“Multiple Streams Of Income”
Ah, “Multiple Streams of Income”, the battle-cry of every MLM spammer since the early 2000’s – but don’t worry, we’re not here to sell you a “lifestyle business” that will “change your life” by persuading you to sell stuff no-one wants to your friends and family, becoming a social pariah in the process.
Nope, we’re here to show you how Multiple Streams of Income works in the REAL world – how we’ve applied it to our businesses, and our investments.
You’ll hear how a profitable £300k a year businesses collapsed overnight because they DIDN’T have multiple income streams, and how this led to a BIG change in one of our businesses.
You’ll also hear more words of wisdom from Warren Buffett, talking about eggs, rivers, baskets, feet and hawks. Plus Jason’s got a cracking tool of the week which we use in our businesses to devastating effect.
Big Idea Podcast Episode 8
Below is the transcription of our podcast for you to read through if you prefer:
John: Hey everybody. Welcome to Episode 8 of the Big Idea podcast. I’m John, I’m here, as always, with Jason.
Jason: Hiya, John.
John: And we are, as always, helping small businesses think bigger.
Today we’re talking multiple streams of income.
Now, I first came across this term many, many years ago, when I was first starting out, in a book called Rich Dad Poor Dad, which is one of the classics, I think. It’s a book that I always recommend to anybody who’s just starting out in business, but also, it’s a book that you can, no matter what stage you’re at with your business career, you can always find something in there. I think I’ve read the book it’s either six or seven times, and every time I read it I get something different out of it. And I just … I’m in a different place professionally, a different place personally, and I just always get something completely different out of it. I think the last time I read it we went out and bought a business, like the week after, ’cause it just fired this neuron in my brain that said, “Oh, yeah, it’s all about assets and liabilities, just buy more assets. Oh, wonder what assets I could buy?” Literally found, I think it was a website at the time, it was earning 300 quid a month and we could buy it for three grand. It was like, “Oh, simple.”
But Robert Kiyosaki is the author of Rich Dad Poor Dad and he talks about multiple streams of income. I think it became fashionable, certainly in many circles and many forums, particularly relating to, for example, the network marketing, multilevel marketing people, to talk about multiple streams of income.
Jason: So what is it, John?
John: What is what?
Jason: Multiple streams of income.
John: Oh, yes, that’s the topic of today’s show, isn’t it?
So say your business has one customer and you lose that customer, then it’s game over, you’re finished. If your business has one type of customer and you lose that type of customer, again, game over. If you’ve got one product and people no longer want that product, game over. If you’ve got one business and you lose that business, game over. To put it simply, if you’ve got one revenue stream and that stream dries up, you’re gonna go thirsty.
Multiple streams of income give you security. If you’ve got seven different revenue streams and one of them dries up, well, you just go and drink from the other streams. And probably, I’d say a good example of that is-
Jason: Is our business, really, because we started with just the one stream of income being [net free 00:02:51] stuff and we just did freebies and we got paid for promoting free stuff. So that was our one stream of income.
John: Certainly, yeah, and it’s, you know, where we are now, 16, 17 years later, that revenue stream would’ve dried up. And if that was our only revenue stream, oh, well, I’d be [out 00:03:11], I’m going back to being a civil servant again, am I? You know? I mean, [Free Racing Tips 00:03:16], one of our websites, for example, we started that business back in 2008 and that one business had one revenue stream, and that came from affiliate commissions, primarily from one bookmaker. And I remember, if you go back … to like January 2013, so the business had been running for about five years on one revenue stream and it was doing very well. But the previous month, I remember, Betfair had bought out one of their rivals, so Blue Square was, at the time, a fairly big bookmaker, they weren’t huge but they were fairly big, and they were bought out by Betfair, who literally sent us an e-mail saying, “We’re shutting down the affiliate programme, we don’t need affiliates anymore.”
