The Green Sheet Online Edition
September 14, 2015 • Issue 15:09:01
The power of residual income – Part 2
As a continuation from "The power of residual income – Part 1," The Green Sheet, Aug. 24, 2015, issue 15:08:02, here are comments and stories from members of GS Online's MLS Forum about the benefit of working within a residual income-based business.
Forum member TheCreditCardMan posted:
"Twenty years or so ago, I began looking for a business to open. Even though I was making good money in sales, I was not the boss. I looked at all sorts of franchises from transmission places to cookie routes. Through my due diligence I found only the parent companies were getting rich, and the cost of starting a coffee shop for $500,000 and then a Starbucks opening up down the street was too much risk for me. And all those hours sucked.
"Anyway, I was writing a check for an insurance policy (I forget – life, auto, disability) and it dawned on me. When was the last time I saw my insurance guy? He gets a slice of this check every time I write it, and he only sold me one time. How many clients does he need to have a steady and exponential income? What is that called? Passive income, residual income? Bingo! What businesses have residual income? I have an insurance license, but who wants to go into homes at 7 to 9 p.m.?
"So, merchant services, here I come. I can remember my first year, $100 residual check, then $300, then $3,000, in a few years $xx,xxx a month. Of course, the rate of increase can never be equaled as when you start at $0, but the pressure is off.
"I do not have to sell every merchant for pennies. If I have a bad week or a bad month, oh well, I can still pay the bills. I take off when I want, for as long as I want. I look at my residual report and see such low merchant ID numbers and look up the account, wow, been making $45 a month from XYZ since 1997. Take that Jiffy Lube!"
1099 relationships rock
Jotucker1983 discussed the W-2 versus 1099 perspectives:
"When looking at this topic from a W-2 versus 1099 viewpoint, there are two types of sales professionals: those who work to build the brand and business portfolio of someone else, and those who work to build their own.
"With a 1099 structure, you have a form of client ownership, that is, the ability to make income on the recurring revenue generated off of the client until the end of their working relationship. This power allows you to build a business portfolio, which is an asset that you can later sell for multiples, use as collateral for financing, or just keep in your asset column as another business asset adding to your net worth as well as providing a monthly income stream.
"If a salesperson is truly a 'sales professional,' then I don't see how it makes any sense to perform a sales position on W-2 to build the brand and business portfolio of someone else, when you could be building your own. After all, working for someone else in a sales role on W-2 comes with quotas anyway, which means you are going to have to perform (bring in new revenues) or you will be cut (with potentially already paid monies clawed back if you totally blow the quota).
"So if you are the one with the talent, skills, business acumen and lead generation skills anyway, why not just do that for your own brand/business portfolio rather than for that of someone else?"
Financial independence rules
Jotucker1983 further expounded on financial independence:
"In terms of looking at this from a financial independence perspective, for sales that don't have a residual/recurring revenue aspect tied to them, you are going to have to continue producing new sales to produce new income. This makes you financially dependent to your job, leaving you with lesser amounts of free time to do other things.
"Plus if you become disabled, ill, have to take care of a sick family member, etc., then this could cause some issues, as you might not have the physical capacities or the time to go out to produce new sales.
"However, for sales that have a residual/recurring revenue aspect tied to them, you can eventually get to a point where the monthly income stream is more than your personal expenses, giving you the status of true financial freedom.
"If you have efficient expense management and budgeting skills, this can be achieved, allowing you to have more freedom to enjoy other aspects of life. This also affords you the ability to be sick and give yourself time to recover from the illness, rather than having to rush back to work before being fully healed, because bills are piling up with no income stream coming in."
Thanks to all members of the MLS Forum who participated in this discussion.
Jeffrey I. Shavitz is Chief Executive Officer of TrafficJamming LLC, which is a virtual business group for entrepreneurs and small business owners to help grow a company's sales (traffic = customers in his language). His experience in payments includes co-founding Charge Card Systems Inc., which was sold to Card Connect in 2012; Alternative Merchant Processing, dedicated to high-risk merchant processing; and Charge Card Funding, involved in the cash advance space. Jeff has published three books: Size Doesn't Matter – Why Small Business is Big Business, which became an Amazon No. 1 top release in both the business and entrepreneur categories; Small Business Aha Messages; and The Power of Residual Income – You Can Bank on It! He can be contacted at 800-878-4100 or email@example.com; his websites are www.jeffshavitz.com and www.trafficjamming.com.
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