Seven Ways To Cash Out On Your Work And Increase Your Income
I had an intriguing chat a few years ago with Pino Di Ioia, a friend of mine who owns a food and beverage chain (Moozoo & Beavertails). That have a wonderful focus on design for their chains that serve juices, pastries, frozen yogurts, chocolates, and other desserts.
Pino was coming in as a guest speaker at an Entrepreneurship class I was teaching. His company had just franchised out their most profitable store in a prime touristic area in Old Montreal. I was curious as to why they chose to franchise out that store, which seemed like a cash cow. His response was very interesting.
He learned from a finance professor during his university years that we all cash out one way or another. Some people cash out on a daily basis with a wage while others do it by selling a company you slaved for years to build from scratch. On this occasion he was cashing out by selling a franchise, which is a step away from selling the company. He kept ownership.
To expand on the ways people cash out for their work:
1- Wage: You are paid on an hourly basis for work you do (e.g. babysitter, bodyguard, waiter, factory worker, etc)
2- Salary: You are paid an salary for doing a job (marketing manager, secretary, CEO, etc). This salary can be paid out in different ways (e.g. monthly, biweekly, weekly). There is a contract and responsibility to deliver specific value to help the company achieve certain goals. The salary can also be paid out in commission (e.g. sales person’s commission on sales made).
3- Project: You are paid to deliver a project. You can be a consultant or a freelancer providing a service to a company or another person. Once you deliver the “project”, you are paid and your responsibilities are over. You can take on another project with the company or another.
4- Interest: You receive a specific interest rate for lending money to a company or person. The higher the risk of not getting paid back, the more interest you charge.
5- Dividends: You are paid a share of the profits from a venture you have ownership in. You might be the founder of the company, an employee with shares, or an investor. You receive a share of the profits that is proportional to your ownership in the venture.
6- Licensing/Franchising: You get paid for giving someone the rights to use your brand or operating formula. That payment can be a combination of an upfront payment, an ongoing fee, and/or a fixed percentage on revenues.
7- Selling Assets: You sell assets such as shares in a company you founded or invested in. It can also be other tangible assets such as real estate, physical products (gold, jewellery, collectables, etc).
So that’s nice to know but what does this mean to us? What can we do with this information?
a) Realize that the further down the list you go, the more risk you are taking and the larger the payoff it.
b) It takes longer to cash out the further down the list you go. This is the concept of delayed gratification that Joachim de Posada popularized with his book “Don’t Eat The Marshmallow Yet!” (see his Ted Talk below). Having the ability to delay your gratification and wait for the bigger prize later in the future is one of the best predictors of success. Set your goals on the bigger prize and stay focused. For example, avoid the temptations of buying your next toy and save in preparation for the future.
c) Realize that no matter what you do for a living and how you are cashing out, everyone is selling a personal service in one shape or another. Do your work like it’s your art. Do something you are proud of. Go the extra mile. Don’t settle for “good enough”. This is popularized by Seth Godin in his book Linchpin and many of his writings.
d) You can cash out in multiple ways at the same time. You can start a business or take on freelance work while keeping your day job. You can even invest (in companies and/or assets) or lend someone money through crowdfunding sites like Kiva.
Do you know someone who can benefit from cashing out in a new way? Maybe it’s someone with a passion and talent for something that s/he can build on the side and monetize. Go ahead and share this article with him/her.