And I know of a similar business to ours, who’s a very, very similar model to that, who Blue Square made up 95% of their income. So overnight, they went, they had a 300 grand a year profitable business that overnight it was game over for them because they only had that one revenue stream. Yeah, January 2013, so that’s four years ago now. I knew that, yeah, we needed to spread that risk. So the first place we did was, well, let’s add another revenue stream, let’s add [for us 00:04:43] paid memberships. And I remember there being some resistance to this from some of the joint venture partners we had because-
Jason: Again, it’s not one of those things that you’re kind of used to. We’re doing free racing tips that by its very nature they should be free, shouldn’t they?
Jason: And that’s kind of the thought that we all had at the time, really, and it’s kind of like, well, John with his vision, let’s go for some paid memberships.
John: Which, too, I mean, again, affiliates was our area of expertise, it’s what we knew. So paid stuff was out of our comfort zone, was out of our sphere of knowledge, we thought that people probably wouldn’t pay for the concept, ’cause hey, if you join a website called “Free racing tips,” you’re unlikely to want to pay.
But we were wrong, because yes, they were happy to pay. And once we realised that members were happy to pay for content, well then we had two revenue streams, so we had our affiliate revenue and we had our paid members revenue. So we then looked to see well actually what other revenue streams can we add and actually let’s get some more paid only products going. So I think we started off with our premium tip. We literally gave one horse racing tip for free and one paid, and that was the model. So then we said, “Well, actually, what else can we add?” So added new paid only products. We added a lucky 15 product, which is a number of bets all bundled together, it’s a kind of fun bet. We added the magazine. We added jumps club, so it was specifically jump horse racing tips. We added FRT Gold, which was our sort of top tier premium package. People were paying 40 quid a month for that. Again, these same people who we thought they’re not going to pay anything because they’ve joined a free site, all of the sudden, actually, yeah, they are paying, they’re paying 40 quid a month. We had the FRT Race Club for a period of time, about a year, wasn’t it?
John: Where, sort of horse ownership, so you could own a share in a racehorse. We literally went out and we bought a racehorse purely to increase our revenue stream. Sending tips by SMS rather than e-mail. Again, it was just adding different products. So it’s not, well yeah, not just different products, but products for different people. So we had a revenue stream, a product, for the high rollers, we had a product for the cheapskates, we had products for old people, for young people. We then also looked at some of the affiliates we were working with and actively worked to increase the current of those revenue streams from those other than the big one, because I think at the time, take you back to January 2013, we were looking at probably 80% of our income from one source.
Jason: At least, I would’ve thought. Yeah.
John: Even now, it’s probably only 60% from that one source, maybe 55% from that one source. But it was just looking to basically minimise the risk of relying on one stream and that one stream drying up. So we bought out some rival websites. We bought some complementary sites, so one of the ones that I mentioned at the beginning was, after reading Rich Dad Poor Dad, I went out and bought a website called Form Ratings. So relating to horseracing still, but it’s not a tipping website. And we went out and we bought a rating website.
Jason: Complementary, we had an audience and we had a, yeah.
John: Yeah, we already had the market for it. And all we needed to do was plug it in, it fits into the model brilliantly, and just provides another revenue stream. So I was looking at the stats over the weekend and I think about a third of our income now comes from these paid memberships, so we’ve still got two-thirds from the original affiliate stream, but … and I’d say the big one affiliate still makes up right about half, 50-55% of that, but we’ve gone from a one-client revenue stream, which as a company, as a business, accounted for 95% of the income, and now that one client accounts for about 35% of the income. So it’s still way too high for my liking, if they decide tomorrow, “Actually, yeah, we’re gonna shut down the affiliate programme, we don’t want it anymore,” then we’d be impacted by that. We wouldn’t be game over, you know?
Jason: Mm-hmm (affirmative).
John: And that’s the key thing, I think, with the multiple streams of income is it would not be game over for us. And I can’t believe we’ve had the last I think five or six episodes now and I haven’t mentioned Warren Buffett again.
Jason: Are you sure?
John: I’m pretty sure. Pretty sure the compounding episode was the last time we spoke about the Oracle of Omaha.
