Recurring Income is
another term for residual income. In
a nutshell, there are three (3) types
of income streams that you may have coming into your business.
1. If
you do a one-time job, sale or perform a
contract, you get paid once and the income stops there.
1. If
you do a normal 9 to 5 job, you will continue to get paid as
long you continue to work for your employer—often called a linear income. This
is the type of income that the majority of workers “enjoy.” Even if you are a
neurosurgeon, lawyer or engineer, you are only paid as long as you continue
working. You stop working and the bank account dwindles.
1. The
third type of income is the recurring
income where you are paid even after
you have stopped working. For example, you wrote a book and as long as your
book continues to sell, you will continue to receive royalty income for a work
done once.
Majority of rich and affluent people created wealth through
a form of recurring income stream.
Take singer Michael Jackson for example; he still continues to receive royalty
from the sales of his records made decades ago. He can even repackage the same
oldies and sell them to generate new income. He doesn’t have to spend time in
the studio to record new songs in order to have the cash keep flowing in! This is the most ideal situation of the three. We
would all like to work once and get paid over and over again. That is the power
of recurring income!
The majority of professionals that enjoy this type of income
belong to the creative fields such as actors, writers, singers, and inventors.
Unfortunately, not many of us are blessed with the talents
Michael Jackson has, let alone the opportunities to be in the lucrative
industries. However, there is one budding opportunity for any ordinary
individual today to enjoy residual income today in the 21st century.
You’ve guessed it: it’s
none other than Network Marketing.
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Network Marketing Reviewed
The field of Network Marketing or Multi-level Marketing (MLM)
has also been instrumental over the past 60 years or so to make the recurring
income concept very popular and attractive.
Here, you can build a network of distributors, referred to
as your down line, and generate
income outside of your own immediate effort. Working for Network Marketing
company is one of the most feasible
places where you can generate
recurring wealth, and so we will now take a look at the secrets to being a
successful network marketer.
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Choosing a Network Marketing Company
According to a respected journalist, Richard Poe, in his
book Wave4
– Network Marketing in the 21st Century, Network Marketing
is responsible for moving over a whopping **$100
billion** of goods and services yearly on the global front. It is therefore
very likely that you have already come in contact with some type of Network
Marketing product or service. The concept of moving goods through an army of
independent distributors has earned its place in the marketing world despite
the negative publicity suffered by the industry. Network Marketing is here to
stay; the question that remains is, “How do I choose a company?”
Here are some very important pointers that would guide you
in the right direction. Any company that you can find passing these criteria
will be a great company to line up with.
1. A company that
has been in business for at least 5 years and has great financial
backing, excellent management and a ‘distributor first’ philosophy. The company
should also have a long-term development goal and not just be out for the quick
cash.
This may be a pretty tall order to
reach but considering that the great majority of start-up Network Marketing
companies fail within their first three years you don’t want your income stream
to suddenly dry up! It’s no picnic to discover that after you’ve spent time,
effort and money to build a solid organization the company closes down because
one of those essential elements was missing.
There is the prevalent myth that
the best time to join a company is at start-up—the so called ‘ground floor
opportunity’—, but if the truth be told, the ground often caves in leaving many
people very unhappy. This does not mean that you should wait for five years to see
if a company would do well, because logically, this would mean that no Network
Marketing company will ever get started. The point here is that you should
assess your risk and know that the chance of losing your money is higher with a
new company than with a company having a proven track record.
You know the saying that the proof
of the pudding is in the eating; just so the proof of the stability of a
Network Marketing company is in the duration of survival. In fact, in over 60 years of Network Marketing history and
after tens of thousands of Network Marketing start up companies, only around 42
companies have made it to their 5th birthday.
Any business owner would admit that
the first years are the toughest. This is the period when the company is just
establishing a footing and income is most likely low. If the company does not
have the proper financial backing it is not likely to survive these years. You
would not want to join a company that is depending too much on the distributors
for survival. A Network Marketing company takes time to build momentum by the
very nature of the business - word of mouth advertising, people telling people.
Before it reaches top momentum it must have the financial backing to survive
the early hurdles.
Customer support for the
distributors is also a critical part of the company. If their distributors feel
neglected then they will simply not stick around. Especially in today’s market
where there are thousands of Network Marketing companies beckoning. The
distributors are the consumers and salespeople, and to neglect them is to
commit certain suicide.
