Residual Income - What It Is and Why You Need It
By Hamish Hayward
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
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