Many entrepreneurs advocate establishing multiple streams of income as the road to financial success. However, all entrepreneurs know that successfully managing even one small business is a challenge. To make the multiple streams of income approach work, you should proceed cautiously and with careful, deliberate planning. Otherwise, you risk spreading resources too thin and causing yourself potential financial problems, or becoming overcommitted to the point you don’t adequately attend to any of your small business operations. Here are some key tips for establishing and managing multiple streams of income.
Focused Rather Than Broad-Based Efforts
One of the questions that arises in relation to establishing multiple streams of income is whether to take a focused, one-business-at-a-time approach, or to go with the “shotgun” approach of moving forward on establishing several streams of income simultaneously. While there is no definitive answer, and much of the answer may depend on an individual’s personality type, the general consensus is that focusing on one business endeavor at a time usually leads to more substantive results, in terms of revenue generated and profitability achieved, being realized within a shorter timeframe.
The well-known investing entrepreneur, Robert Kiyosaki, author of the “Rich Dad, Poor Dad” book series, took a serial approach to building multiple income streams, first establishing a business as a real estate investor, then adding other investments, and finally leveraging his knowledge into creating a self-help publishing business.
Create Passive Income
Passive income streams are those that, once established, continue to generate revenues with only minimal effort and attention. A classic example of creating a passive income stream is writing a book. Once written, it can continue to generate revenues without a lot of ongoing work. Most passive income streams require little more than ongoing marketing efforts.
An increasingly popular passive income stream system is producing educational or entertaining videos. Popular YouTube channels generate substantial advertising revenues, and once videos are created, they can be used over and over again. A logical second business to set up is sharing your expertise in your primary business. Other potential passive income efforts include franchising your existing business or implementing affiliate marketing on your website.
Keep Your Businesses Separate
Avoid the mistake some individuals make of trying to run three or four separate businesses without actually separating them, housing everything under one roof and mixing expenses and revenues all together. Each of your small business ventures should be treated as a separate entity, with its own accounting records and resources.
It is critical to be able to periodically review and evaluate each of your streams of income, and that is another reason for keeping separate records of operations, expenses, and income, thereby enabling you to generate financial reports to critically review each business to determine how well it is functioning. Some business ideas just don’t pan out, and the best use and preservation of your resources involves recognizing and discarding a bad idea as soon as possible.
Regular reviews of each individual business may also enable you to identify problems with one of your businesses that you can then take steps to correct before the problem grows to the point of creating potential default.