A common mindset among people who earn a salary or wage is that the only way to earn more is to find a job that pays more or to somehow work more hours. Perhaps with paid overtime or similar. The same goes for self employed people who charge by the hour. Increase the hourly rate you charge or simply work more billable hours. Neither of those are ideal or easy to achieve. Not to mention hardly appealing.
With only 24 hours in a day and a finite number of high paying jobs, this can be a limiting mindset. There is also the effect on the other areas of your life such as time with family and friends. Luckily there are a few other ways you can earn more without just working more.
Passive income is the one that gets a lot of attention. Headlines screaming that you should find a side hustle. Get a passive income and soon you will be retired and living on a beach. It’s not quite like that though.
If you are able to turn your work into a product you can escape the hourly rate grind.
If you aren’t clear what the concept is, think of something that pays out over the long term after some initial work at the beginning. An insurance agent is a good example. When they write a policy for a client they receive a commission. They continue to receive a commission on each renewal for as long as the policy remains paid up. The work involved in a renewal may be very minimal compared to the initial work, or even nothing if the client simply continues to pay the premiums.
Passive income streams are great and it is how I earn some of my income. I continue to earn for work I did more than ten years ago. That doesn’t mean I don’t continue to work. The secret is to build up a large base over time. Using the above example, the agent continues to get new clients. If they didn’t they run the risk of all the income stopping if the clients don’t renew.
What it means is the return for the work is not based on an hourly rate. You can still work the same hours per week. As the client base increases, so do the associated premiums. Therefore the commission paid to you increases. This is a common remuneration method in sales type industries where the product spans a number of years.
Occupations that traditionally charge by the hour have a few options. I started work in an accounting office and had to track every six minutes of my time. I hated timesheet summary day. So many holes in the day with no client to charge. Six minutes means ten units a day. Some use five minutes, others use fifteen minutes or more. The principle is that the client pays for the time you work for them. Based on an agreed hourly rate. I can see you already thinking this rewards working slowly. It does to a certain extent, however, most clients are price sensitive so it can only be taken so far. To increase the income, you work more hours or for a higher hourly rate.
If you are able to turn your work into a product you can escape the hourly rate grind. A good example is a tutor. It doesn’t matter what the area of expertise is for this example. If you are able to create a course, people can buy it and you no longer have to personally work with the client. Rather than having eight clients a day paying $50 an hour for 20 days a month and visiting once a week, you may have 160 clients each paying you $50 a month. Both scenarios yield $8000 per month.
If you think going from 40 clients a month to 160 is a lot, remember, you now have an international business. You’re no longer limited by geography. The course can be delivered online rather than in person. These courses can still be live and perhaps you run a one hour session once a week. You have moved from working 40 hours a week to working one hour. Yes, that’s a bit of a simplification. You may take a day to prepare and deal with things after the course. It still means you have reduced five days to one day.
Use some of the other time for marketing to get more clients. Increasing the number of course participants won’t significantly increase the work load like it would if you were personally working one on one.
The other way to increase income without working more hours is to move from time based billing to value based billing. This does require some work when setting the values, however, the benefits are two-fold. You are able to increase your earnings without working more (provided you have valued it correctly) and the client knows the cost at the outset. They don’t get any nasty surprise at the end. A happy client.
Even with hourly rates, the amount charged is not based exactly on the length of time the work is performed. Clients are actually paying for the person’s knowledge, usually built up over many years.
Value based billing is comprised of two parts. The first is the value of the person’s experience and the second is the value of the work to the client. You may be able to save the client $10000 with an hour of your time. Should you charge the same to them as you do to a client where you saved them $5000 with an hour of your time? My opinion is you should charge the first client more. You value to them is more. You should be rewarded for that extra value.
There are a few variations on this theme and think of it like a success fee. You are paid a fixed amount plus a separate amount based on the success of the work. This can work across many industries.