to pick a product or service that’s essential, or is at least perceived as essential, by a large and very motivated segment of our society. The more people who need it and the more often they need it, the more successful your business will become.

These characteristics are essential to the kind of hands-off, hassle-free businesses that can create life long streams of cash flow.

Now what about earning a salary? Being an employee is an honorable way to earn income, and it may even perhaps be an enjoyable way to earn income for some individuals, but it doesn’t flow 24 hours a day and it doesn’t provide the tax deductions I’m trying to help you develop.

You need to start thinking less like an employee and more like an investor and an entrepreneur.

Even as an employee you must learn to think of yourself as a free agent.

Just as in sports, where athletes lease their skills to a specific team on a temporary basis, you will eventually be leasing your skills – your mind, your body, and your experience – to needy employers. You must become a one person business, leasing your services out to the highest bidding team on a short term basis. In this case your financial stability will come from properly investing your earnings. For that you need to think like an entrepreneurial business person. For many of us this is a foreign experience.

A hundred years ago, about 90 percent of our ancestors were entrepreneurs. Now the number is between 10 and 20 percent. By moving from the farms to the factories, we delegated our freedom to large centralized organizations. We got soft and in the process lost our entrepreneurial skills. And now that the paradigm of the world is changing, we’re being forced “back to the farm” so to speak – back to individual responsibility. The whole world is moving away from centralized authority of every kind. With downsizing, companies are splitting into profit teams. Many of those who have been downsized are realizing that being an employee is even riskier than being in business for themselves. That’s what has fueled the incredible home-based business revolution.

Unfortunately, most entrepreneurs own businesses that are nothing more than glorified sweatshops that simply provide jobs for the owners. They don’t have the freedom to come and go as they wish. They are tied to their one person businesses. That’s certainly not my idea of fun.

What I’m suggesting you create, is much more powerful. You want residual income – lifetime streams of income that you don’t have to manage. You want to create income streams that don’t require your presence. You’re not trying to create a traditional mom-and-pop business which requires you to keep regular hours. You want up escalator income that flows to you… whether you go to work or not.

Can you see the distinction? I hope so, because it’s critical. If you start out with this goal in mind, you will be able to easily see through the thousands of business opportunities that are all around you. You’ll be able to zero in on only those businesses that will allow you to earn passive, perpetual income.

Open any income opportunity magazine that you find on most major newsstands and you’ll see lots of ads for businesses such as carpet cleaning, upholstery repair, auto detailing and the like. Hard work which requires you to be there. And sure, you might earn good income, but is it linear or residual? Will your efforts eventually create a lifetime stream of income when you stop working? If not, it’s a business that will ultimately require long hours as you try to go up the down escalator. Unless you can figure out a way to turn it into residual income, keep looking.”

I strongly encourage you re-read this post at least 3 times to make sure you fully grasp and internalize the qualities and characteristics you should be looking for in a home based business.