John: But Warren Buffett is, as I’ve mentioned once or twice before, my business hero and he’s full of these brilliant words of wisdom and the one I [trawled 00:10:11] up for this particular episode was, “Never rely on a single source of income. Make investments to create a second source. You don’t want to test the depth of the river with both your feet.” And I think that just sums it up brilliantly because, yeah, you do want multiple streams of income for risk-averse people. So create investments, create that second source of income, then the third income, then the fourth, but yet don’t go all in. So many people are going, “Well, I’m all in to the this one venture,” and they don’t actually think, “Well, what if something goes wrong with that one customer, with that one business model, with that one revenue stream?”
So in true Warren Buffett style, that’s what we’re doing now, is we’re reinvesting the vast majority of our profits into buying the second, the third, the fourth, the fifteenth source of income. So we took the profits from the freebie site, from the sale of that one, we invested that into an affiliate [tool 00:11:15]. We’ve taken the profits from that and we’ve [pooled 00:11:17] into a mobile phone insurance business, a live sports streaming company, a travel website. Then we take the profits from those and we create the sports betting website. Once that’s making money, we buy up a few competitors and we grow exponentially. We buy a business that does something similar to the core business, but actually it’s a totally different business model, different customer base, et cetera. We do joint ventures with a small number of partners, usually in completely different sectors than we’d normally work, where they’ve got the specialised knowhow in terms of actually doing the do, but we’ve got the sales and marketing knowhow and [often 00:12:02] the funds to be able to do so. So now what we’re doing is we’re taking the profits from all of this and, last year we created a new investment company, so invest in property, both residential, commercial. We’ve bought one-bedroom flats in Bradford, City Centre. We’ve redeveloped a warehouse in Cheshire.
Jason: Which we saw when you went to Liverpool, I believe.
John: That’s right. I didn’t [crosstalk 00:12:26] haven’t even mentioned Liverpool this episode. This episode will be going out just before the replay on Wednesday, so you know, I’ll let you know how it does next week, I might be a little bit quiet on the Liverpool front. But yeah, we’ve developed that warehouse. We’ve invested in burial plots in London. A hotel in Wales. I’ve personally invested in a flotation spa in Norwich. That’s just in the last year. So yeah, I’m also … some money I’ve taken personally out of the business over the last decade or so, again, I’ve applied the same principle, so I’m not all in to one revenue stream. So I personally invest in animation art, silver bullion, stocks, shares, I trade [forex 00:13:14], I’ve got professionals looking after a hedge fund, I’ve even got a professional gambling fund. Thankfully, I haven’t got the same person looking after the two of them. In recent years, you might have thought it was. But it’s all about spreading risk.
Jason: Okay. But last week, John, we talked about the one thing. Surely having lots of things, lots of balls in the air, so to speak, you’re kind of going against that one thing principle that we talked about last week.
John: I mean, it does, if you spend all your time trying to juggle everything. So whilst, yeah, we may well have sort of over 20 different streams of income, we’re only really focusing on one at a time. And [Pete Cann 00:14:02] asked a similar question in our Facebook community, which if you’re not a member of you can go along to BigIdea.co.uk/Facebook and you can ask a similar question. That’s what we do, we answer your questions live on the podcast. And Pete asked, “What does it take to turn a stream into a river?” Now, I answer this quite flippantly before we actually came on air and said, “Well, you just add more water.”
Jason: And then you choked on it.
John: Well, for me it’s about remembering the old 80/20 principle, where 20% of your income streams will account for 80% of your income. And for me, it’s about not fighting this, it’s about embracing it. And it’s about spending 80% of your time working on those 20% streams that provide the bulk of the income. And if I think back to when, just after we had kids, not we had kids, but you know, my wife and I had kids, I’d gone from working 100 hour weeks being busy, busy, busy, really, really working nose to the grindstone achieving nothing, all of the sudden I only had 20-25 hours a week to actually devote to the business. And so I said, “Well, I [now can’t 00:15:23] do the 80% of stuff that achieves 20% of the results, so what if I only do the 20% that actually achieves 80% of the result? Why do I need to bother with the rest of it?” And sure enough, that actually it was life changing for me, it really was.
You’ll find that you can even narrow this down. So you do the 20% that accounts for 80% of the income, but you’ll also find that 20% of the 20% will provide you with 80% of the 80%. So identify the unicorn, as tech investors will talk about, it’s the one that just runs away with everything else. We’ve talked before about snowballs. It’s the avalanche, it is the Mount Everest snowball, the one that makes all the difference, and just focus on that one and swing for the fences. But don’t neglect the others.
