225 Make more money by focussing on what works
Thank you for joining me today. I am going to be talking about ways to make more money by eliminating income streams.
That sounds a bit counter-intuitive but bear with me. Have you ever felt that you’re spinning your wheels with an income stream or job but can’t quite figure out why? I can sympathize with that. Recently, I was listening to a podcast by James Schramko where he talks about a 10-step system of evaluating an income stream.
I never think there is a substitute for intuition and common sense, but the right tool can help you out. I took it a step further and made a cheatsheet that you can find below. A word of warning, any tool is just a guide and shouldn’t be the end all for decision making.
Criteria for Evaluation Income Streams
Each criterion gets a rating of 1-10
Effective hourly rate
Take all the money you make from the income stream. Then subtract what you spend to do the work. For example, the cost to commute to your job. Then divide it by how many hours you put in. Let’s say you have a day job where your income is £3400 a month which is about £40000 a year. A nice salary. Now let’s look at your expenses. Let’s say your commute is £500 a month and you spend £100 a month on coffee and lunches. Now your income is £2800.
If your spending 40 hours a week at the job, 1.5 hours for commuting twice a day, and let’s say 3 hours for off-hour emails and work socials if you must meet with clients or whatnot. Once you break that down and it comes out to be £12 an hour. That is not going to make you rich. You have to work more hours to make more money.
Overall profit per month
Overall profit and overall income are things we are very aware of, but you need to be careful. We talked about it in the last criteria a bit. It’s the money you take home after your expenses. Like in the last example, you may be making £40000 a year but after the costs of having that job you’re below £34000. Rate you overall profit or income and rate that from 1-10.
Is the income stream recurring? If you have a day job, then that is more than likely recurring since you have some guarantee of that income; at least as long as you have the job. Other income streams are not. Such as a photographer. If you do weddings and other special events, then those are one-off jobs. If you have rental property, then you’ll have revenue that occurs each month.
How much do you care about your day job, freelance business, or Amazon? It’s something you must be honest with yourself about. You may hate your day job, so you would rate is a 1 out of 10, but you like the profit. Whereas, a photographer may love what they do but don’t make enough money from it.
Can you sell it?
If you’re are following along with the podcast you may have noticed I skipped this one. Never fear, I eventually realize my error and cover it later on.
If you have a day job, no. There is no way to sell it. You probably won’t be able to see a freelance business. If you own an Amazon business, it can be quite easy to sell it. In fact, we have had Coran Wordmass on several times to talk about it.
Is it in a growing market?
If you’re on Amazon, you are part of a massive trend and growing fast. That is to say the online retail has grown about 20% every year in the US. Keep in mind that you may be in a fast-growing industry but also determine if your niche is as well. Now if you’re working in a brick-and-mortar store then you might be on the other side of that. Many people don’t think about this for their day jobs. If you worked for Woolworth’s for 25 years you might get the impression that it’s safe. However, you are on the front of a shrinking market trend.
Is it scalable?
If you are a freelance photographer, then it would be difficult to scale. You can only be in one place at a time so there is a limit to how much work you can handle. Now if you ran an agency that employed photographers, then it would be much easier to scale. However, you have the risk that comes with employing people.
Now on Amazon, the beauty of it is that, with FBA, you can sell 100 units or 1000 and it wouldn’t be much extra work. You will have to monitor your business, deal with supplies, and other things so it is more work. But it isn’t 100x more work for 100x the sales.
Is there a by-product?
With your current income stream, is there another way to use it to make more money? With this criteria, photography can score really high. On top of your regular gigs, you can also sell stock photography as recurring income. If you’re a personal trainer selling on Amazon, can you sell your clients your own products?
Are there easy wins?
This could vary with a day job. If there is a promotion coming up and you’re in the frame for it, then it could be an easy win. Most of the time that’s not the case. If you’re a sales manager, there might be an easy account you know you can close and increase your income.
Easy access to customers
Is it easy to get customers? With your day job, this may not even be an option. With Amazon, there are a lot of customers out there for sellers. As a photographer, it may be difficult to find new clients because the market is saturated. If you have rental property in a high-demand area, then it’s probably very easy to find new tenants.
Tally Up the Score
Once you go through all 10 criteria and rate each one on a scale from 1-10, then you can use that score to determine if it’s worth keeping. I rated a day job at 39. Property scored well. Amazon can score incredibly well on this chart. It has tremendous potential to make a lot of money.
Once you rate your income stream, you can determine if you should eliminate it, maintain it, or if you should increase your effort in it and make more money.
If you use this system and have success, please share it on our Facebook group.