There are generally three basic ways to earn money:
- Wages (paid for time)
- Commissions (paid for results)
- Equity (not paid unless you sell)
Freelance can either be wages or commissions, depending on if you’re charging per hour, or per completed project.
Often, people are paid in more than one way. Man cannot live on equity alone, but in an environment where you get paid in equity, generally the fewer wages you take, the more equity you get.
There’s a yuge overlooked fourth way: revenue sharing.
Revenue sharing is when you do work now in exchange for a share of future income.
Pros
- Generally based on revenue, not profit (so you get paid from the first sale)
- Ongoing income for the life of the revenue
- Work once, collect cash “forever”
- You can stack multiple revenue sharing agreements
Cons
- No income while working
- No guaranteed income at all (AKA it’s not a wage)
No guaranteed income means a few things: the person you’re partnering with has to be genuinely valuable, the go-to market has to be sound, you have to try and project what your time is worth that you would put into it versus what you would get out.
Putting in 100 hours to get $100 back is bad by anyone’s standards.
When You Should Do It
If it’s a good product or service you’re supplying, you could potentially be paid even quicker than a wage (AKA working hard and launching in a week versus getting a job and waiting two weeks for your first pay check).
Generally, you’re waiting longer because it’s appropriately harder to launch a good product. People who do revenue sharing deal tend to be people without an immediate need for cash.
The freelancing rule of thumb is to charge at minimum 150% of your hourly W2 wage. So if you make $50 an hour, charge $75 as a freelancer. In reality, you can charge a lot more, but you have to be confident with it and know how to sell.
Revenue sharing is good when you can expect high ticket results, even if it will take a while. If a revenue share will net you $25,000 over a year, but it will take you a month, that’s a great deal for most people. In theory, you only need to work 5-6 months to make double the median income in the US.
If you already have a full-time job, it’s understandably difficult to work double shifts for half a year. But that’s the beauty of residuals: you can do double shifts for ONE month a year, and after 5 years you will have doubled your income without ever changing your job.
How to Find Residual Income Opportunities
Most of the time they’re not going to be multi-year, from what I’ve found. Here are two in my life right now:
One friend of mine runs a business where he employs former startup founders to coach businesses trying to improve their own funnels (both acquiring customers and improving profitability of those customers). If you refer him a startup founder, he will pay you a portion of revenue associated with that founder for the duration of their role as his employee. Literally the best rev share deal I’ve ever heard of.
The reason he’s doing that is his list of prospects is way longer than his list of employees, so his biggest bottleneck is finding good employees.
Another friend is doing the same thing with his digital marketing business (making websites for people). Refer him a customer and he’ll do commission for any one-off project, and if they sign up for his monthly retainer, you get a cut of that forever.
Honestly, if you have friends like these, it could be the best money-making move you have to just kill your other side projects for two months and make your main effort finding leads for these two. If you struck gold like I have, and you’re good at selling, you could double your income and then coast off of that for a while.
If you don’t know people like that, but you’re good at selling, find ambitious and talented people and strike up those conversations. Any business owner wants more sales, especially if the marginal cost for new customers is low.
It goes without saying—get these agreements in writing before you do the work.
