Cashflow might be the most important element of any small business. You can have a great business idea, be an incredibly hard worker, and have all the mentors and connections in the world, but unless there is money coming through that door on a consistent basis, the business isn’t going to last too long.
How many times have you read about new startups and their burn rate, which is defined by Wikipedia as “a measure for how fast a company will use up its shareholder capital… if the shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down.”
For an individual entrepreneur, it works the same way. If the cash flow isn’t coming in, they might have to borrow money from friends, find more clients, borrow on credit cards, or go back to working a full time job.
In the pursuit of wealth and building a business, I propose that there are 3 types of income that solopreneurs should strive for:
1) Consistent Income
Consistent income is what feeds the bottom line of the business, and frankly, pays the bills. This is money that you can count on to come in without fail month after month, serving as a baseline for basic expenses.
Let’s look at some examples:
Joanne is a talented web designer. She left her full time job last year at a major publishing company to go out on her own and build her own business. Because she was so specialized in what she did and her old company really loved her work, they agreed to keep her on retainer, paying her $3,000 per month in exchange for being available to do small projects such as ads, banners, emails, templates, and website design projects as they come up.