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Which of these revenue models is right for you?

09 May 2011

Everyone wants to make money while they sleep! But the reality is that nearly all service professionals can’t go straight to that ‘money while you sleep’ model until they’ve outgrown the startup phase and have a more stable business.

There are essentially three simple models for service based businesses and professionals:

Direct Revenue
This is where you need to be providing the service directly to your clients. It’s all about you delivering one on one, and while you’re doing this, you can’t be doing anything else in your business (but others can!)

When you’re in start-up mode, or you haven’t achieved a sustainable level of clients, or if you’re unable to forecast your next 6-12 months’ cashflow with any certainty, then this revenue model applies to you.

This is a fundamental and critical revenue model that some service professional try to bypass, by going straight to either of the next two models. You will never achieve leverage or passive income if you have no clients.

Leveraged Revenue
When you have a sizeable, stable client base, or you can confidently forecast your cashflow for the next 6-12 months, you can start to create more products and services to provide those clients. Some of the outcomes you will achieve include:
-    You add more value to your clients
-    You increase your revenue
-    You create new IP and products faster because you’re leveraging off what you’ve already done before
-    You create new revenue streams

Leveraged revenue simply means you create additional revenue by using existing knowledge or programs or methodologies and repackaging and repurposing it.

For example, I created an entire HR system for clients many years ago, based on delivering this information via the Direct Revenue model. I provided consultancy services to create and implement a customised HR system for some of my clients. Later, I repackaged that into a product and sold it online to create Passive Revenue. Now, that has been updated and is available as a hybrid product/service via a mentoring/information download package.

It does take time to repackage your IP and methodologies, but usually not as much time as if you were to create something new from scratch.

The new products and services you create as Leveraged Revenue may also be Passive Revenue – for example, if you create a new program that you deliver one to many, that would still involve you. However, you’re doing it once and delivering it to many at a time. If you turned that program into a product, that could generate passive revenue that wouldn’t involve you at all in the delivery.

Passive Revenue
If you have distributors or resellers who sell your products they would be creating passive revenue for you. Royalties and commissions create passive revenue, as do information products.

But you need to know that passive revenue requires very robust back-end systems and processes to make this model function properly.