Everyone is always looking for additional income. What I’m about to talk about is not a new concept, it might even be something that you’ve heard about before in theory, but I’m putting a name to it.
The 6 Buckets of Income
The theory was something I picked up on after listening to an episode of the Intentionally Inspirational podcast.
It’s the idea that any business should have income coming in from a variety of sources, in other words, six different buckets.
Why 6 buckets of income?
Admittedly, the number 6 is arbitrary. It can vary a little. It can be 5 buckets or 7 buckets, but probably not more and definitely not less.
In good times, most businesses thrive. Money is coming in and everyone is happy. Good business owners tend to have more business than they know what to do with.
Then disaster strikes. (Think COVID-19.)
Suddenly, all those businesses that were doing great, collapse overnight.
Some of this can be blamed on the economy, but some of it can be blamed on a lack of diversification. With six different sources of income (i.e. 6 buckets), one or two of those sources can go down and your business should still be able to survive on the remaining sources of income.
If you have fewer than 6 buckets, you run the risk of not having enough alternate revenue sources to get your business through the tough times.
If you have more than 7 buckets, you’re stretching yourself pretty thin. Think, “Jack of all trades, master of none.” Is that the person you want to help you out?
How do you create 6 buckets of income?
Creating your 6 buckets is going to depend on your business, but there are some main buckets that you want to put into the mix.
Your core business
The first is your core business. You have a business, what does it do? That’s your first bucket of income; your first stream of revenue. It’s what makes your business exist.
This one is not difficult to identify.
Another bucket will be passive income. Revenue from sources that you just let simmer on the backburner. Interest on savings is one small contributor to the passive income bucket.
If you can’t think of any others, start exploring your passive income options. Affiliate marketing or digital products like ebooks or online courses are good places to start. In the case of the later, it’s something that takes time to set up, but once it’s there, it can become a steady stream of monthly income.
You have your business because you’re good at what you do. Is there a way to help other small business owners in your industry? Can you use your expertise to help these small businesses? For many small business owners, consulting can be a way to diversify income so that their core business is not the only bucket of money pouring into the business.
The other three
The other three buckets are going to depend on your industry, the state of your industry, and your skills. To create your other buckets of income, you need to explore your industry and adjacent industries. Are there large gaps within your industry that you can exploit? Is there a similar industry that has space for you to move into? Is there a major event that has created a new need?
For example, Intentionally Inspirational founder Jason Wright created a new revenue source out of the COVID-19 crisis. He opened up a new product to help businesses with their annual marketing strategies. He helps them create a marketing strategy and gain a little peace of mind for a one-time fee.
The extra benefit of 6 buckets of income
In addition to giving steadier footing to your business revenue, the 6 buckets of income have the added benefit of pouring into one another. If, for example, someone buys your ebook and they enjoy it, they are more likely to turn to you when they need an expert in that field. Suddenly, that passive income has turned into a consulting client.
Creating 6 buckets of income can be difficult and it won’t happen overnight, but if you build one bucket at a time over the next few months or year, you’ll be on steadier financial footing if another downturn occurs.
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Written by Erika Towne