Four Ways to Earn Income

2. Earn income when others work

The word for this is “over-rides”.  The concept is simple.  Every time someone else does something to earn money, (work, sell, construct), you earn some of the income they generated.  Now before you get upset and say that is somehow immoral or dishonest, let me explain.

Let’s say that you own a hot dog cart and sell hot dogs downtown during lunch hours.  On an average day, (about 4 hours work), you sell 100 hot dogs for a total income of $250.  After you deduct the cost of the dogs, buns, toppings, etc., your net income for the day is $160.  Not a bad income, ($40 an hour). 

(Side note: If you are the business owner and have to be at the business to earn income, then you are just trading time for money, see "Trading Time for Money").

One day you want to take your kids to the zoo, (to see the llamas), but you don’t want to lose out on a whole day’s income.  So you find a person who needs to earn some extra cash and offer to pay her $60 to operate the cart for the day.  I would say that is a pretty fair deal.  She gets a $15 hour job and you get $100 and weren’t even there. 

Congratulations, you have just discovered the power of over-rides, making money when someone else works by using a basic business model: hiring someone to sell your product to the public.  (Now tell me, how was that dishonest?)  The person you hired is making money they need and you are getting a return on your financial investment, (the cart and inventory).  It doesn’t take long to realize that if you had two, three, or more carts, you can make some very good income, all without having to trade your own time for money.

Let go a step further.  You like the person you hired to run your cart and want to give her a chance to run her own business.  Here is your offer.  You will buy another cart and let her run it herself, all she has to do is give you $20 each day and 50 cents of every hot dog she sells.  Our friend now has a chance to earn $160 for herself, (or she can do like you did and hire someone to run the cart for her).  You make about $70 each day without having to worry about managing inventory or running a business.

Find three or four other people that want to run a hot dog cart and now you are making a great income without having to worry or care about employees, inventory, dealing with customers, etc.  This is the basis for what is called “Franchising”. 

The bottom line:  our entire economy is built on this simple financial principal, every time a product is sold or someone is paid a wage, there is someone who gets paid an override.  It can be a person, or an entity, (company, stock holders, etc.), but that is how it works.

What you may not realize is how easy it is to become someone who earns money via over-rides.  The reason most people don’t feel that the average person can build a business for themselves is simply because they don’t know where to look, or what to look for, (more about that later).

Next Post: The third way to earn income