Investors understand the need to diversify their investments to reduce risk. But it's equally important to diversify your income source to mitigate career risk, according to Dorie Clark, a marketing consultant, adjunct professor at Duke University's Fuqua School of Business and the author of "Entrepreneurial You," "Reinventing You" and "Stand Out."
“It's natural that when you're successful at something you'll keep doing more of it," she said. “But if you have too many proverbial eggs in one basket, that's risky. You could lose an important client or a recession can hit and you won't have a strategy to handle it."
Everyone, including entrepreneurs and employees, should develop multiple streams of income for themselves, Clark recommends. Of course, there are limitations to how much extra time you'll have to pursue outside work if you're employed full-time, and you need to be careful that you aren't poaching clients or breaking any rules that your employer sets about moonlighting.
If you decide to pursue a secondary income, “you need to find a way to make time consistently to work on something to create a revenue stream outside your day job," said Clark. While working on a side job isn't for everybody, “not only is it smart to have extra income, but you never know what could happen and you may need to rely on that money," she said.
Also, unless you're extremely well-known in your field already, you're not likely to earn a large income from speaking engagements or similar work. However, building the foundation for future income can be rewarding in the long-term.
Jeffrey Shaw, a branding consultant, business coach and author of "Lingo," started his career as a portrait photographer for wealthy families in Greenwich, Conn. and New York City. Shaw estimates he now has nine streams of income that generate a total income in the mid-six figures, including public speaking, book sales, consulting and podcasting, with photography comprising only a small part of his entrepreneurial empire.
While generating income from various sources sounds great, Clark warned that people need to plan carefully.
“It's easy to get in over your head with the concept of doing 10 things at once, but you need to pace yourself and try to add just one or two income streams per year so you don't get overwhelmed," said Clark.
Before you get started, consult with a financial planner or banker to help create a financial plan for you, said Mary Helmich, personal banking strategy manager for City National Bank. There are often start-up costs that could require an investment, even if it's just to create marketing materials.
Additionally, you should have a plan for how the new income you earn will be utilized. "Once you start earning extra income, don't just see it as money for discretionary spending," she said. "You should invest that money in something that will generate future income for you."
6 Places to Look for Multiple Streams of Income
Whether you're an employee or an entrepreneur, developing new revenue streams requires a different mindset. While a vision of where you'd like to be in five years or a decade can be helpful, Shaw said that the ability to be flexible is more important when you want more than one stream of income.
“Being open to various opportunities is the best way to create multiple streams of income," he said. “You need to reject the idea that a 'jack-of-all-trades is master of none' and have confidence that you can succeed in multiple ways," said Shaw.
Shaw began coaching other photographers when they asked for help establishing their business, but at first he felt guilty about doing more than one job.
“I was worried about diluting my ability and my reputation as a photographer, but I finally embraced the idea of generating income in more than one way," he said.
These six options are just a few ideas for how to earn money from more than one source.
Consult with Clients
The easiest starting point for additional income is to share your expertise by offering consulting or coaching services, said Clark.
“There are no start-up costs to this, because if you have a computer you can set up a website," she said. “It's also gratifying to experiment with ways to share what you know."
For example, Clark said that someone who owns a bed-and-breakfast can train people who would like to open one.
“The skills you share don't have to be related to your day job," said Clark, adding that they can be related to a hobby or personal passion. “You can be a project manager by day and teach people about photography techniques on the side."
Shaw's business includes multiple streams of income from short-term coaching for entrepreneurs to fix their branding, long-term brand consulting for companies, one-on-one coaching for businesses and small coaching circles. His personal experience and research when building his own brand for his photography and for his coaching business with photographers expanded his expertise in branding. Shaw wanted to share his knowledge with others, which eventually became a consulting business.
Author a Book or Start a Blog
Both Shaw and Clark count revenue from book sales among their income streams. Many nonfiction authors prefer to wait until they have comfortably established a writing style, have a social media following and a firm idea of the theme and goals for a book before jumping into that medium. But even if you're not ready to write a book, Clark suggests writing a blog, especially if you're an entrepreneur.
“To go back to that bed-and-breakfast example, you can write a blog about your experiences running one and then monetize it with sponsorships or ads or a membership fee," said Clark. “One couple I know started a recipe blog and charges a monthly membership fee for access."
While a blog or a video blog may not generate much money at first, Clark said it's an important way to attract potential consulting clients and to start building your personal brand, that can help you lay the foundation for a book deal.
Start a Podcast
A podcast can operate like an audio blog with your personal insights on a topic or it can become a platform to interview other experts in your field and make connections. Clark said most podcasts need to have around 10,000 downloads per episode to attract sponsors. As you're building that audience, a podcast can raise your profile and increase your brand recognition, helping you attract new clients and possible public speaking opportunities.
Shaw's podcast provides income for him through sponsorships and by capturing the attention of potential clients.
While public speaking can be very lucrative for well-known individuals, Clark said most people aren't well-paid at first.
“As you build your brand, public speaking can become more lucrative," said Clark. “Writing a book and starting a blog or a podcast can help you become well-known in your field and become an attraction for audiences."
Shaw began public speaking when his consulting clients asked him to speak at workshops and conferences. Now his business includes keynote speeches and presentations on branding, marketing and adapting to a changing world. Public speaking may soon be Shaw's primary source of revenue after nine years of adding extra income streams one or two at a time and building his brand through his coaching, his book and his podcast.
Host Live Events
Depending on your field and your ability, said Clark, you can organize professional how-to workshops for six people or run a conference for 300 people.
“You can be paid to be a facilitator for a mastermind group, which is a peer-to-peer mentoring group to bring people together to discuss their ideas and offer each other support," said Clark.
Invest in Real Estate
When you've earned enough income to reinvest it, a common source of cash flow to supplement your income now and in retirement is to own one or more rental properties, said Patricia Hausknost, a wealth planner at City National Bank.
“Instead of selling your starter home, keep it and use it as a rental property," she said. “Or buy a rental property now if you have the resources to do that."
Developing multiple revenue streams requires creative thinking about what you can do, followed by practical thinking about turning your skills and your passions into money-making opportunities. If you're interested in exploring new sources of income, find a mentor who can help you identify opportunities in your field, Helmich said. That person's success can help guide you toward the same positive outcome.
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