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This topic has alot of information we can share, so we have split it into a few parts.  We also cover this information in more detail in our book at Details For Success.

In today’s world, way too many people are using the term “residual income” and many of them are using it incorrectly – giving false hope and misleading people. Let’s be clear what these three terms mean, because NO, they are not ‘all the same’.

Residual income occurs when you do something once, and continue to get paid on it ‘for a long time’. If you sell credit card processing to a business, and they enroll, and you get paid a percentage of their fee EACH MONTH they use you, AND you can show that the majority of your customers have been using you for 12months, 24 months, 36 months etc….That is Residual income. The odds of them going someplace else are minimal. Same with a financial planner or an insurance agent – assuming that they get paid on you every (month? quarter? year?). Both of those professions have shown that people do ‘not’ generally switch companies every month or quarter, and many not even every year. That is reliable residual income. These businesses also have business reports that document your business with them and duration. (And, if you are with a direct sales/MLM company and you must do parties/classes/call someone to offer a special and get a sale every month, that is not Residual income – that is Repeat Income).

Repeat income occurs when customers continue to use your services/products again and again, however not always automatically or on a reliable schedule. Is residual income also repeat income? YES…But repeat income is not necessarily residual income.  If you go to a favorite restaurant frequently (or a dry cleaners, or counselor, or auto repair facility), they get repeat income. You can very easily choose to stop any of those or use a different vendor and many people do. Generally these businesses don’t have a documented business report that shows your business with them either. Many network marketing or Multi-Level Marketing companies say they provide residual income.  Some actually do and can prove it; most however do not.  Most distributors do not have customers that purchase (literally) month after month unless they are on ‘autoship’ (which means they get sent the same thing every month).  Autoship can provide residual income as long as whatever is being auto-shipped is needed every month & affordable – which are key factors.  In many MLM’s, both of those factors (needed every month & affordable) are not true or are true for a small segment of the population (so make sure those are the customers you have if this is the income model you are using to pay your bills!) If you are looking at that model, make sure you see business reports that show how long people have been getting those autoships and staying customers.

Referral income occurs when your clients/customers “generally” use your products/services one-time or infrequently (such as a Realtor (who buys a house every month??), a Mortgage broker (who refinances their house every month or takes out a new mortgage every month), a payroll processing agent (that sells payroll services to a company – many get paid ‘once’ on the customer but not every month the company uses the payroll services).  These (and many business) business rely HEAVILY on referral business (“We did a great job for you, we will do a great job for your referrals”).  This is a tough business to be in because you “literally” start at Zero every month and get paid on what you sell/close “this month”.  It definitely puts the pressure on since most of us have to pay our bills “monthly”.

Can people with Residual income still have referral income? Absolutely! Businesses with Repeat income normally have good referral income as well because people refer products & services they know, like and trust. However, not all businesses provide residual income – the ‘doing something once and get paid on it for a very long time’.

Next time: Part 2: What Are The Benefits Of Residual Income?