Visualize Your Income Potential: Is Your Business Scalable?
I recently discussed a potential business with an enterprising friend. She wants to sell handcrafted products on Etsy as a source of alternative income. Personally, I am not the kind that discourages any type of income, but this story will highlight some of the intricacies and pitfalls that you may face on your income streams building journey.
The Scalability Issues
In our conversation about her business, I asked her how long does it take to create one of her $20 widget. Her response was about one per hour. I quickly visualized a scenario where her business does so well that she could sell an unlimited number of widgets. Let’s assume that she can make 12 of these a day, 365 days a year. Her potential income (not profit) is $87,600 a year. Not bad, but I wouldn’t want to work 365 days a year, would you?
You may say “so what? $87,600 is not so bad”. There are three problems:
- She’s trading a lot of her time for the money. In this case, her income is basically the same as someone making $20 per hour but without the benefits and overtime (not counting the cost of raw materials).
- It takes away her ability to develop other income streams. As she spends more and more time with this income stream, it also robs her of time that she could be spending on something else.
- There’s a limit on how much she could earn from this income stream. The minute you are trading time for money, you are limiting yourself to a finite potential.
As you embark on your alternative income journey, it’s a useful exercise to imagine yourself being extremely successful with whatever you’re doing and visualize the bottlenecks that could stunt your growth. In this case, it’s time.
The Scalability Solutions
Of course there are several options that my friend has to solve her business scalability issue:
- Choose a different business altogether. It’s not the best or the worst option, but it’s an option. She could always find something that’s more passive, or consume less time.
- Outsource the work and become the middleman. She could try to outsource to someone who’s willing to work for less. For example, if she could outsource the work for $10 per widget and sell it for $20, that’s a $10 profit margin per widget. Her time investment is now tied to managing the outsourcing relationship, marketing, and sales. Now she’s only limited by how many she could sell and how fast her vendor could produce the widgets.
- Increase her efficiency. If she doesn’t want to outsource, or couldn’t find someone to do the work for less, her other option is to find a way to reduce the amount of time it takes for her to create each widget.
Does your income stream have a limiting factor? Could you reduce or eliminate the bottleneck?