Residual Income - What it is and Why You Need it
by Hamish Hayward
Published on this site: August 2nd, 2005 - See
more articles from this month
As you surf the net, you will come across a wide variety
of business opportunities. Invariably, each one will claim
to have the best compensation plan available and many will
claim to offer "residual income". However, a cursory
examination of many of these pay plans will reveal that, although
there may be a very real earning opportunity, it cannot truly
be described as residual income.
What exactly is residual income anyway? Simply put, residual
income can be defined as any payment system where you receive
regular, ongoing payments as a result of a single sale. The
frequency of the payments may vary - they could be weekly,
monthly, quarterly etc. - but they are regular and ongoing
with no further selling activity once the initial sale has
been made.
Some potential residual income opportunities are listed
below:
- Telephone calls and line rental
- Mobile phone supply, line rental and calls.
- Electricity supply .
- Gas supply.
- Web hosting supply.
- Autoresponder supply (monthly rental).
- Any software which is supplied based on a rental basis.
- Property rental.
These are just a few examples, there are plenty more. Any
product or service which is provided on a lease or rental
agreement has the potential to provide you with residual income.
Ideally, your customer will automatically renew each week/month
without any requirement for action (effort) by either your
or your customer.
There may also be some scope for residual income with disposable
or consumable products. In this case, the mechanics of the
reorder process have a critical bearing upon your earning
capabilities. For true residual income, the reorder process
should be automatic as described above. This is not simply
a matter of semantics or a pedantic definition. There are
several reasons why you should target genuine residual income.
Many people who set up their own small home business do so
with the express intent of eventually replacing their salary.
Due to the regular nature of the payments, residual income
is ideal for this. In fact, it's considerably better than
having a salary as you continue to get paid for work that
was done inthe past.
With genuine residual income, the automated reorder process
means that you don't have to spend time servicing and supporting
your existing customers. You can focus your energies on finding
new customers and/or recruiting new distributors/affiliates,
thereby continually growing your business at the fastest possible
rate.
If your customer needs to take some action to reorder then,
even with a consumable product that needs to be replenished
periodically, there is a "break point" in the process.
The customer may decide to economise and do without the product
that month, they may decide to use one of your (many) competitors
or they might just simply forget to order.
With an automated reorder system on the other hand, your
customer needs to make a positive effort not to reorder. It's
a well known fact that customers who pay for products and
services by subscription are much more loyal and less likely
to cancel. Even if they do decide to opt out they tend to
delay this for longer than they would otherwise.
Think about it for a moment. Have you ever kept a subscription
running for longer than you intended, or do you know someone
else who has? Perhaps you might even have some small but regular
subscription running right now that you've completely forgotten
about.
That, of course, is the reason why many companies will give
you a reduction in the standard rate if you set up a subscription
agreement. Reader's digest know the value of this. So do telephone
companies, electricity companies, internet service providers
and software providers around the world. Now you know about
it too - take advantage if you possibly can.
Finally - and let's not kid ourselves here - many people
don't like selling. There are ways round this and it's possible
to minimise the discomfort some people feel - but it's still
there at some level for many of us.
Picture the scene. You've just made a sale, you feel great
and you're already thinking about how you're going to spend
you hard earned money. Then it hits you - you've got to do
it all again this afternoon, tomorrow, next week. Takes the
gloss off a bit - right?
Now think about a slightly different scenario. You've just
made a sale. Your new customer has signed a repeat subscription
agreement and you are going to benefit for months, if not
years to come. Is that a better home movie? I think it is.
There are other benefits of residual income but, for the
sake of brevity, I hope that those already discussed above
provide sufficient compulsion for you to actively seek out
at least one residual income stream.
To summarise, genuine residual income will help you maximise
the returns on your efforts and build a solid, reliable and
predictable income from your home business. You need it.
Hamish Hayward
http://www.perfectsystem.co.uk/
Hamish Hayward - Discover the 6 key assessment criteria
you MUST apply before you commit to any business opportunity.
-http://www.perfectsystem.co.uk
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