Successful Businesses and Entrepreneurs have Multiple Income Streams

To build wealth, you need more than one stream of income. Find ways to make money from what you’re already doing.

That’s it. It may sound simple, but think about it for a moment. Your time is limited.

If you always trade time for money, you’ll eventually run out of hours, and with them your ability to earn more.

Earning money from your time, through a job for example, is a straight-line relationship. To earn more, you have to work more, and your time and energy are limited.

To build wealth, you need ways to earn income in the same 24 hours we all have. The more your income depends on your time, the harder it is to get rich. That’s why it helps to understand the 7 levels of financial independence.

Think of a waiter. Every shift takes all their energy. How could they earn more in those same hours? Now think of the restaurant owner with several restaurants. They earn money from all of them, even when they’re not there.

A business within a business

Let me ask you three questions:

1. Is McDonald’s in the burger business or the property business?
2. Are cinemas in the film business or the snacks business?
3. Is Jay-Z in the rap business or the business of building other artists and brands?

The answer to all three is both. And it goes deeper than that.

Jay-Z

Take Jay-Z:

• As a rapper, he trades his time and skills for money and builds his personal brand.
• As a record executive, he earns from other artists’ time and talent. His label, Roc-A-Fella Records, released Kanye West’s early albums, and as president of Def Jam Recordings in the 2000s he signed Rihanna.
• As an investor and entrepreneur, he uses his money and brand to build businesses far bigger than his music income could be.

In 2019, Forbes named Jay-Z the first hip-hop billionaire. Most of that wealth doesn’t come from rapping. He found more ways to make money from what he was already doing.

He was already in music, but he thought like a business owner. Instead of only trading time for money as a rapper, he started finding and developing other artists, building a team that earned money for him. He had to review huge numbers of hopefuls to find a few stars, and many of his bets didn’t pay off. But the ones that did earned him far more than he could have made from his own time.

He then used his brand to take stakes in businesses, rather than just being paid to promote them. That shows how valuable a strong brand can be.

Cinemas

How much profit do you think a cinema makes on a ticket? Not much. A large share of ticket money goes to the film distributors.

The real money is in drinks, popcorn and sweets. These are very profitable, which is why cinemas usually don’t want you bringing your own snacks. Once you’re inside, the snack counter is the only option. The film gets you through the door. The concessions make the profit.

McDonald’s

McDonald’s isn’t just in the fast-food business. It’s also one of the world’s largest property owners. It owns or leases the land and buildings for many of its restaurants and charges franchisees rent, often linked to their sales. So the better a franchisee does, the more McDonald’s earns.

This model goes back to the 1950s, when Ray Kroc and Harry Sonneborn set up Franchise Realty Corporation to buy sites and lease them to franchisees.

Harley-Davidson is another example. Most people see a motorbike maker, but it also earns money through its finance arm, Harley-Davidson Financial Services, which lends customers money to buy its bikes.

Where is the real money?

Once I started looking for businesses within businesses, I saw them everywhere.

I love football, so I looked at how David Beckham made his fortune. He earned millions playing for Manchester United, Real Madrid and LA Galaxy. But most of his wealth came from sources not linked to his time on the pitch: sponsorships, endorsements and business deals. Companies like Adidas paid him to wear their boots, so every match earned him money from his club and his sponsors. After retiring, he became a co-owner of US football club Inter Miami.

Beckham is in the football business and the endorsement business. He created extra income streams from what he was already doing. Many wealthy people use the same approach.

How can you build multiple income streams?

Most of us won’t get sponsorship deals. But we can still build several income streams:

• Invest in dividend-paying shares or funds
• Own property and earn rent
• Rent out a spare room, storage space or your driveway
• Earn royalties from something you create, such as a book, course or photos
• Turn a skill you use at work into freelance or consulting income

For more ideas, read our article on income-generating assets.

First, make sure you can manage your money well. Extra income only helps if you keep track of it and invest it rather than spend it. Remember that income from side businesses and rent may need to be reported to HMRC.

The key lesson is that wealthy people find more ways to make money from what they already do. Break the link between your earnings and your time, and start building income that arrives while you sleep, play football or watch TV.