Residual income can continue the flow of money after the original business transaction has been occured. Here are some active and passive types of income that your company can utilize.
Residual income is income that continues to accure after the original business transaction occurred. Common examples are royalties earned by actors for reruns of television shows. These earnings may continue for many years or even decades, depending on the specific contract terms.
You don't have to be an actor to develop a continuous income stream, and the digital revolution has made it easier than ever. This article reviews both active and passive types of income. Royalties are passive since they are paid automatically once the initial work has been completed. Vending machines are active since they require restocking and servicing once the machines have been purchased and deployed.
Internet Marketing
If you've got a website, you've got a platform to display ads. One way to do this is to utilize a program like Google AdSense which allows you to place ads for other companies wherever you want. When someone clicks on those ads, you get a fraction of the income that Google collects from the ad sponsors. It costs you nothing and you can choose the types of ads you'll display. Advertisers bid their per-click rates through Google and the highest paying ads will be shown. It's as simple as it gets to lock in an income stream with little effort on your part.
Music
Residuals from the music industry are available to songwriters and musicians. A classic example of how lucrative this can be was the theme song for the Tonight Show starring Johnny Carson. Paul Anka reworked a song he had written for Annette Funicello called “It's Really Love,” and it was played every night at the beginning of the show. Anka and Carson shared the residuals every time it was played, amounting to several million dollars over a period of 30 years.
Opportunities today include creating soundtracks for video games, video trailers, advertisements, and other entertainment industries. Every time a commercial airs or video game is manufactured, the contributor gets a share based on the specific contract arrangement.
Freelance Writing
The Internet kicked the door wide open for freelance writers. The need for online content dwarfs that previously required for print publications. In some cases, the writer may get paid for producing the article and collect additional compensation based on the number of clicks that article receives. There are several websites that recruit writers and offer them both forms of compensation. The demand for ebooks has created additional need for writers, giving them the opportunity to sustain an income stream long after the book was written.
Vending Machines
They've been around for years and they're everywhere. The business model is simple and straightforward, but the key is securing great locations with lots of traffic. The hard work at the front end increases the odds of a nice payoff in the long run. Another popular machine exchanges coins for cash, for which you're typically paid a 9% exchange fee. This is essentially a pure play because you're not selling anything beyond customer convenience, minimizing your personal involvement.
Photography
Photographers have opportunities similar to musicians who continue to earn on their published work. A photograph or video that's shot for an ad or commercial can draw residuals every time it's used in the future. The amount and frequency depends on how the contract is structured and who owns the copyright to the original image. Companies also have a continual need for stock photos that can be resold multiple times under a usage license.
Smartphone App Development
If you've got a great idea for a new app, find someone who can develop it for you in exchange for a share of the rights. The more successful apps are downloaded millions of times, generating a small per-unit profit that quickly adds up. Users are always on the hunt for creative apps and unique games.
Affiliate Marketing
This is an arrangement where a merchant website pays its affiliate websites a commission to send it traffic. The affiliates post links to the merchant site under an agreement that the affiliate will collect a fee every time those links are clicked. Unlike AdSense which pays only for each click, an affiliate can set up an agreement that is based on a share of the actual revenue generated by each click.
Different agreements can be established with each merchant, allowing affiliates to customize the income stream based on individual expectations for each business. You can optimize each agreement for lead generation and potential sales. Another advantage is that you choose the merchants you want to deal with, so you'll always know which ads will appear on your website. Display options include image or text links to products on other websites, advertising buttons or banners, and a shopping page that offers the merchant's products related to your website content.
Insurance
Insurance policy sales are one of the benchmark forms of residual income generation. Unlike a car salesman who makes a commission only on the day a car is sold, an insurance salesman collects for the sale of the initial policy and every time it's renewed for years to come. The cumulative effect of this can be dramatic over time, resulting in thousands of dollars of income for a single policy.
Miscelleaneous
The possibilities for residual income are almost limitless, but many require significant capital to get started. Examples of these are real estate rentals, storage units, parking lots, and financial investment management. If you're fortunate enough to reach a point where you can hire someone to completely replace you and run your business, perhaps you'll really be able to finally enjoy the residuals.
Summary
One key to maximizing residual income is to maintain exclusive rights to your work. This is sometimes easier said than done because the temptation to sell your rights may be great if you need money now rather than later. The more control you exercise at the beginning of the process, the better the rewards will be when it comes time to collect the residuals. This means holding the copyrights to all written works, music, photography, software, etc. for as long as possible.