A sad reality of the Network
Marketing industry is that there are many scam artists that come along just for
the quick cash just before they close shop and disappear. This would require
that you do your due diligence such as checking consumer alert websites as FTC.gov and WorldWideScam.com
among others. These scam artists will normally emphasize the compensation plan
over the actual product—if there really is a product—and apply high pressure
sales tactics to persuade you to join the “ground-floor opportunity”. These
criminals prey on human greed and have little sympathy for the naïve.
2. High quality (unique if possible), reasonably
priced products or services that should be, ideally, consumable so users will
have to buy over and over again.
Traditionally, Network Marketing
companies are able to produce higher quality products simply because they don’t
have to pay outrageous prices for advertisement. Just think about the millions
of dollar paid per year by companies such as Nike to sports stars for a 30 second commercial. This money, if Nike followed the Network Marketing
model, could go into developing better quality products and paying their
workers better salaries. Because a large part of a normal company’s budget goes
towards advertising, Network Marketing companies will deliver a higher quality
product, all things being equal, per dollar spent.
Also remember that you want to be
paid continually so you need a product or service that is consumable so the customer has to keep refilling his supply.
Nutritional and telecommunication companies fit this requirement very well.
Apart from being consumable,
another important factor is how ‘needed’ this product or service is. The
negative side of pushing nutritional products is that most people are only
concerned about their health after it is already failing! (You’ll do well
recruiting at the local hospital). If you are marketing a service such as web
hosting, medical coverage or legal services you are more likely to have less
attrition in your down line.
If the company is selling a product
that you can pick up at your local department store, then you’re not likely to
do very well. A unique or proprietary product will do better since you’ll have less competition—you learn very early
that there is no such thing as zero competition although some companies will
want to make this claim.
The “acid test” question to apply
to the price of the product or service is, “Would
I purchase at this price if there wasn’t a compensation plan attached to it?”
If your answer is “No,” then you are looking at a potential pyramid scheme
where a product is just attached to the compensation plan to make the
opportunity appear legitimate. In these cases you will always find that the
compensation plan becomes the selling point and the product or service rarely
mentioned.
Here is an informational article on the subject of
recognizing and avoiding such schemes:
http://www.ftc.gov/bcp/conline/pubs/invest/Network
Marketing.htm
3. A Compensation
Plan that is fair to both fulltime and part-time distributors alike with
leadership bonuses for those who build large and productive teams.
We have already mentioned that a
successful Network Marketing company will have a “distributor first”
philosophy. In no other place should this be exhibited more than in the
compensation plan. It takes only some simple arithmetic to see how many sales
or distributors you need in your organization in order to be in profit. Most
people don’t take the time to do the math and sometimes are “deceived” by the
fancy potential income charts that are put out by the company.
The point here is that you need to
read between the lines and the fine print to be sure what you are paid for your
effort. Most people will skim this section because it may read like a tax code
and who likes to do their taxes? That’s why we hire accountants.
Compensation plans fall into
basically four types:
(a)
The Break
Away Plan. This is the oldest and most traditional plan and allows
distributors to build and be paid on an unlimited number of frontline
associates. When the frontline associates reach a certain predetermined volume
they can “break away” from their up line and form their own organization. In
this break away plan the leaders are paid on all their frontline and also
certain levels down in their break away groups. In this model if you don’t work
you don’t eat. You have to recruit in order to be compensated.
(a)
The
Unilevel Plan. Here you are only paid on a certain number of levels
determined by the company. In this case there are no ‘break away’ groups. The
larger your frontline the larger will be your total group size. The lower
levels would therefore be much larger than the upper ones. Again if you don’t
recruit you don’t get a check.
(a)
The
Matrix Plan. In this plan you are limited to the number of recruits you
could have on your frontline. So in a 3
X 5 matrix you’ll have 3 on your front line then 9 on the second level,
then 27 on the next and so on. Compared to the two other plans we’ve looked at
the matrix plan limits your success to a certain level. What’s so appealing
about this plan though is that recruits are told they only need to get 3 and
are even promised “spill-over” from a “heavy hitter” in their up line. The results
are that everyone joins looking for spillover and never makes any personal
effort. Results? Certain failure. A matrix, though limited, can work but the
distributors must depend on their personal efforts and allow the spillover (if
any) to be just an added bonus. One prime example is SOLOBIS.
