Wednesday, May 24, 2006

Residual Income - What It Is And Why You Need It

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 in the 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

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Hamish Hayward -- Discover the 6 key assessment criteria you MUST apply before you commit to any business opportunity. --
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