Little and often is better than big and infrequent
Traditional businesses were simple to understand. You have something I want and I have money - something that you want - so we swapped.
If I was happy with the thing that I bought from you, I'd come back in the future and buy another. I'd get what I wanted and you would make a profit.
The profit went to pay your bills - rent, electricity bill, salaries etc. - and everyone was happy.
But next month, if I didn't need a new thing from you, you as a business owner would have a problem. All of a sudden you don't have the profit you normally would have made from me to pay your bills.
No problem, you can probably survive a month or two. But then what?
What if I never come back. You make no profit, there's no money to pay the bills and all of a sudden your business is in trouble. It shuts down.
This is the simple but usually overlooked problem with most businesses. It's why 90% of new businesses fail and it's why there's so much panic when a recession hits. People stop buying things so if you are relying on big sales each month, you are in trouble. If you're selling low cost items, people are more likely to keep buying them.
Selling time is not going to make you rich
“How did it get so late so soon?” - Dr. Seuss
This is very simple to understand but people rarely think about it. There are 24 hours in a day, seven days a week and 52 weeks a year. That’s a total of 8760 hours in a year.
Most people can’t work 24 hours a day so let’s say that you work eight hours a day, five days a week, 52 weeks a year. That’s a total of 2080 hours a year.
If you worked 2080 hours a year at £10 an hour, the maximum you could earn is £20,800.
That’s not a bad salary but it’s below the national average.
Let’s say you work as a computer repair technician and you charge £20 an hour for your time, the maximum you could earn in a year is £41,600.
That’s not an amount to be sniffed at but remember that doesn’t account for your outgoings and that’s the maximum you could earn assuming you are fully booked throughout the year, you do not have any holidays or sick time.
If not time, then what?
There are alternatives to selling your time. One of the best examples of this is online guitar lessons.
I saw this many years ago and wished I had the talent and foresight to take advantage of this.
There are many people offering this but Guitar Tricks is one that I’ve personally used and can recommend. They charge $19.95 (around £15) a month for access to hundreds of online guitar lessons.
Why is this amazing? Because they create one video, which can be accessed by thousands of people each paying £15 a month. There’s no repeating of work like there would be if you were teaching people guitar in their own homes. They make one video covering a song and that’s their work done. That video will last forever and continue making money.
Plus, £15 to a customer is not a lot of money so they are likely to remain a customer for quite a long time.
The trick is to sell something that does not require you to do much when a sale is made or to sell something where there’s work required up front but after that, the customer has a subscription that they keep paying and you have to do little if any work on an on-going basis.
The key is finding a niche market where you can generate some income over the long term. Like all businesses, a lot of work will be required up-front but the goal is to set something up that will continue to generate income without you having to do much work to maintain the business.
Tim Ferriss, the author of the excellent Four Hour Work Week book, started a business online selling nutritional supplements. The genius of his idea was to outsource everything he could, meaning he didn’t have to do much work once the business took off.
Tim got another company to produce the supplements so that when he made a sale, he would pass the details on to the manufacturer who would produce the supplement and post it to the customer. No matter how many sales he made, Tim’s only job was to pass the order information on to the manufacturer. He literally just sent an e-mail - something that he could and eventually did outsource to someone else meaning that the business practically ran itself whilst Tim continued to make money and hence, he only had to work four hours a week.
No easy ride
Setting up any business is difficult, time consuming and there’s a much higher chance of failing than there is of succeeding but if you are thinking about starting a business, think of the best way to make money and see whether a subscription model like guitartricks.com could be applied to your business.
There are many sectors where a subscription model could work, you just need to consider the long term gain rather than the short term profit.