(a)
The
Binary Plan. This plan is a special case of the matrix where you can only
have two on your frontline, hence ‘binary’. The only caveat here is that many
such plans require you to balance both sides of your organization before you
can get paid. This is really a trick so that the company can keep your money as
long as possible and sometimes forever. Some dishonest companies will start off
by opening only one side of the binary—called a ‘power leg’—as there is no possibility of you getting paid until the
other side is opened. By the time the other side is opened many people may have
left the company leaving their commission checks behind as well. You are
forever left, not only with recruiting, but trying to balance the sides of your
team. Beware of such plans!
There are variations of these plans that have come
along such as the straight-line plan where you are paid on every one that comes
in after you.
Companies that follow these plans
don’t seem to survive very long since most people just join and stand by
waiting on their checks. There is no real incentive to work the plan.
Warning: You should
always be particularly suspicious of compensation plans that pay out over 60%. This normally
means that the product is overpriced, qualification quotas or volumes are
almost unreachable or the breakaway structure can rob you of your investment
and hard work. If the company uses the breakaway plan you may find your down
line disappearing just as you are about to hit the big numbers. If a company
intends to be deceptive it will be in the compensation plan; so study it well!
4. Training and solid up line support for your team.
Many companies provide training and promotional materials
for their distributors but it is often difficult to strike a balance between
product promotion and distributor training. And distributor training normally
takes a backseat. You should be wary of companies that charge exorbitant prices
for their promotional materials. You are investing your advertising dollars so
the company should not seek to make a profit from you here—although many do.
You should seek to align yourself with an experienced leader
and learn as much as possible from his or her recruiting methods. Be sure to
investigate your up line because that can be the one factor that determines
success or failure for you. Study the company literature to see who the ‘big
hitters’ are and join their group. It is said that misery loves company; so
does success.
5. A wide and even global market if possible.
You may find a company with all the
great characteristics that we have looked at so far and then discover that it
is not available in your area—ouch! With the advent of the Internet you find
that many more companies are going global. This means that your market reach
will be wider and chances of building a solid team greatly improved.
Apart from the sheer geography of
the company’s market reach, is the potential customer base as well. For
example, many American nutritional companies are aiming for the ‘baby boomers’
who are now in their midlife years and make up a good percentage of the buying
public—in means and numbers. This demographic of customers want to look younger
and are very health conscious. Any product that caters to their needs will most
likely have a ready market.
Another big “bubble” when looking
at population demographics is the children of the baby boomers. Look at what
they are spending money on!
Choosing a company that has a
product or service for which there is no ready market will make it very
difficult on the distributor. And in this industry one needs a lot of
encouragement.
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Network Marketer’s Survival Guide
In the Network Marketing industry attrition rate can run as
high as over 70%. This means that
the majority of people who try a Network Marketing company don’t survive the
first few months! The upside of this is that 9 out of 10 of those who survive
through ten years become very wealthy. This industry has produced more
self-made millionaires than any other single industry in America.
What a recommendation for Network Marketing!
So if this industry has produced so many self-made
millionaires, how is it that more people aren’t staying for the long haul?
First we would look at some of the major reasons for failure and then some tips
to help you escape these traps.
5
Main Reasons Network Marketers Fail
Human beings are complex creatures and so it is always a
little risky to make general statements. Over time, however, a pattern emerges
and we can get a very good idea why so many people start this business and then
drop out.
1.
Mishandling
of rejection from close family members and their warm market.
When someone is first introduced to
the concept of Network Marketing they become very motivated—mainly by the
income possibilities—to start recruiting right away. Most companies will teach
you to start with a list of your warm market and work from there. Even though
this is a logical route, rejection from this group can be very discouraging and
most people stop there. This means that the majority of recruits will give up
after speaking with their spouses for example.
Only lately has Network Marketing
become recognized as a viable and respected profession and many are still quick
to cry, “Oh! You mean a pyramid scheme”. This comes because of the negative
press that many famous companies have received and the general misunderstanding
of the public.
1.
