Time is your most valuable resource in business and in life.
You cannot buy any extra time at the end; you can only do things that make you more effective with the time you have now. Levered Income is about finding those tools and business models that help you leverage your time, make you more effective and ultimately help you make more money.
- Moving money from low capital businesses to higher capital businesses leverages both business model and capital.
- A tale of four businesses and their impact on your time.
- Where do you Allocate Capital?
- Capital and Lever Rank.
- Final Thoughts on Time – Your Most Valuable Resource.
Typically, higher capital businesses will require less time and effort on the owner’s part than lower capital businesses. What does this mean? You can leverage the capital to make more income if you have capital. This contrasts directly with lower capital-intensive businesses, which typically require some form of work or management by the business owner.
Lets take a look at few examples from both Real Estate and Online Marketing Businesses:
Real Estate Businesses
Real Estate Investment Trusts (Lever Rank 75) Versus Vacation Rentals (Lever Rank 10)
Real Estate Investment Trusts (Lever Rank 75)
Real Estate Investment Trusts require very little from the owners to operate and receive income. If you have $1,000,000 of ready capital and spread it equally across 20 REITs and have an average yield of 6%, you will receive $60,000 per year of income (pre-tax).
As a business owner, you must research the individual REITs and monitor the companies’ health over the year. You can leverage the work of specialty REIT analysts to do the heavy lifting and spend only 30 minutes a month yourself for that $60,000 in income.
Direct Real Estate Investing – Vacation Rentals (Lever Rank 10)
Vacation rentals are on the other end of the real estate spectrum with a much lower Lever Rank of 10. Suppose you purchase four vacation rental properties for $1,000,000, set up Airbnb profiles, and for this example, they have a net income of $60,000.
As a vacation rental business owner, you will need to hire a cleaning staff and deal with permits, bookings, customers, and complaints in addition to the regular upkeep of the properties. The workload and risk exposure is entirely different from that of a REIT buyer.
Affiliate Marketing (Lever Rank 85) versus Digital Marketing (Lever Rank 20)
Affiliate Marketing (Lever Rank 85)
Affiliate Marketing requires almost no capital to start and virtually none to operate. Using Wealthy Affiliate, you can learn best practices, host ten affiliate marketing websites, and research keywords all in one place for $49 per month. The leverage is immense because you can build and run a multimillion-dollar business for only $49 per month.
In this business model, you have no worries about product fulfillment and customers; you are just building your audience. For the sake of analysis, let’s keep income the same as the above real estate examples and say that you have five affiliate marketing websites that each brings in $1,000 per month in income (or $60,000 per year).
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Digital Marketing (Lever Rank 20)
A Digital Marketing Business is easy and inexpensive to start, and there are many online free courses on how to become a digital marketer. Your costs are the website, hosting, and domain name. You will need to acquire some tools to streamline processes for your business, but there are also many to choose from, and some are even free.
In this business model, you need to both acquire customers (build your audience) and then service those same customers. Additionally, significant time is spent performing digital marketing services for clients, even if you outsource some or all of the work.
To keep the comparison the same, let’s keep net income the same as the previous examples and say you have 25 clients from whom you make a $200 per month profit ($5,000 per month or $60,000 per year).
As a business owner (of your four different businesses), where do you allocate additional effort and capital?
Although I own and operate each of these four types of businesses in the above examples, my approach would be to divert effort and capital away from Vacation Rentals and Digital Marketing. Both of these businesses are great businesses and you can make a lot of money with them, but the point of Levered Income is to leverage your TIME to increase your income flows.
As more and more capital becomes available as you build income streams, you need to shift that capital into businesses that pay you AND give you more time.
The Lever Rank ranking process takes into account the business model and also the capital required to start the business. You need to look at the difficulty of acquiring the $1,000,000 to start the REIT or Vacation Rental business and include that in the analysis. It is important to understand that once you have capital, you need to strip out the difficulty of acquiring that $1,000,000 in the first place (since you already have capital).
If you already have capital, we can remove that factor from the Lever Rank calculations. This would change real estate investment trusts (REITs) to an even higher ranking (along with Dividend Stocks and triple net lease businesses, which we’ve discussed in-depth in other articles).
Because REITs (as well as Dividend Stocks and NNN businesses) have the least impact on your time (your most valuable resource) to operate. You are essentially just evaluating other businesses and then buying a portion of those businesses. The CEOs and employees of those businesses are working for you, and the profits of those businesses flow through back to you.
Let’s take a look at the reverse, the “no capital” situation. If you have no capital, you cannot start high-capital businesses like real estate businesses, so all those high-capital “Lever Ranked” businesses are now irrelevant.
How can you leverage your income to eventually get capital to participate in those higher-capital businesses?
Focus on the “low” or “no” capital businesses and use tools to make you more effective. Start an affiliate marketing business and use a platform like Wealthy Affiliate to teach you and support your affiliate marketing efforts. Start a domain resale business and leverage the Namecheap platform to get started.
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In the “no capital” scenario, you spend more time and effort to build those businesses. Then, as these businesses take off, you can take the returns from these businesses and reinvest them to move them “up” the time-saving ladder.
As you build and operate different businesses, your thoughts on the value of time become more and more important. Your most valuable resource is something you need to protect and cherish.
I find that sometimes I become overwhelmed with so many different things going on and the constant pull of attention in so many different directions. At these times, I take a step back and look at why I am feeling so scattered. Usually, it is the result of me becoming absorbed in something for which I can use a tool to reduce the time impact.
Earlier in my career, I would “live and breathe” my businesses, meaning that I worked on them 24/7. I equated that level of commitment to “success” (I’m sure that it played a part), however, now I realize that I could have accomplished more if I had focused more on finding tools and processes that would amplify my efforts.
Always remember that time is your most valuable resource. It will help you focus on time with family (do you really need to look at your phone at dinner with family?) and focus on your business (is a $25 tool that saves you 1 minute a day worth it? Hint – absolutely).