To be successful in business and to build wealth, you need to have multiple income streams – You need to find multiple ways to make money doing what you are already doing.
That’s it. This might sound simplistic but let’s think about this for a minute. For you to truly understand this statement, you need to realise that our time is limited.
If you always find yourself trading time for money, then you will run out of hours and will run out of the ability to make more money.
Making money as a direct result of your time, say through a job, is a linear relationship. So if you want to make more money, you would have to work more and we all know that our time and energy is limited.
In order to create wealth, you want to find more ways to earn income during that same 24 hours in a day that we all have. And the more that income is based on you trading time, the harder it will be to amass wealth. You need to understand the 7 Levels of Financial Independence.
You see, when you think of a regular job, like a food server at a restaurant, for instance, it takes every bit of energy for you to work those hours. How could you possibly be earning more money in those same hours?
But, when you look at the owner of that restaurant, he owned multiple restaurants, earning money from all of them, while he wasn’t even there.
The Inception Effect – Building a Business, within a Business, within a Business…
Let me ask you a few questions.
- Is McDonalds is in the Hamburger business or the Real Estate business?
- Are cinemas in the Movie business, or the Concessions business?
- Is Jay-Z is in the rap business or the business of producing rappers?
The answer to all 3 of these questions is BOTH. But it also goes deeper than that.
Take Jay-Z for example:
- He is a rapper, where he trades time and skills for money to build his personal brand.
- He is a producer, where he leverages his time for more income from overrides on the time and skills of other rappers.
- He is an investor, where he leverages his money and branding into BIG business opportunities to amass wealth far beyond what he could trade his time for.
Jay-Z is one of the richest musicians alive, but does that money really come from his rapping You see, Jay Z found multiple ways to make money doing what he was already doing.
He was already in the rap game. But he had a business mindset. So rather than just trade time for money as a rapper, he decided to start producing other rappers, and he became more of a talent scout. He was building a “team” that he could override. Similar to many business models you might be aware of.
He had to review thousands of potential artists, just to find the handful that would be hits. He had to take risks on people, many of which didn’t pay off. He had to gamble away his time, with the chance that he wouldn’t find any talented artists at all.
But, his calculated risks paid off. He found artists like Kanye West and Rihanna, which he produced and earned a massive residual override from. This is similar to finding a top sales rep under you in business that you get started, and then get a cut from all their sales. Sometimes, you can override more on a deal like that than you could ever make yourself trading time for money.
Then, he was smart enough to leverage his business mindset even further, by getting his branding involved in commercial product endorsements where he would get a piece of the company if it ever took off. This proves how important branding and marketing is and without a successful marketing strategy, it’s difficult to have a successful business.
Within a business, the real profits aren’t always what they appear to be
Let’s go back to the cinema example. How much profit do you think they make on the sale of an actual movie ticket? Not much when you consider that the producers have to get paid as well, so do the actors and the investors that put up the ad dollars to get people to go to the theatre. And so much more.
The movie business would be a tough business to be in. If it weren’t for the business within a business.
Think about it. How much profits is made on drinks? How much profit do you think is made on a bucket of popcorn? These concessionary items are highly profitable for movie theatres. It is where they get the bulk of their profits.
Once you are inside the Cinema, you have zero options. You are not allowed to bring in your own food or drink. And you don’t want to sit through a movie without any right? So they have effectively driven you to the concession stand to buy their marked-up products that have huge profits.
They make so much profit on concessions, that it’s worth LOSING MONEY to get you into the theatre because they would still be profitable.
They rely on the movie production companies to spend the money to drive people to the theatres, and that’s why they give up so much of the money on ticket sales.
But their real business only begins AFTER you have bought your ticket and you are inside. The real profit is made by the sale of concessions; the popcorn, the soda and the candy. Why do you think they don’t allow you to bring your own food in?
And let’s look at another example, McDonald’s. If you think McDonald’s are in the fast-food business, then you are wrong. McDonald’s are in fact in the property business. They essentially take buy the land and the building for each franchise, and then LEASE them back to the franchise owners at a 40% increased premium!
What’s even crazier is that the better the franchisee does with their business, the more they would have to pay in lease fees!
Based on this model, McDonald’s went on to become of the largest real estate investment companies in the world, under the corporate name: Franchise Realty Corp.
“Make money from property and do business for fun”. Lord Alan Sugar
Another great business is Harley Davison. Most people would classify it as a motorcycle company. But astute investors would say that Harley Davison is a finance company. I will let you do the research for this on your own.
Where is the Real Money?
I began looking for opportunities to find businesses within businesses so that I could really open my mind and expand the possibilities I could have in my personal life.
Sure enough, examples were everywhere.
For instance, I love football. It’s one of my passions. So I started looking at David Beckham to see why he makes so much money and is a multi-millionaire today.
Everyone knows David Beckham as being one of England’s greatest midfielders. During his playing career, he made millions playing for the likes of Manchester United, Real Madrid and LA Galaxy.
Today, Beckham is retired but he still manages to rake in millions of dollars every year. By understanding this, you can see how David Beckham made all his money.
David Beckham made $75 Million last year. And is now worth about $350 million. Whilst Beckham did make a lot of money working for time as a footballer, the bulk of his fortune comes from income not linked to his time. The majority of his net worth was created via sponsorships and endorsements.
You see, David Beckham is in the “football business” and the “endorsement business”. He has created multiple incomes by doing what he is already doing. Companies like Adidas pay him handsomely to wear their football boots on the field. So whenever he played in a match, he got money from both his club and from Adidas.
When it comes to leveraging your potential in order for multiple income streams to come your way, David Beckham is by no means the only one doing. A whole host of multimillionaires use this trick and that is why they have built the wealth they have.
What should the average person do to get multiple income streams?
The first thing that they need to make sure of is that they are able to capitalise on the different streams of income because if they are unable to deal with the finances then they won’t be able to manage it.
Whilst people like me and you are not able to get money from sponsorships or endorsements, we are still able to accumulate multiple income streams. We can do things like invest for dividends, own property, rent out space in our house or driveways, create royalty income e.t.c. The list really is endless. If you want to take control of your financial wellbeing and want to create multiple income streams, read my article on income-generating assets.
The main thing you need to realise is that wealthy people tend to find multiple ways to make money, doing what they are already doing. You need to break the shackles of your earning power being directly linked to your time. In today’s world, it is essential to earn money whilst you sleep, play football or simply laze around watching TV. It is time to take control of your destiny. It is time to build yourself a stream of passive income.