False
expectations for too early results with too little effort.
Depending on the way in which the
business is presented, one can get the impression that there is not much effort
involved. I mean, just get two who gets two and you can become rich. When early
recruits realize that considerable networking
and marketing is involved in Network
Marketing, disappointment quickly sets in. There is work involved, and any business that presents a plan to you and
says that you don’t have to do anything is peddling a lie. All successful
network marketers worked for their success.
Many marketers do not factor into
their planning the cost of advertising their business. This cost can eat up a
good chunk of your investment especially when you are just launching. The idea
here is that you have to regard this as a normal business and not just a trial
run venture.
1.
Lack
of focus.
Network marketers have gained a
reputation of jumping around and changing companies like they change clothing.
At least this applies to those who flirt with success but never reach it.
As I mentioned before, those who
survive the early years normally go on to do very well. However, there are many
people who are looking for the ‘next big thing’ and keep jumping from
opportunity to opportunity. This normally describes the behavior of those in
search of the ever evasive ‘ground-floor opportunity’. The rule of thumb here
is that you should establish yourself in one solid company before venturing off
into other companies. And if you do work more than one opportunity, make them
complementary to each other. A perfect example is working a leads company which
you’ll need anyway to feed your primary Network Marketing company. In fact, if you find any tools that enhances
your business, why not purchase from a company that has a compensation plan
attached?
1.
Failure
to work an easy to duplicate recruiting plan.
With the advent of the Internet and
all the new communication means that it affords, Network Marketing has come a
long way from the home meetings and house to house presentations. Doing these
presentations was very intimidating to many people and so the recruiting chain
often broke along the way. The key here is that if the recruiting machine does
not have a system that anyone can comfortably do, it will come to a screeching
halt. Good trainers know that a simple system must be in place or the trainer’s
efforts will not be properly duplicated. If the impression is given that a
recruit must be turned into an instant public speaker, giving motivational
speeches at the local Hilton, they can be easily scared off.
At the same time, you must take the
time to learn the system and become familiar enough with the products that you
can tell a friend about its benefit. As a user yourself, this should not be
difficult. A caution here is to work the system that has been field tested,
rather than trying to invent your own methods. This doesn’t mean that you
shouldn’t be innovative, but there is no use to reinvent the wheel either, so
be teachable.
1.
Baby-sitting
of down line members.
Teaching is surely a part of the
game of building a strong team. Some marketers make the mistake of doing too
much for their down line members thinking that if they didn’t their recruits
will leave. This often backfires, however, because the down line members become
comfortable and depend too heavily on their up line and never grow strong
enough to build their own teams. There is only so much you can do for someone
and no more. These spoiled over-dependent down line members can become a
liability instead of an asset to your team. So avoid the temptation to
micromanage your team; you’ll get burnt out. Teach your team members to fish
instead of fishing for them.
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Secrets of the “Heavy Hitters”
Now we come to the positive side of the equation. Ninety
percent of conquering a problem is to identify the problem. Even addicts have
to first agree that they have a problem before they can be helped. So if we can
quickly review the major reasons why people fail we can just avoid those
pitfalls. Let us take a look at these pointers:
1. Be prepared to handle rejection. Who
said that any kind of selling was easy? But it all comes down to attitude. If
you can understand that a rejection of the opportunity that you are so excited
about is not a rejection of you as a person, then you are on your way. “No”
must be interpreted as “next”. This is easier said than done but it’s the price
of success. The Internet and other new technologies now allow some rejection
proof approaches, such as using lead capture pages and autoresponder messages.
These methods serve to “pre-qualify” your prospects. There still must come a
time when you will have to be in personal contact with your down line members
however.
Part of preparing your mind for
these ‘negative’ people is to fill your mind with positive messages. There are
many Network Marketing and “positive thinking” speakers that will help you keep
your spirits up. You will be surprised to discover the boost that motivational
tapes and books can give to your attitude in general. This is one of the
benefits of being in this industry—it teaches you to have a brighter outlook on
life.
1. Be realistic in your expectations. To
expect too much too soon will only set you up for a possible let down. Accept
that this is a legitimate business that requires investment of time and effort
and you must be prepared to sow the seeds for the harvest you expect to reap.
Who builds a house without first considering the cost?