So I would say, I probably spend 70% of my time working in that area, the top 20% of the top 20%, that brings in 80% of the 80%. And that may be literally one thing. So for us, right now, that is the sports betting businesses. So we focus almost entirely on those. We do big sales campaigns, we do conversion rate work, we bring in consultants to squeeze out an extra 20% here, an extra 10% there. That leaves, so yeah, [I only spend 00:17:04] about 70% of our time is spent in that zone. That leaves 30% of our time to focus on other things. And I split that up roughly 25% working on the remaining 80% of the top 20% of income streams.
So again, I spend 95% of my time working on the top 20% that gets 80% of the results. Of that, I spend the majority of that time working on the top 20% of the 20%. I then spend about a quarter of my time on the rest of it. So that’s working on the investments, website purchases, joint ventures, literally things that are gonna build future revenue streams. So last year, that was setting up two property companies, putting 20-year strategies in place. This year, it’s launching the podcast to help small business owners. This isn’t going to make us any money this year, but it will open doors, it will increase our reputation in the community, and that will positively impact our businesses over the long-term.
And we’re going to do that without having to resort to plastering ads all over the podcasts. ‘Cause, you know me, I love listening to podcasts, I’ve been listening to them for several years now, and there’s nothing I hate more than you get a podcast and there’s some brilliant content on these podcasts, but you’ve got to skip through the first five minutes because it’s “a word from our sponsors” and then halfway through the app, “Oh, we’re now going to leave the really, really good content because we need to have a word from our sponsors.”
Jason: Brought to you by.
John: Yeah, and then there’s three minutes of ads at the end of it. And I’m there on my phone, I’m just, yeah, skip 15 seconds, skip 15 seconds, skip 15 seconds. And we do this for the love of it, we’re doing this to scratch an itch. And it does pain me to see some of the podcast owners who provide brilliant content, but are looking to actually monetize that by plastering ads over it.
Anyway, gone off on a tangent there. So-
Jason: No ads. [crosstalk 00:19:23]. Ever.
John: Unless there’s a really, really big check. In which case, who knows.
So back to the task. So I spend 95% of my time working on that 20% that brings in the majority of our income. That then leaves up 5% of my time to focus on the entire remaining 80% of revenue streams that bring in a trickle, that bring in a little bit of income.
Jason: But you’re watching those and you’re looking there for those opportunities that might develop because each of those trickles may have a [damp 00:20:00] or turn into a stream or a river. [crosstalk 00:20:02].
John: Exactly, you never know when the market’s gonna change or when things are gonna actually, the stars are going to align in a different way that actually what is a small revenue stream now could actually, if technology improves or if the marketplace exists for it, could turn into a different revenue stream. It could turn into a much larger revenue stream. And for some of them it’s just [a case it’s 00:20:32] keeping them ticking over. So they may be, we’ve got a revenue stream that earns us 500 quid a year, which it doesn’t make sense for us to focus on that, but if we don’t give it an hour a year, would dwindle to 300 pound a year or 400 pounds every two years. And just literally keeping an eye on them, keeping them ticking over, spotting where there are opportunities to grow, just keeps them ticking over, but I’m not wasting a lot of my time in that area.
So I spend a disproportionate amount of time working on the one or two streams that really make a difference, building our income streams for the future, but when I’m building new revenue streams I’m not looking to build a revenue stream of a few hundred quid a year, I’m looking at ones that have a chance of being in the top 20% of the 20% in 20 years time.
So let’s look forward two decades. Two decades from now the income from our property investments will far, far eclipse our traditional businesses, but they’re not going to do that without us laying the foundations for that right now. And that’s what we’re doing with our businesses now is actually we’re laying the foundations for the property income by saying, “Well, we don’t need to actually take any money out of that for 20 years,” so we’re going to compound that over the next two decades until it’s something really, really meaningful. And again, if you haven’t listened to it before, I think episode 2 was our compounding episode, wasn’t it? And we talked there about the power of literally just doing that, rolling profits over, reinvesting everything.
