One of the biggest benefits of being an entrepreneur is that there's no cap to your income-earning potential. You can diversify your products or services, maneuver your way into new markets, or tap new audiences to grow your revenue.
But this is a double-edged sword. On the flip side of things, entrepreneurs have no guaranteed income. How you manage this friction will play a large part in your overall success or failure.
There's no such thing as guaranteed income (outside of annuities, of course). Whether you're an employee, a self-employed freelancer, or a business owner, there's always the possibility of income evaporating. However, the risk for sudden changes in income is much higher for entrepreneurs.
As an entrepreneur, here are a few safe and effective tactics for making your income more predictable. These solutions won't necessarily make you rich, but they will cut out some of the risk.
It's impossible to reach what you don't aim for. Saying you want more predictable income is one thing. But what does 'œpredictable' mean to you?
For some, predictable income means making the exact same income each month. For others, it might mean a 10-15 percent variance. Then, there are those who are fine making a baseline figure '” such as $5,000 per month '” but would prefer to make twice that in a good month.
Don't just say you want predictability. Define it, and determine precisely what it is you want or need to be happy and financially stable.
If you're serious about setting and reaching income goals, you have to be religious about tracking. You need to track revenue '” both gross and net '” on a rolling basis. Monthly isn't enough. Think in terms of weeks (or possibly even days).
By concentrating your tracking efforts, you prevent a scenario where you get to the final day of the month and suddenly realize you're nowhere close to your income goal. Staying current with your numbers on a rolling basis allows you to forecast and optimize for greater accuracy.
What if you could start each month with a very clear idea of your minimum revenue for that month? With a subscription revenue model, you can. Customers pay in advance, and you know precisely how much you'll earn. (However, your revenue could go up if you add new customers.)
Plus, it's important to remember that customer retention is far cheaper than customer acquisition. By utilizing a subscription model, you actually increase the profitability of each one of your customers.
It doesn't matter if you sell physical goods, information products, or consulting services '” there's plenty of creative freedom here. The marketplace is more receptive to subscriptions than ever before; seize the momentum.
If you sell services, try to avoid one-off sales, where a client pays on an as-needed basis. This is good for the client, but bad for you. Whenever possible, entice clients to commit to retainers and contracts.
By switching to retainers and contracts, you're able to project revenue into the future. This allows you to focus on adding value, as opposed to constantly selling to new clients.
You can't control everything. As hard as you may try to establish predictable income, there are always larger factors at play. The right insurance products can help you offset some of these risks.
For example, you need a contingency plan in place for a situation in which you become sick, injured, or unable to work for a long period of time. A good disability insurance policy could provide steady income for a period of a few months to years. It won't be 100 percent of your income, but it should provide at least two-thirds.
Likewise, there are certain policies you can get to offset losses that occur due to factors beyond your control (such as cyberattacks, natural disasters, or even global pandemics).
There's nothing easy about making money. (If you've figured out the secret, please share.) Whether you're making $50,000 per year or $5 million, there's a considerable amount of effort that goes into generating income. As hard as it is to come by, income can easily slip away.
By seeking out a higher degree of predictability in your income, you can enhance your financial situation and sleep easier at night, knowing you're protected against worst-case scenarios. But don't wait until tough times strike '” start brainstorming and implementing strategies today.
The post An Entrepreneur's Guide to Generating Predictable Income appeared first on KillerStartups.