Did you know that a substantial number of businesses fail, not because of a lack of customers, but because of cash flow problems? Add to that the importance of showing predictable cash flow for financing, investing or selling your business and all of a sudden cash flow becomes a critical factor for every business out there.
Don’t worry, though. We’ve got this.
Today I’m going to show you the secret that so many folks overlook – the art of plannable income AND creating predictable income for your business!
First, we need to go over the three major forms of revenue every business has, the one form of income everyone forgets to think about and how THAT form of income is your secret weapon for getting you out of that constant need to sell, sell, sell all the time.
The three major forms of business revenue are:
1) One-off income:
The most common form of income for startups and small businesses in their early years. The premise is simple:
You sell something once, you deliver it once. Once a sale is complete you must put in additional effort to continue to bring revenue in.
Here’s an example:
You sell dog leashes. Once you sell a leash, you need to make the product again (or have another in your inventory) and attract a new buyer to buy another leash to make another sale. Alternately, you groom a dog for a fixed price as a service. Repeat clients must be resold or you must find new clients to groom more dogs.
2) Passive income:
Okay, this one tends to be the thing that entrepreneurs dream of and plan to create but don’t know how. Here’s the premise:
You create something, you sell it many times, but your time spent delivering it doesn’t increase beyond the initial creation.
Here’s An Example:
You write a dog training book or online training course for virtual attendees. You can market and sell that book as many times as you want. For each sale you make more commission but you don’t have to rewrite the book each time you sell it, whether you have 1 or 1,000 customers. You’re able to sell the product or service again and again.
Here’s the Hitch:
Don’t let the word “passive” fool you. While passive income is the holy grail many petpreneurs to focus on, it’s actually a bit of a misnomer. Unless you’re earning residuals off something someone else is managing for you—no income is truly “passive.” Plus, what many entrepreneurs forget is that passive income takes significant up-front investment time, money and resources. Think of writing a book: you have to create the idea, research, draft, revise and publish it all before getting your first sell.
3) What I’ve dubbed “plannable income:”
The most reliable form of income, in my opinion. Here’s the premise:
You provide a product or service, but your client signs up to receive it again and again at point of sale.
Once a sale is complete, you have an on-going income stream that is likely to continue unless something changes.
Here’s An Example:
You sell cat food at a monthly subscriber rate. The customer only buys once but receives the product regularly and you receive income regularly. Or, you’re a dog waste management company who removes dog poop from people’s lawns. You sign clients up on a lawn maintenance schedule of once a week, bi-weekly or monthly. You sell to the client once and have repeat, regular business (and income).
Some forms of income can both be passive and plannable. But these are the unicorns of the business revenue—valuable, illusive and hard to pin down. They also still require that up-front work, so businesses going after them need the time and money to invest in making it happen.
Pros, Cons and Crux of the Three Forms of Income:
When I start working with petpreneurs and other cause-focused organizations they’re usually doing two things:
- Spending all their time in the one-off sell-deliver, sell-deliver, sell-deliver cycle
- Dreaming of a day when they’ll have passive income checks supporting their dreams
Why you need to get off the one-off income train:
While it’s easiest to sell one-off services or products and your customers probably love them, strategically this leaves your business in a tricky spot because:
- It leads to constant feast or famine: You know that amazing feeling when one month you sell a lot and that horrified pit-in-your-stomach feeling when you miss your sales numbers the next month? You’d like to invest in your business but if you don’t know how much money you’ll make any given month (or day) it becomes challenging to budget – and even more challenging to feel comfortable spending money to grow.
- It’s costly to create and sell: Each sale can take a lot of time, from networking, to getting ads on the right social media feeds, to closing the deal. Plus, you have to provide the service or product after each and every hard-won sale. You’re going to stay busy – but not in a good way.
- It’s stressful: Not knowing if you’ll be able to cover operating costs or pay your mortgage is too much stress! The human body is not designed to undergo prolonged stress and it can have some pretty serious effects on long-term health.
Life does not have to be hope and luck—which is what people end up banking on when they rely on one-off sales as their main revenue stream.
Where most petpreneurs dream of being (and get distracted with):
Creating a passive income product that generates all their income for them forever and ever and ever…
Passive income is a smart move. Every business should eventually have a passive income stream. BUT it’s not something that is easy to do and there is no guarantee the product will even sell. It’s even more difficult to correctly pull it off if your business is struggling financially and stress is high.
The up-front time to design, write and create the product, plus testing and consistently selling it, will take a good chunk of time to turn a profit, and it’s too much to undergo if you’ve always spent your time in the one-off sales realm.
Leaping from one-off sales to passive income is not the most viable option for most pet businesses because the financial and mental/emotional safety net is not in place.
Where most petpreneurs really need to focus:
Stabilize your business and income (and mindset!) with plannable income before diving into the much bigger investment of creating a passive income product.
One-off selling can leave a business in the horrendous feast or feminine cycle: no income predictability, working on the fly, reacting to problems. If you’re trapped in that vicious cycle, it’s time to get strategic and step out of that cycle with plannable income.
Before jumping to passive income product production, you need to stabilize your finances. It will help you breathe. So take your time and think things through so you make the right moves the first time.
So many petpreneurs spend their days mired in the sell-deliver cycle – dreaming of this passive income product that’s out of reach. Plannable income is your intermediary step from one-off to passive, so you can still make the money you need without as much risk.
Plannable income helps you plan.
It will support you and your business while you create passive income streams. Instead of feeling rushed or pressured or falling into that pit of despair (who hasn’t fallen into that?!) that can come with one-off sales, you can rely on your plannable income and have the headspace, creative space, time and energy to create passive income streams.
- What ways might you generate more plannable income for your business?
- Can your profit margins decrease a bit if you spend less time selling?
- How might you incentivize your existing clients to buy?
- How might you incorporate urgency and scarcity into the deal to help get fence sitters off the fence?
There is a price to pay for freedom. Discipline, strategy, execution…these are all paramount to a business’s success—and it takes time to set up support networks that help you become a disciplined, strategic, consistent doer.
Focusing on plannable income is a way to stabilize your business, a critical component to funding your freedom, petpreneur. It’s totally worth it in the long run. So go on, start planning to have the money you need when you need it.