Passive Income vs. “Hours for Dollars”: A Different Take

Here’s an e-mail I received from Perry Marshall. It’s good so I wanted to share it with you. Since it’s a direct word for word copy (with no comments or edits by me) I figured I’d leave the links in there about his roundtable.

Enjoy!

G-Man

Geoffrey,

A popular refrain in the entrepreneurial world is, “It’s time for you to step up to the plate and stop trading hours for dollars - and own a business that works for YOU instead!”

In “Rich Dad Poor Dad”, Robert Kiyosaki defines an asset as being a business or property that generates income when you’re not there actively working. That’s a pretty clear definition and it’s well worth striving for. It’s an immense blessing to be able to take your foot off the gas for a time when you want to attend to other things, and know that your business is still quietly churning away.

It’s also a tremendous advantage to building out other profit-generating ventures, to have a core cash machine that covers your expenses and provides the necessary cash for your new adventure. And the starting point of any of these modern miracles is a traffic / lead generation system that runs 24/7 - Marketing On Autopilot.

Yes, Marketing On Autopilot is every bit as good as they say it is. It should be one of your first and greatest goals.

But there’s another side to the story, and it’s this:

If you go to a seminar and see some guy talking to you about passive income, don’t forget that he’s not earning a passive income by talking to you. He’s actively earning an “hours for dollars” income. He’s on the clock.

As Harvey Mackay says, beware the naked man who tries to sell you his shirt.

I’m not knocking the seminar guy. Heck, maybe he is selling a passive income opportunity. Ain’t nothing wrong with being paid X dollars for spending Y hours telling people about the passive income deal. But what I am doing today is inviting you to see the world as it really is.

On a Mastermind Club call, a member was talking about a project he was working on which was all contingency. Meaning, 50/50 split or some percentage of profit or sales or whatever, with no up-front fee.

I asked him, “Why no up-front fee?”

“Because that’s trading hours for dollars, and I want to earn residual income.”

Hmmm… first of all, passing up an up-front fee because it’s hours for dollars, that’s just leaving money on the table. Any hour you spend, if you can get some dollars for it, by all means get them. To twist around a popular phrase, if you go to the bank and deposit a check, the teller doesn’t ask you “Hey wait a minute, did you trade hours for this?”

I seldom if ever take projects on a contingency basis. In my estimation, an offer to take work with no money up front is an indication that it’s (1) a wobbly project with dim prospects for success anyway, since the entrepreneur isn’t able or willing to hire help; and (2) it virtually assures you, the contingency-paid contractor, less respect than you deserve.

There’s a third problem, which is: What assurance can you possibly have that the guy’s going to pay you for your piece of the pie at all? He’s never cut you a check before, how do you know he’s going to in the future?

And… If the thing’s wildly successful, what keeps him from chopping your arm off six months or a year later? What’s to keep him from saying, “Hey, he’s already collected over 75 grand from me, that’s more than worth the time he sank into this.” He doesn’t care if the other five projects you also did on contingency didn’t pan out.

Every project, no matter how automated, has a finite life.

Therefore, all businesses trade hours for dollars.

There are no exceptions to this rule.

It’s just a question of whether you trade a few hours for a few dollars, a few hours for many dollars; whether the dollars come fast or slow; whether the hours go in up front or steady-as-she-goes; whether you control the purse strings or not.

The good news is, if you understand all this, you can get a lot of dollars for the hours you put in. Just apply them in the right places.

To your success,

Perry Marshall

The fastest way to move your business from “Doing OK” to thoroughly dominating your market is my 2-Day, 4-Man intensive March 26-27.

I and three others focus a half day on YOUR business exclusively, and you go home with immediate actions already taken. First come first served:
-> http://perrymarshall.com/adwords/roundtable.htm