When you are quoted the salaries of
the big recruiters, be sure to ask how much time and money they spent to get to
that level. This information will give you a clearer picture.
1. Once you find a reputable company be
prepared to stay for the long haul.
This goes without saying but if you
expect to succeed you must stay the course. The most successful people in life
have gone through very trying times but they stuck with it and left a legacy
behind. It is often said that tough times don’t last but tough people do. The
same is true for those seeking to build a solid recurring income. You should
commit yourself to at least 3 years before making a decision either way.
Jumping from one opportunity to the
next only shows a lack of decision and stability in you planning. Teenagers are
expected to fall in and out of love every few months, but married couples have
committed for life. Be prepared for a marriage not a fling!
1. Do not make the business more complicated
than it needs to be. Stick with what works.
There is always the temptation to
improve on the methods that experienced networkers have shown to work. Go with
what works, not with what should
work. If you find a system that has been working just plug into it and squeeze
the last drop of success you can get from this. This means that you must show
yourself teachable to your up line and be willing to teach your down line
members the same system. Success normally comes from doing what works over and
over again until it becomes second nature.
Another note of caution is that you
should not expect from your recruits what you are not doing yourself. There a
many networkers who will give advice that they are not willing to follow. In
other word they get their team members to “do the dirty work” for them. This
practice takes away from the real meaning of duplication—I’m doing the same thing that I’m teaching you to do.
1. Train and then let loose!
The
real power of Network Marketing is the power of leverage. Rather than using
100% of your own effort, you are using 1% of the effort of a hundred. If your
down line members become too dependent upon you then they will be using 110% of
your effort. This can easily lead to
rapid burnout.
So the key here is to train your
frontline members, then train them to train their frontline members. As you
gain leadership experience in the business then you can occasionally pick up
the slack for a colleague. The important thing here is that your team members
understand that effort is required on their part or they cannot expect your
support.
Here are some additional insider tips on really hitting the
ground running. These ‘secrets’ are learned from the study of those who have
made millions in this industry.
1. Talk to many at the same time instead of
one at a time.
We just mentioned that the real
power of Network Marketing is leveraging your efforts. Did you ever notice that
the real successful people in this industry never talk to one person at a time?
Just think about it. Your recruiting message or script will be the same for
each prospect. You are introducing them to a business opportunity. If you were
to use the telephone to do your presentations, how many prospects can you talk
to in one day? So here is what the serious marketers do:
a
Set up a toll free number with a recorded
message and invite callers to leave their number and other contact information.
a
Advertise conference calls where many people can
join and listen to your presentation at the same time.
a
Run a message board on your website where people
can ask questions and discuss the business.
a
Host an online conference chat room.
a
Buy leads and load them into an auto responder
with your prospecting message. Be careful of here to avoid SPAM complaints.
Also confirm that the auto responder company that you use allows you to use
purchased leads.
1
Target
other network marketers.
This may seem to go against the
issue of not jumping from opportunity to opportunity, but it is much easier to
work with someone who has already worked in the industry than a totally new
person. There are list brokers who specialize in mailing list of distributors
from companies that have closed down. For these individuals you don’t have to
teach them to fish, they already know, and that can be a plus.
In addition to this, you can expect
that if they join forces with you they can bring their entire down line from
the old company. Of course, one challenge is that these seasoned marketers will
also be more difficult to recruit since they will take a more critical stance
of your opportunity.
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Target
business-minded people and entrepreneurs.
Here again you are targeting people
who are already motivated and understand what it takes to run a successful
business. These individuals would also already be networking in their
businesses and therefore would be in a position of influence. Such people
include chiropractors, real estate agents, sales people and internet marketers.
These professionals come in contact with a large number of people and could be
the boost that the organization needs. The more ‘business minded’ your
prospects are the more likely you will recruit them.
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Make a
written plan with all your goals and steps to get there.
Psychologists tell us that when we
write something down we are more likely to commit to it. That’s why you are
required in a contract to place your signature on the dotted line—helps you
keep your end of the bargain.
Every business owner should have a
goal to which they are aspiring. If you aim for nothing you are likely to
strike it. If your plan is to get to a recurring income of $10,000 per month
then you should set smaller goals on your way there. Say, $3,000 per month
after the first year, then $7,000 per month after the second year and finally
$10,000 per month by the third year.
