Building business value is one way, building recurring income streams another. Using digital sales and marketing to automate income is also key

 

School 

When are we first taught that to get money we have to put time in ?? Maybe in school where they give you maths questions like ” If Joe got paid £4 per hour for 10 Hours work and Jane got paid £3 per hour for 12 Hours work how much did they get in total”.

 

Early Work

Maybe it was when I worked at the Spar supermarket for whatever it was per hour and I knew that the more hours I worked the more I got paid.

 

Later Work

That equation got a bit altered when I joined the Navy – we never really thought much about how much we got paid and we also didn’t think much about how many hours we put in. We just did what had to be done and we got paid what we got paid. In the end one of the reasons why I left the Navy was because  I realised that although I was always going to be ok – actually, well off – as a middle to high ranking officer I was never going to be a millionaire !!

After the Navy I went into High Tech. sales. Salespeople don’t get paid by the hour – aside of a basic salary they get paid on results. Obviously you have to put time in to meet your targets and get your commissions but there are the beginnings of a disconnect between time and money.

Of course we all also become aware that you can get paid more money for time depending on what you do – doctors earn more than supermarket workers and military people. People that work in the City get paid telephone number salaries that are largely related to the profits that their firms make. Of course doctors and City types work long hours and it is very demanding work.

 

Your Own Business

We started LanSwitch ( a computer networking company )   in the early 90′s with £2000 ( £6000 total )  on each of our credit cards and we sold it for £65 Million !!! We only paid ourselves a modest salary for the 7 years that we had LanSwitch ( became Voyager Networks and Internet ) but if you divide £65 Million by 7 I guess that is a pretty good annual/monthly/weekly/daily salary !!

It was probably after the sale of Voyager ( to Ronald S. Lauder Communications ) that the concept of the P.I.G. ( Passive Income Generator ) became clearer to me and it became so from the voice side of the telecommunications business.

Part of Voyager’s value was it’s pretty secure, recurring income stream. ( From e.g. Maintenance, Line and call revenue ). However when we started attending the Board Meetings of RSL Communications we learnt about the income that their voice resellers were earning from fixed line and mobile rental and calls. The way this works is that once you sign up a customer as a reseller of a telecommunications companies services ( eg BT or some other Telco ) then you get a small but recurring revenue as commission from those customers for as long as you keep them as customers. As a reseller you don’t have to go and build a telecommunications infrastructure – the Telco already did that. So you don’t have a massive capital outlay but you get an income which, aside from your time and effort involved in getting the sale, is all profit.

Let me just go back to the £6000 becoming £65 Million. This is, in some ways,  fairly common. Early investors in e.g. Google, Apple, Cisco, Facebook and Twitter all ” leveraged ” their investment so that e.g. a $10,000 investment became worth a $Million or even more. To achieve it you must have ” risked ” some money by investing in a company whose value might grow from nothing to something considerable. Everyone who starts their own business probably hopes that one day it might be worth a lot of money. Of course not everyone succeeds in this.

Certainly there was a lot of time that went into this – along with skill, knowledge and innovation. However the value created is not directly related to time. Although over the years I have found that typically it takes around 7 years from starting something to it becoming valuable and I have tested this with other investors and looked at a variety of companies to check its validity.

The telecommunications resellers also put a lot of time ( effort, skill etc etc ) into getting their customers as well. However once they got them they could go lie on a beach, sleep, race cars or whatever and the money kept rolling in.

Many of these resellers have ” sold their book ” to other, usually larger, resellers and Telco’s but you can bet that they never forgot about the PIG’s that they built and which they finally sold for some number times the revenue or profit that they made.

Of course these PIG’s were pre-Internet to some extent. ( Actually the same basic model still exists today and I have friends and business colleagues that still operate it ). I suppose I mean that the money comes in in a traditional way – you send out a bill and it get’s paid. It is not money from an ” Internet ” business although it may be money from the ( telecommunications ) infrastructure of many businesses.

Let us think about other PIG’s …… People write songs and the royalties from those songs come in forever no matter what. Authors write books and the royalties from those also come in forever. ( Think Harry Potter !! ). People invent things and the licence fees last forever. How did the richest people in the world make their money ?? There’s an overview HERE . Typically they built High Tech. businesses; they invested in property; they provided products or services to millions of people.

 

Even small amounts of money from millions of people are millions of dollars, pounds or whatever.

 

Some Internet Marketing companies and specialists ( sometimes called Online Marketing or Digital Marketing ) know how to get many people to purchase products and/or information online.  Companies like the Six Figure Mentors ( also called the Digital Experts Academy and PRO U in the USA ) automate the process of acquisition of products from being found or discovered on the Internet to placing an order with eg a credit card. They know that the best formula is to get small amounts of money from lots of people ( say $20 for an entry fee ), slightly larger amounts from fewer people ( eg a monthly $100 membership fee ) and then larger amounts from a few ( eg $2-20,000 for Internet Marketing Training ).

 

Other companies like Market America / Market United Kingdom combine income from online portals – with huge arrays of products at different prices ( e.g. Motives and Shop.com online shops ) – with multiple membership and training fees. This combines automated  online purchasing with physical recurring income from many people.