In a previous serious of articles we looked at several proven models on online businesses. The models given are broad categories and offer many options. One of the great things about an online business is the amount of flexibility available.

Because the overheads can be so low with an online business, it’s possible to operate one at far less than its full potential and still make significant income. Here are three common levels of operation.

Supplemental Income

This is the easiest level to achieve. It’s ideal for the person whose lifestyle would get a significant boost by having an extra $2,000/month or so. While nobody is going to turn into a millionaire at this level, it can make a massive difference to a lot of people.

Two grand a month can mean a young mom can stay at home with her kids for a decade. It can mean a guy who is painfully scraping by on a small pension can go to Mexico or the Caribbean and live like a prince. It can mean paying off a mortgage or student loans in half the time. It can mean living in South East Asia and doing business from a laptop computer at one of the most gorgeous beaches in the world and backpacking all over the region.

This is also a level that can allow a person to do other work that pays little or nothing. For example, a person could work with stray animals, the homeless, or disadvantaged children – things that will never be financially lucrative – while supporting himself with a small online business. That’s freedom to do something good for the heart while still making ends meet and looking at the rat race in the rearview mirror.

A small online enterprise like this is not only easy to get going and to operate, it means not having to leave an existing job. A few hours a week of your time is all this type of online business usually requires. But don’t kid yourself, a business that delivers $2,000/month is worth a small fortune in today’s low interest financial environment. At a 5% return on investment, you’d need nearly a half a million invested to match that monthly income.

Principle Income

The next step up from having an online business that delivers a relatively small supplemental income is to have it provide your principle income. That is, all the money you need from year to year. This, of course, is a much broader range. Let’s call it $3,000 to $30,000 a month.

If you’re not used to making north of a quarter million a year it can sound like a lot. And it is a lot. But in the online world, a business that makes $25K/month is barely noticeable. It’s a flea on the leg of an elephant. People and websites you’ve never heard of, and likely never will hear of, are quietly and relentlessly making this level of income year after year. There are hundreds of ways to do it.

It’s also why being an expat is so attractive to online entrepreneurs. When a person can live anywhere and make exactly the same annual income, why would he choose to live in a high-tax jurisdiction? It would be like throwing away money. (Note this is a more difficult transition for citizens of America and Eritrea, two countries that hate to let go of a state milk cow. But, to be fair, Eritrea only takes 2% of an expat’s income. And an American couple can earn about $200K per year tax free if they live outside the US and meet certain other conditions.)

A safe rule of thumb is to build an online business until it’s making 150% of what you make in your rat race job. After it has operated six consecutive months at 150% of your conventional income, it should be a safe, easy transition to leave the rat race and begin engineering your life to have the elements and circumstances you really want.

Most people discover that they actually require less money every month with an online business than they do with a conventional job. That’s because a lot of our expenses, such as commuting, parking, wardrobe, dry cleaning, lunches, etc., are related to holding a a rat race job and do not apply to owning an online business that you can run from home. And, let’s be honest, many careers require a lot of wasted expense to “keep up appearances.” So 150% usually provides a very nice cushion when it’s time to walk away from all of that.

Mogul

The upside potential of online businesses is legendary. A great idea can go viral and make millions. A greater idea can go public and make billions. But, honestly, how many Mark Zuckerbergs are there?

Billionaire status aside, a perfectly executed online business that grows to dominate a lucrative niche – even a fairly small niche – can make north of a million dollars annually. Several million is possible while still being a relative blip in the online scheme of things. Of course, at that point you’re talking about having several employees, probably many thousands of customers and a ton of daily responsibility. This is not the relax-on-the-beach plan.

Getting to this point would be a very nice problem to have. Most people elect to sell the business to somebody with the infrastructure to operate it property. But that’s also a good payday, for sure.

Becoming an online mogul is more likely than buying a winning lottery ticket, but it’s still a very long shot. However, unlike random chance, it’s something that is significantly under your control. Hard work and good fortune can be well rewarded. Even better, it’s not an all-or-nothing proposition. Even if your business never reaches the stratosphere, it can generate an income very far beyond what anyone would ever pay you in a rat race job.

Online businesses offer flexibility as to how large they need to be in order to make a profit. A small, easy to operate business can generate a very nice supplemental income. A business offering a solid value in a good niche can quietly earn an owner anywhere from a comfortable annual income, to a level of reward virtually impossible in conventional, rat race employment. A rare, brilliant idea can go to the moon.

In Part 3 we’ll discuss: Freedom of Time

 

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