A very important part of writing
out this plan is to calculate what is required to get to your goal. So if you
must call 20 people to get 1 ‘yes’, and that prospect is worth $50 per month to
you, you will know how many calls you have to make per month to get to $3,000
per month in one year. Looks simple, but most people don’t do this kind of
calculation and so they run their businesses with blind expectations.
Knowing where you are going is one
of the easiest ways to get there!
1
Continually
work to improve your people skills, especially your listening skills.
At its core, Network Marketing is
really people management. If you don’t like dealing with people then this is
not for you. You are always going to be in direct or indirect contact with
people and so you should brush up on your people skills.
One of those skills that you’ll
need to primarily focus on is your listening skills. One of the most common
downfalls of Network Marketingers is that they talk too much and don’t listen
enough. This applies to the majority of salespersons. You have to always take
time to listen to the customer because if you do - they will tell you what they
are looking for! Here are some quick tips to improve your listening skills
(particularly on the telephone):
(a)
Well ... just stop talking and listen.
That’s the toughest part.
(a)
Learn to view things from the prospect’s
position. Is your prospect a single mom struggling to make ends meet? Empathize
and provide the solution.
(a)
Restate what the person tells you to be sure
that you understand what they are saying. This also makes the other person feel
“heard.”
(a)
Try not to interrupt them while they are
talking—another hard one.
(a)
Ask a lot of questions for clarification but not
to be confrontational.
(a)
Avoid jumping to unnecessary conclusions and
learn to “listen between the lines.”
(a)
Smile! You’ll be surprised to see what this does
to your tone of voice.
1
Stay
informed in what’s happening in the industry by subscribing to at least one
professional Network Marketing journal.
There are many magazines to choose from and many
books written on the subject of Network Marketing. As an “expert” in the field
you should be able to speak of it in a professional way and be aware of the
latest trends and technologies available to you. Think of how impressed your
prospects will be when you can quote them the latest statistics. This helps you
to build immediate credibility with your prospects. If you expect to make
$20,000 per month, think about what other professionals with similar salaries
had to endure before they reached that level, a doctor for example—years of
medical schools, educational loans and internships! Don’t be skimpy on your
education.
1
Write
your own book or produce Network Marketing tapes and CD’s.
This may appear to be a tall order
but it is not as difficult as it first appears. First you can publish an E-book
even if you have this book written by a professional ghostwriter. You can place
a bid at a website such as Elance.com
and have writers bid on your job. This book will have your name on the cover
and no one has to know that you never wrote one word!
Audiotapes and CD’s can be produced
at home using a stereo recorder or in a local sound studio. You can also use
your computer with the appropriate software and hardware to do this. There are
many companies that will reproduce these recordings for you at minimum cost.
Having your name on these products can be a real income booster. People want to
know that they are following a leader and that is the way you are presenting
yourself.
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About Affiliate Marketing
Affiliate marketing
has been made very popular on the Internet by companies such as Amazon.com, ComissionJunction.com
and ClickBank.com.
Strictly speaking, because you are getting a one-time
commission for most of your sales in an affiliate program this income is not
really recurring. The trick here is to join affiliate programs that offer a
monthly service such as a web
hosting, or membership websites.
Remember the key is that the product should be consumable or requires
renewal. Also affiliate or associate programs don’t normally pay you beyond the
second level so you cannot really build large organizations as in a Network
Marketing company, therefore your income is a bit restricted. In this case you
will have to spread wide—create a large frontline.
Most affiliate programs don’t require you to train or
support your customers, so this all balances out. In life it’s hard to break
the “you get what you pay for” rule.
It’s the sowing / reaping principle.
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In Closing
You should take a look at your income sources and evaluate
them to see how many are recurring and how many are linear. The key here is that you may want to
“balance you portfolio” so you can have income coming in even if for some
reason you are not able to work. Especially as a small business owner this
can be critical to your survival.
Even one of your fat monthly checks tucked away on a fixed
deposit account will provide you with recurring income—accrued interest.
How long do you think it will take Bill Gates, the richest
man in the world, to make his first billion if all his bank accounts were
presently frozen and taken away? That’s the power of
recurring income!