February 3, 2021 5 min read
Opinions expressed by Entrepreneur contributors are their own.
The Office for National Statistics figures, released in December, state that “the number of payroll employees has fallen by 819,000” since February 2020. While these figures were front-loaded, the prime minister and expert commentators expect the overall COVID-19 situation to worsen before it gets better. It will be some time before the vaccination program has enough coverage to release the restrictions, and that is if the virus does not mutate to nullify the vaccines’ efficacy.
The above figures do not capture sole traders and SMEs’ picture without a payrolled workforce. In addition, with schools closed, for the time being, maintaining 9-5 working hours whilst at home proves problematic, particularly for parents expected to supervise their children’s learning. Therefore, traditional working models are under increasing pressure, and we can expect no return to ‘normal’ even after widespread vaccination. What does this mean for future income streams?
Financial ‘survival of the fittest’
“It is not the strongest of the species that survives, … It is the one that is most adaptable to change.”
This quote is often attributed to Charles Darwin. It is actually a paraphrase of Darwin’s ‘Origin of Species’ by Leon Megginson (Professor of Management and Marketing, Louisiana State). That the phrase comes from a management context is not surprising as it perfectly captures the entrepreneurial spirit with which we should face these uncertain times.
Many people day-dream, amidst the drudgery of a mundane 9-5 job, starting a business or applying a creative skill to a profitable side hustle. Perhaps people are watching your pension situation and realizing the state pension really is not sufficient, and you need another income stream. Most have fancied a passive income stream. Now is the time, especially if you are one of the 819,000 recently unemployed or if you want to financially benefit from your additional time due to lost leisure activities or released from your dead-time commute.
If your income streams are successfully adapted to change or sufficiently diversified to mitigate the risk of change, you will not only economically survive but potentially flourish in this pandemic.
It is frequently written that one of the defining characteristics of millionaires is that they have multiple income streams. This is largely true, of course. However, in the pop-culture presentation of this statement, the implication is that you too can be a millionaire so long as you have a second stream of income. Sorry, but it isn’t that simple. What it does mean is that the mindset of a millionaire is not ‘What do I need to do to get the money?’ but rather ‘How can I use money innovatively to work for me.’ Further, by diversifying one’s income streams, one can benefit from favorable tax arrangements rather than facing an ever-increasing Income Tax bill, and that financial risk is mitigated.
Income streams can be created in various ways. Many can work in conjunction with others, and some are more easily automated than others to provide a passive income stream.
Diversification is key
As an investor and multiple business owner, I cannot push diversification enough. Make sure your eggs are not all in the same basket. This goes for investing in the stock market, becoming an entrepreneur, or even on the very basic scale selling products. Having your financial risk spread across multiple streams and increases your financial stability and longevity if one of those streams were to turn out a failure. Take your time and research into ETFs, Tracker Funds, Blue Chip Stocks & Property Crowd Funding projects.
Related: Risky Business: Should You Diversify?
Starting a side income
An online business can easily be developed during this period of time, and many ideas can be implemented with limited or no start-up costs or ongoing overheads. Services delivered online are the most obvious and COVID secure options. These side businesses can vary from dropshipping or start even smaller with freelance sites for small jobs like Fiverr.
Related: 50 Ideas for a Lucrative Side Hustle
Utilize your network
Building business relations takes time and trust. Start with people who you know within your network. These individuals are more likely to give you a try because they know you personally. In this day and age, social media is booming. It’s now easier than ever to reach out to people on social media, especially Instagram. Spending time networking on social media is key to growing your brand recognition and gaining customers.
Related: 6 Ways Networking Helps Entrepreneurs
Manage Your Debt
Between having a 9-5 job to maintain and starting not only your side business but spending time on your branding and networking across social media, all whilst maintaining your available cash and outgoings, can somewhat be stressful at times. Lowering your debt is key to growing as an entrepreneur; the above points will definitely assist with this. However, for extra help and a somewhat hands-off approach, I love to use tools such as Moneybox, which is a clever app that allows you to round up those purchases you make on your card to the nearest whole number. These pennies can then be added to my first point of financial investments via the app in a simple, hands-off approach. Another great tool that can be used to save money to lower those debts would be utilizing the likes of Monzo Bank, which allows saving pots to put aside a certain amount of money each month, all whilst monitoring your outgoings and incoming payments in a smart manner. All automated, allowing me to focus all my attention on my core side businesses.
Entrepreneurs who have mastered the above methods to diversify their income are on the road to becoming a successful entrepreneur.