We’re not spending a huge amount of time on those businesses now, but fast forward 20 years when we’ve got, say, 200 properties, we are going to then be spending a lot of our time there because that is going to be providing 95% of our income. Right now, it probably, in terms of income coming in, it’s probably 5% of our income on an average year, but we’re not actually, we don’t need that money, so let’s just roll that over, spend a little bit of our time growing that, let’s put the systems and processes in place, and get those foundations in place so that 20 years time we’re still earning really good money from the businesses, but we’ve also got the property side of things, which we’re earning phenomenal money from.
And I’m gonna go back to Warren Buffett, once again, because I think we have gone so long without a quote from Warren that it’s time we had two in the same episode. This, again, it goes back to there’s a common saying about not putting all your eggs in one basket and … what Warren Buffett says is something a little bit, a little bit different. He says, “Don’t put all your eggs in one basket, but do put most of your eggs in one basket, and then watch that basket like a hawk.” And I think that’s a fantastic way to live life is to actually just … yeah, you spread your risk, let’s have your what-ifs by spreading those eggs over several baskets, but actually let’s still have 80% of your eggs in that one basket. And that basket is going to be the one that you’re gonna focus on, that is the unicorn, that’s the one you’re gonna swing for the fences, it’s the Mount Everest snowball or whatever metaphor works for you. That is the one that you’re gonna spend most of your time working on, most of your time growing. Still within that one basket, you can still expand it with different products, different revenue streams, different markets within the same business.
So thank you very much, as always, to Mr. Warren Buffett without whom I wouldn’t be able to do what I do. And we’re gonna go now from the Oracle of Omaha to the Prodigy of Plymouth, it’s time for Mr. Jason Brockman’s tool of the week.
Jason: The tool of the week. Well, this week’s tool actually is in relation to our multiple streams of income because it itself can be a stream of income for you. My tool is AWeber this week, AWeber.com. It’s an e-mail marketing piece of tool. I don’t know the vast amount that it can do, I do know the basic things that it is. It provides you with a form that you can put on your websites and collect e-mail addresses from people who’d like to subscribe to your list and it puts it in a list for you and you can then talk to them each week or month, periodically, as you like, as you see fit to send them e-mails and let them know about what you’re doing and what you’re up to. That is it in its very simplest form, what AWeber does. There’s a huge amount of other things that it does, but it is a voyage of discovery that you guys need to go on, because, I guess, in some few weeks time we’ll be talking about e-mail marketing, no doubt.
John: Absolutely, yeah.
Jason: ‘Cause that’s one of our favourite topics ’cause that’s what we use an awful lot in our businesses, so we will be talking to you about marketing. So AWeber.com is a good place to go to have a look.
John: Yep. Gonna have a popper link to AWeber into the show notes.
Jason: We will.
John: Again, it’s the e-mail provider we use for all of our marketing. I know lots of people use different CRM systems and different e-mail marketing software. For us, AWeber is, I always say, it’s simple enough that I can use it, ’cause I’m a complete non-techie. But it’s also complex enough that Rob, who you’ll be hearing from next week, can do lots of fancy things with. We can move stuff around, create different lists, and mail to people who have clicked but haven’t bought and people who have watched a particular video and you can send people down a path. If you’re creating marketing funnels in any way, you can have a lot of fun with AWeber.
Jason: I saw a really good e-mail list generator kind of thing really from a company. In awe of your water bottle last week I went out and built a similar water bottle.
John: For those on the Facebook group, I just display my water bottle now.
Jason: It’s the Bevgo. I love the fact that you can pop your fruit in there. So you’ve got a love bit of lime in there at the moment.
John: That’s lemon, actually.
Jason: Oh, you’ve got lemon, yeah, that’s right. I’ve got the lime and a bit of kiwi. But yeah, so I bought this bottle, it came back, and inside was a card. It said to get the full instructions for the water bottle, which I can’t imagine there would be too many because it’s-
John: Fill with water.
Jason: Not a complex thing to do.
