a list of not quite residual income streams

I think the test to be a "true" residual income stream is that funds will still be coming in just as strong ten years later.

So this test pretty much craps on creating an app, or writing a book on software engineering. But those two things are pretty close. Either of these could have a lifespan of, say, three years. Longer if you do a bit of working updating it/them once in a while.

Another would be something where you do the work and you have to do something periodically to keep things moving forward.

Anyway, I thought I would create this thread to be a place to list off all the things that smell like a residual income stream, but fall a little short.

As a small business owner I wrestle with whether or not I can transition my business from something that I have to be (very) physically involved with to something that can support itself and become a not quite residual income stream. I guess I would consider that a not quite residual income stream (NQRIS?) vs. what you have down at #807 in the big list of REAL residual income streams since it would most likely still require some of my energy/effort over time but not as much. Where would things that only require a few hours of regular attention fit into this hierarchy?

A lot of affiliate marketing, which is my current game, falls into the "not quite residual income" category in my experience. Maybe a web page with Amazon links will still be generating revenue in ten years if you don't touch it, but in my experience most affiliate programs are way less stable and reliable than that. Programs come and go, links break, and the work I did two or more years ago often doesn't generate a dime unless I revisit it regularly to update links or re-purpose content that was written for an offer that no longer exists. The best income is from chasing fresh programs and new offers and limited-time sales, but that's "daily treadmill" work that's often indistinguishable from working at a square job.

I think it makes a lot of sense to look at affiliate marketing work from the perspective of "what can I do to make this more of a residual income stream". But very little of it can pass the strict "funds still coming in undiminished in 10 years" test. A lot more falls into this "not quite residual income" category where funds trail off over time but can be maintained with a modicum of maintenance, and a final tranch is definitely in the territory of "do it this week, get paid in 30 days, do something new after that because you'll never see another dime from this work."

Well, one such thing is selling life insurance and annuities.

(Maybe that raises your hackles as not-permaculture-related. You're mostly right. But this thread isn't about doing permaculture. It's about getting money to pay for permaculture.)

The life insurance agent typically gets a moderate commission upon seeking a new policy, and then an itty-bitty commission each year the policy stays in force. That eliminates the temptation fur shenanigans related to signing up and cancelling.

Those renewal commissions can add up to big dollars over time. You CAN neglect the existing clients completely, but it's more effective to send them Christmas cards, etc. In other words, those renewals can be completely residual, but it's better to treat them as only ALMOST residual.

Maybe we need some sort of scale. Something about how many hours would need to go in to maintain it each year after the first year.

But this gets a little more complicated with the idea of for some things you might put in one hour per year to keep it maintained. Which, for something that is bringing in $5000 per year is fine. But if it is bringing in $3 per year, then an hour each year is not worth it.

Maybe that could be the residual income quality scale. What is your $/hour for effort after the first year.

For my article with ants and aphids, I put in zero time over the last year and probably earned $50. So my $/hour is ..... infinite? Maybe I mentioned the article three times, so each mention was a few seconds. So I spent less than a minute - therefore my $/hour is $3000 per hour for one minute of work?

And then there might be some things where you have to put in three hours per year, but get back something like $3000 per year, so that rates at $1000 per hour.

paul wheaton wrote:Maybe we need some sort of scale. Something about how many hours would need to go in to maintain it each year after the first year.
:snip:
But this gets a little more complicated with the idea of for some things you might put in one hour per year to keep it maintained. Which, for something that is bringing in $5000 per year is fine. But if it is bringing in $3 per year, then an hour each year is not worth it.

For myself I go with the general rule that if its a near residual sideline it has to generate double what my annual base rate is.

Lets say I charge my time at $20/hr in my main income. My target would be $40/hr for the sideline. Do the interplay between time spent vs income produced to see if I reach that number. If I make less than my main base rate I would drop the effort or *sell it off.* (To continue the sideline making less than base is an opportunity cost as you could expend the hrs making more at the main task.)

Sell it off. I know it was not part of the discussion but it should be considered because selling your business itself can become a residual income stream. Say you develop a sideline that produces $5k/year. But analysis says its not profitable to you. That does not mean it could not be profitable to someone else! You work out a payment buy out scheme with the buyer and that becomes your residual income stream.

Hope it helps.

Let's say the scale is something like 0 = best residual income, as in 0 hours required to maintain.
And 10 = worst or most extreme "not quite residual income," something that takes many hours per week, month or year to maintain, but still isn't an hourly thing, maybe not even a part-time job.

Like Dan's idea about insurance possibly being a fit for this list, I might have something that is 8-10 on my proposed scale with the payroll services I provide.

It's Intuit Online Payroll (see a flash demo here), and I buy it at a wholesale-type rate, and re-sell it to my clients. Then, I am my clients' first line of tech support for the system. The thing is, the system is self-service, and is generally so reliable and easy to use, that I have clients who use it all year long with maybe only one or two questions for the year, if that.  Other clients need quite a bit of help per year, so that's when it starts being more of a job than a residual income stream.

Mike Cantrell wrote:Well, one such thing is selling life insurance and annuities.

The life insurance agent typically gets a moderate commission upon seeking a new policy, and then an itty-bitty commission each year the policy stays in force. That eliminates the temptation fur shenanigans related to signing up and cancelling.

Well, life insurance must be very different from health insurance, then. Because with health insurance, the policy can't stay in force from year to year -- the insurance company stops offering it at the end of the year, so that you have to buy its more expensive replacement.

Jason Hernandez wrote:

Mike Cantrell wrote:Well, one such thing is selling life insurance and annuities.

The life insurance agent typically gets a moderate commission upon seeking a new policy, and then an itty-bitty commission each year the policy stays in force. That eliminates the temptation fur shenanigans related to signing up and cancelling.

Well, life insurance must be very different from health insurance, then. Because with health insurance, the policy can't stay in force from year to year -- the insurance company stops offering it at the end of the year, so that you have to buy its more expensive replacement.

Yes, life insurance is very different. If you buy a 30-year term life policy, the terms do not change for 30 years. The earlier in your life you buy the policy, the cheaper it will be, but once you lock in a price, it's constant as long as you keep your account current.