Your Home Business – Linear or Residual Income?

Home business opportunities come in many flavors and varieties. There are many ways to make money and achieve the financial independence you want.

Have you thought about the different ways you can get paid for whatever you do in your home based business? It can make a big difference in how quickly you achieve your long-term plans.

Let’s take a look at linear income and residual income, the two most common ways you can get paid for home business activities. Just to make sure we’re on the same page, we’re talking about a business here, not a work from home job. We’ll talk about income from home based jobs in due course.

Home Based Linear Income

Linear income is based on hours you work, or jobs you complete. For example, if you are a home based web designer, you might contract with a customer to develop a custom web site for $2000. You’ll probably command $1000 up front and $1000 on completion and delivery of the site. This is linear income. You are getting paid one time for creating a design, and moving to the next project.

Other examples of linear income include work from home jobs, where you perform tasks in exchange for pay based on the time you’ve worked. This is the same as regular job income, where you make x number of dollars for x hours of work. The downside is that you only make money when you’re actually hands-on working. If you get sick or have to take a leave of absence from your home business, your income will stop.

There is nothing wrong with linear income. Many home business owners make money this way, and are quite content with what they do. However, if you’re looking for more and desire greater freedom with less time spent tied down to predictable tasks, there is a different way to earn long-term income.

Home Based Residual Income

Residual income is money you continue to make from a task or project after the initial work is done. When a task or project is completed, straight linear income stops. Residual income kicks in after that and provides an ongoing income stream for your future.

My favorite analogy for this is an ebook. Let’s look at two scenarios.

Scenario A – Someone developing a website about pets hires you to write an ebook called “Teaching Your Puppy to Become a Great Watchdog”. You agree on the details of the project and set your fee. Once the ebook is finished, you are paid $2500 for the project and move on.

Scenario B – Since you love dogs, you write this same ebook, but put it up for sale on Clickbank and other places where digital products are sold. Since this is a popular topic, you are easily able to recruit affiliate resellers for your ebook. Each time a customer buys your book directly from you, you make $20. Each time one of your affiliates makes a sale, you earn $10. Either way, this is income you can make over and over again for an indefinite period of time. You did the same initial work (writing the ebook), then simply set up the sales channels and can now enjoy ongoing income from it. This is residual income.

Residual type income can also be earned through a network marketing or MLM business. Many successful home based entrepreneurs create their own physical and digital products, and also manage profitable network marketing businesses. This creates multiple streams of residual income for them.

Residual or Linear Income – The Bottom Line

However you earn it, home based income from your own business is a wonderful thing! How you make money depends a lot on your temperament and preferences. Many people love the act of creating things and have no desire to do any ongoing marketing or promotion to sell their works. Others pick a niche they like and outsource development of information products to promote as ongoing residual income streams. What matters is doing what you enjoy, and appreciating the freedom you have to work from your own home.

Did you get some value from this post? If you did, I would really appreciate you sharing it with others! And, your comments are welcome below!

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