Jason: But more importantly an ingredient book that you can use with the fruit basket. “Pop over to our site and you can download it.” So I popped over to the site and, sure enough, there was the e-mail box from AWeber that you could just fill in your name and your e-mail address so they could send it to you. So I was like, “Okay, that’s great.” It sends a confirmation e-mail, just to confirm that we’ve got the right e-mail address. Okay, clicked on that, went back to the website where it said, “You’ll have an e-mail in a minute and we’ll send it to you there,” and that’s how they used it to generate their leads. And, no doubt, I’ll get lots of e-mails from them, but it was just [an obvious 00:27:47] way that they actually put it together, a physical product and how to capture your e-mail address, because it’s not a known thing or not an easily thing to do if you just sell a product online, is it?
John: Yeah. No, [inaudible 00:27:57] ’cause, again, I bought mine on Amazon. And for those listening, it’s basically a one litre water bottle and there’s a little fruit basket inside, so you can put your fruit inside and it just infuses the water. And there’s a little timescale on the side, so it’s got 8 AM, 9 AM, 10 AM, 11 AM, midday, and then 1-5 on the other side. So you can monitor your intake of water and infuse it with fruit. But yeah, again, I’m on their mailing list and I don’t normally, I wouldn’t buy a water bottle and think I must join the mailing list of this water bottle company. But yeah, sure enough, I thought, “Well, actually, I fancy seeing what these recipes are.” Because they just teased it, didn’t they?
Jason: Mm-hmm (affirmative).
John: They said, “We’ve got a free recipe book. Do you want it?” I’ll go on there. So yeah.
Jason: And the first e-mail that I’ve had from them was obviously thanking for the purchase, but it was also like, “Did you know this is what else you can do with the bottle?” And actually, it was adding value, so adding value to that e-mail means I might not unsubscribe, which is what I would have done [after I had 00:28:57] the e-book. So it’s like, “Oh, there’s a bit of value.”
John: I must’ve missed that. What else can you do with the bottle, then? Other than fill it with water and drink it.
Jason: It came with this really weird basket thing, like a spring, which it came with and I had no idea what that was for and it doesn’t mention it in its free book and it doesn’t mention it anywhere. And in that first e-mail it says, “Oh, use your basket to use it as a protein shake.” So I should throw that in with it, give it a good ol’ shake, and that really mixes up the protein powder, so you can actually use it for protein shakes. But I didn’t know that, so a bit of value. Always add value to [your list 00:29:22].
John: I’ve learned something today, that every day’s a school day. And with that, we are back next week with another episode. And we’re going to have a special guest next week. We are going to have Mr. Rob Moore, no, not Rob Moore, he’s another podcaster. Rob [Rowe 00:29:37].
Jason: That’s the one.
John: Yeah. Rob [Rowe 00:29:39].
Jason: [inaudible 00:29:40] Rob.
John: [inaudible 00:29:41] Rob who normally looks after the podcast here and does a lot of our marketing. And we’re gonna dissect a marketing campaign that we did back in October. And it was probably the best marketing campaign we’ve ever done. Everything just completely fell into place, the stars aligned, and we absolutely smashed this one out of the park. So there’s a lot of lessons to be learnt here, about why it worked and how you can actually replicate that in your business. So that is what we … That is what we will be talking about next week. That’s ’cause I’ve been drinking too much lavender lime, isn’t it?
So, as always, guys, if you want to join us in the Facebook community, you’d be more than welcome. How do they get in there Jas?
Jason: Just go to BigIdea.co.uk/Facebook and there you are. You’ll find us.
John: Fantastic. You can comment on this episode, you can let us know what you’d like to talk about, what you’d like us to talk about in the future, you can watch the live recording of next week’s episode, which we do every Monday at lunchtime. If you’re listening on iTunes or on Stitcher, you are probably picking us up from Wednesday or Thursday onwards. But yeah, you can join us in the Facebook group and you can watch it being recorded live. You can watch the live video of it. You also get live [in-between-isodes 00:31:01], so every now and then I get inspired and whip out the phone and record a little video for everybody.
Other than that, we will have all the show notes for everything we’ve talked about in today’s show at BigIdea.co.uk/podcast, and other than that, we will see you next week. Bye-bye.
Rich Dad, Poor Dad – Robert Kiyosaki & Sharon Fletcher