What’s The Multiple Income Stream Misconception?
When people think of multiple income streams, they tend to think in terms of a ton of completely different, unrelated income streams.
This is problematic because the amount of work it takes to scale with unrelated projects is vastly higher than it would be with related ones.
Yet people will say, “I’m going to start a blog and then when it makes $500 a month I’ll invest in cryptocurrency and then parlay that into real estate and then…”
This is the wrong way to approach multiple income streams. I’ll tell you why now.
In the above example you have to master three separate skills. First blogging, followed by cryptocurrency investing and then real estate investing. That’s also without noting that all of those things require learning multiple skills.
You have the same amount of time – and with minor variations adjusted across the population – the same luck, intelligence and talent as other people. You will be competing with people who devote 100% of their time to one of those areas.
For the most part, you’ll have a limited budget too. Limited not because I’m telling you you’re poor (I don’t have a clue about you,) but because if you’re splitting your investment three ways or using one project to bankroll another, you’re going to lose money. First in operating costs for all three and then you lose money when you want to transfer it from one project to another.
(Time Out: If you’re enjoying this article, then you should probably sign up to my mailing list, where I give out ideas and business tricks that I don’t share publicly. Click here, fill out your details and get yourself on the list! You won’t leave this page.
Now Back To The Regular Programming Schedule…)
That and it’s hard to maintain your energy when you’re flitting focus from one project to another.
What’s The Alternative?
The alternative is to develop multiple income streams within the same niche and with the same business.
Let’s just say you’re a writer. (I know, lazy example.)
Now, you could start doing the online freelancing and making a few hundred dollars a month. Then you could say, “Right… I’m going to start investing in penny stocks.”
This is not so great for the reasons mentioned in the above section.
But what you could do instead is say, “Right… My main service is a blogging service where I charge $100 per blog. What else can I write to make money?”
So you could look into what it is the people that hire you do. You’ll find some of them put your work up on blogs or niche sites. Some of them run newsletters or affiliate mailing lists.
You try that yourself, and it’ll probably succeed because people are already paying you to do it.
Oh, and guess what? You now command a higher price because you have more results (and less incentive to work for bad clients.) You also add to your skill-bank and so can get different work.
Now you have two income streams; one where you work for clients, another where you work for yourself. Both doing the same thing but with very different sources of income.
If one dries up, you’re still doing ok… but you don’t have to learn several different systems.
But What About Diversification?
This is diversified. See the above sentences.
But to take it further, let’s talk about two goals of business diversification because they get confused.
- You diversify because you want more money from more people
- You diversify to mitigate risk
When you’re talking about companies diversifying their income, they are not trying to diversify for reason two.
Do you think McDonalds does Mexican-themed weeks because they’re worried about their business collapsing? Of course they don’t.
They’re just trying to get more people in the door.
This is the majority of your diversification.
If you’re a writer, you should offer cheap, expensive, custom, recurring, one-time, catch-a-really-rich-guy-and-get-as-much-as-you-can and multiple instances of products and services to as many different markets as you can.
This is not about diversifying for your safety net. It’s about increasing income, because all of those income strategies are good, run simultaneous to each other and hit different target markets.
For the second point on mitigating risk:
There’s nothing wrong with investing in diverse stuff. But it’s not an income producing strategy.
Get a savings account. Put excess money in it. Invest in stocks, or real estate or whatever. But this is not your business. Don’t treat it like a new business because you’ll run into the problems above. Instead, it’s a store of wealth that you put excess funds into.
A ton of people start out in business and get stuck on the shiny object train. They want to invest in stuff before they have sufficient funds to do so. (Currently, people think they’re going to hit it big by investing $500 into cryptocurrency. That’s unlikely.) They want to put money from one business into another. (Inefficient.) Or, they see their first business as a stepping stone to bigger and better things.
Again… there’s nothing wrong with moving on or investing.
But you need to think smart and separate investment opportunities from business ones.
You need to maximise your business potential income because that’s where you put your skills, energy and investment money in, and you need to optimise your investment strategy by treating it as separate stores of wealth.