Business Round Table
So lets talk about residual income
by Cheryl Baumgartner Medical Billing/Coding/Insurance
Cheryl Baumgartner 
Medical...
I hear a lot of people throwing around the term 'residual' income. I have to wonder if they understand what residual income really is. I think a lot of people confuse it with 'repeat purchase income' and they are two different things.
Residual/renewal income is only earned on services not consumable products. Services are usually provided for a certain length of time. Like your insurance. Each year that you renew your policy the agent that sold you that policy earns residual income. Or a magazine subscription every time you renew your subscription the company earns renewal income. The thing with renewal or residual income is you do your job one time and your customer continues on with your service indefinitely or until they cancel and you earn off of the work you did initially. Kind of like Elvis,John Lennon and Michael Jackson all of their estates earn an income off of the work they did one time while they were alive in the form of royalties.
Now let's talk about consumable products. You do not earn any kind of residual/renewal income off of consumable products because the income depends on the customer making a new purchase of your consumable product. I happen to have some products that I like and I buy them over and over again. No one is getting residual income off of that because each time I buy it is a separate individual sale. You must sell that product again and again to your consumer base.
My Tide detergent runs out and then I have to go buy some more. I cannot maintain that box of detergent. It will run out and have to be replaced. My insurance policy is maintained by me simply renewing it by paying my premium. Before you get sold on residual income, make sure that it actually is residual income and not repeat purchase income. If you truly have residual income it will pay you for years into the future for what you do today, repeat purchase income will only pay you when that customer buys your consumable product again.
Oct 30th 2010 14:41
Medical...I hear a lot of people throwing around the term 'residual' income. I have to wonder if they understand what residual income really is. I think a lot of people confuse it with 'repeat purchase income' and they are two different things.
Residual/renewal income is only earned on services not consumable products. Services are usually provided for a certain length of time. Like your insurance. Each year that you renew your policy the agent that sold you that policy earns residual income. Or a magazine subscription every time you renew your subscription the company earns renewal income. The thing with renewal or residual income is you do your job one time and your customer continues on with your service indefinitely or until they cancel and you earn off of the work you did initially. Kind of like Elvis,John Lennon and Michael Jackson all of their estates earn an income off of the work they did one time while they were alive in the form of royalties.
Now let's talk about consumable products. You do not earn any kind of residual/renewal income off of consumable products because the income depends on the customer making a new purchase of your consumable product. I happen to have some products that I like and I buy them over and over again. No one is getting residual income off of that because each time I buy it is a separate individual sale. You must sell that product again and again to your consumer base.
My Tide detergent runs out and then I have to go buy some more. I cannot maintain that box of detergent. It will run out and have to be replaced. My insurance policy is maintained by me simply renewing it by paying my premium. Before you get sold on residual income, make sure that it actually is residual income and not repeat purchase income. If you truly have residual income it will pay you for years into the future for what you do today, repeat purchase income will only pay you when that customer buys your consumable product again.
Oct 30th 2010 14:41
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Comments
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Cheryl Baumgartner
Medical Billing/Coding/InsuranceYes investments will also bring you residual income. what gets me is when I come across someone claiming that Avon will bring you residual income-it will not. Overides on your team's income of consumable products are overrides, not residual. It still takes another sale of that consumable product. And I have seen people calling it residual income! Oct 30th 2010 15:21 |
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Louise Venison
 TE owner, affiliate marketerI'd agree with everything you're saying except when it's an auto-shipment of products. I'd call that residual income because it's automatic, and the customer has to make an active decision to cancel it (and most customers won't as long as they like the product and have a use for it). Oct 30th 2010 15:28 |
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Sean North
BusinessI agree true residual that really can only be built with time and investment and re-investment, I dont even consider my Royal Marine pension as residual income though technically it is. Avon certainly isn't because as a main agent I believe that you if your turnover drops you start to lose the amount of override on your team at least of what I know of other similar programmes in the UK thi is the case Oct 30th 2010 15:28 |
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Cheryl Baumgartner
Medical Billing/Coding/InsuranceIf it is a consumable product, it cannot be true residual income. Consumables even on autoship are not true residual income products because they are consumable. The things that provide a true residual income cannot be consumed because consumables are temporary. Oct 30th 2010 16:01 |
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Louise Venison
TE owner, affiliate marketerOK, then I have to say I totally disagree with what you're saying. It might be some kind of "officially correct" terminology that only non-consumables can be described as residual, but it doesn't describe real life situations. From where I'm looking at it, anything that renews automatically (like my monthly auto-shipment of skin care products) earns the company a residual income, anything that doesn't renew automatically (like my car insurance that I have to go into the office each year to pay for) doesn't. The skin care company doesn't have to sell me the product again each time because it just arrives at my door. The insurance company does have to sell me their policy again each year because, seeing as I'm going to have to take action to renew it, I might as well shop around. If I'm going to start using terms like residual income (which I don't generally because any subscription, whether it's for a product or service, is easy to cancel) I prefer to use it in a way that makes sense to people. ie you make the sale once and you continue to earn on it, as long as your customer doesn't cancel their regular payment. Oct 30th 2010 16:27 |
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Louise Venison
TE owner, affiliate marketerBy the way, please don't take anything I say personally. I love a debate, and I have a tendency to find one where most people would just nod and agree! If anyone raises a point that I can see any possibility of debating, I'll usually debate it. Oct 30th 2010 16:31 |
for me my residual income come via investments i.e. stocks and shares,income returns from start up businesses I invest in and rental properties. something I have been doing since I first read The Richest Man in Babylon many years ago
Oct 30th 2010 15:15