Income Model
You may have already read my article about Income considerations. Well, there is more to income in business than just how much it totals. Read on!
Profit Sharing
Now there is an odd idea. Profit sharing. There is a business model where income is split between people up and down a line. These are called Multi-Level Marketing businesses. These are groups of businesses arranged in a direct line from the parent company, enroller to enrollee. So when you enroll, you are in next in line below your enroller. It’s like a family tree for the business. Here’s the catch with this model: the profit from your sales is shared (divided) all the way up your line. The benefit is that you also share in the profits of those you enroll. So initially you run at less than 100% or your profit, at some point you have enough team members below you that you are back up to 100% of your profit, and beyond that you are reaping additional income from your team members.
Personally, I am not into sharing the profits from my sales…..
So I prefer a model with no profit sharing, where my results are dependent on my effort, not dependant on the efforts of other people.
Total Income Potential
The critical element here is time input. Take for example a Coaching practice. Even in the online world, the total income possible is limited by the number of hours spent coaching, “on-the-job” so to speak. This is a 1-1 model: one unit of income for each one hour spent in the business. This is very much still a job, although self-employed, and online.
Time input can have a different outcome. For example, with online sales of products. You invest time building the store, populating it with products, then the store goes to work and sells for you. This is a scaleable income: it has the potential to increase directly based on the amount of traffic you drive to the site, and is NOT dependent on the number of hours spent daily. It just keeps working behind the scenes.
A business can be a combination of the two: for example, if you have a store which markets your carvings, then the store part would be scaleable, but the product is not. So this ends up being a 1-1 income model.
You still need to create the business that is a fit for you, and if that is something like Coaching, recognize there is a built in income ceiling simply due to the hours available. Of course, there are ways to introduce a scaleable factor, for example by marketing courses related to the Coaching.
Passive Income Source
The world of online business is littered with the promises of time freedom. Scaleability is one factor contributing to this hold grail of the digital nomads. Passive Income is another. For example, marketing upgrades to existing clients is one form of passive income. A source of passive income greatly increases the stability of your online income. When coupled with the front-line income source, this also has the potential to multiply your income.
Price: Volume Ratio
The final consideration is the price point of the products or services you are marketing. Larger items typically have a larger profit margin.
The consideration here is number of sales (and customers) required to generate a sustainable income. Low ticket price items require a large number of customers and purchases. High ticket items require fewer customers and sales. The Ferrari dealers really don’t need to sell as many units as the KIA dealers.
It takes the same amount of work to groom a customer and to make a sale, whether for high price or low price items. This may lean you towards high ticket price low sales volume products. Some would argue that it is more difficult to find people who wish to buy high ticket price items. This may lean you towards low ticket price high sales volume products. Would you rather sell Ferraris, or KIAs?
So there are a number of income considerations in choosing your business model of choice.
Up next…Additional Training
