Multiple Streams of Income—Magic or Myth?

Hi Mike,

Interesting post (as usual)!

However, I have a slightly different take on this issue....

Here's the way I look at it....

Let's first take a hypothetical example of someone who has 3 streams of income. Let's say that with all of them he or she has to actually do work (that is, they are NOT passive streams of income)....

Now, let's say that when he adds up his revenue, and subtracts his costs, and takes his time into account, that stream A makes him a measly $5 per hour....

Let's say that stream B does a bit better, and makes him $15 per hour.

And stream C does the best - what he makes there is $40 per hour.

If he divides his time equally between these 3 streams, he makes $20 per hour on average, which isn't too bad.

NOW, let's take the person who does ONE income stream. The key is here, the person who does one income stream doesn't have time to TRY all three. So whether he makes $5 per hour, $15 per hour, or $40 per hour, depends in part on "luck" - did he pick the "right" one to do?

If he chose to spend his time on activity A all the time, after he adds up his revenue and subtracts his costs, he makes a mere $5 per hour - FULL TIME. He doesn't know about stream B or stream C, because he HASN'T TRIED THEM! He doesn't "have time" to try them.... In this case, he is obviously worse off....

Also, if he does stream B full time, he is worse off too. He makes $15 per hour, instead of $20 per hour which the multiple-streams-of-income guy makes.

But, if he is lucky and chose to do stream C from the beginning, he makes $40 per hour - he lucks out.

I think one thing which might be missing is sometimes we might count all those who choose to do stream C, and forgot about those "unlucky" ones who chose to spend all their time on streams A or B.

NOW, back to the multiple-streams-of-income (MSI) guy. He's making $20 per hour.... BUT, there is nothing to stop him from saying - hold on a sec! With stream C, I'm making $40 per hour, and with streams A and B, I'm making much less. Maybe I should spend all my time on stream C!

This is the approach I like.... Do MANY streams of income - but that doesn't mean you KEEP doing everything all the time! Instead, keep the ones which are making you good money, and drop the others. However, keep experimenting.... Don't be opposed to trying new little streams of income.... Keep what works, and replace what isn't working as well....

The last point I want to make here, is that we are assuming that a person has to work for all these streams of income, all the time. That's not necessarily the case.... Often, if a stream is profitable enough, it can automated somehow - whether by using technology, or by hiring people, or by outsourcing some of the work - that kind of thing. Then, it frees up your time.... You still have money coming in, but you have the time too. This, to me, is the ultimate goal....

The advantage of "low skill" businesses is that it is easier to outsource some of the work, I think. For example, if you mow lawns, and you get LOTS of lawn-mowing jobs, you can first start by SELLING those extra jobs to other lawn mowers. (Yes, jobs like these CAN be sold.) Then, if you want to take it a step further - start a lawn-mowing franchise. This is exactly the process a guy named Jim Penman did here in Australia.... You can read his full book online about it at this web page: http://www.jims.net/jim_book/surprise.htm . (I warn you - it is a full-sized book!)

If you do something which requires your rare talent or skill, then this is tougher to do.... It means you are less "replaceable". That "ties" you to the business more, and makes it harder for you to "outsource" any of the work....

But, I still agree with "specialization" - but not necessarily a "skills-based" specialization. Instead, I think a "niche-based" specialization is perhaps better.... For example, if you sell clothing, you can target your clothing especially for bicycle-riders. It doesn't mean you need any special skills, you just need to make sure that what you make fits the wants of bicycle-riders better than most of what's out there. And make sure that bicycle-riders know it!

Anyhow, those are few of my rambling thoughts on this topic.... :)

- Dien Rice