I’ve spent years interviewing, researching and coaching super-successful, self-made millionaires and billionaires about the best ways to build wealth which you can read about in my books Business Brilliant: Surprising Lessons from the Greatest Self-Made Icons and The First Habit: The One Technique That Can Change Your Life. One of the most valuable lessons? Keep yourself in the line of money at all costs.
Look at Colonel Sanders, for example. Harland Sanders’s restaurant started to lose money in the 1950s due to the construction of a new interstate highway that bypassed his location. He ended up having to sell it off. At 65, he decided he was too old to start again in a new location. He spent the next few years traveling from restaurant to restaurant, state to state, trying to sell his fried chicken recipe to other restauranteurs. He probably would have found a buyer much sooner if he hadn’t insisted on one particular condition:
He wanted a share of each sale of chicken cooked with his recipe.
Sanders was determined to stay in the line of money. This made it harder for him to get his recipe out there, but it also led to the millions of dollars that his recipe eventually earned him. If he’d just sold the recipe off to the first restauranteur that said yes, he would have earned a one-time paycheck. By keeping himself in the line of money on each and every drumstick, he got a far tastier deal.
Get Paid for Results
Getting paid for your work is one thing – getting paid for results is another. What do I mean by that? I’m talking about the difference between a wage worker or salaried employee and an owner. For example, if a retailer sells a shirt for $50 that costs $18 wholesale, the retailer keeps the difference. The key to earning wealth is to be in the position of getting to keep that difference.
Being outside of the line of money (working for a wage or a salary) means trading off the risk of losing money for the security of predictable, steady income. It also means giving up the ability to claim the reward when prices are high, and costs are low.
Climb the Line-of-Money Ladder
There is more than one way to be in the line of money, and you may be more suited to some than to others. Think of it as a ladder, and the higher up the ladder you go, the more risk you carry – and the higher the reward. The rungs, from lowest to highest, are:
- Player pricing: This level includes self-employed consultants and other independent contractors who charge hourly rates. The problem with this rung is that you have a finite number of hours to spend working, and there is a limit to the revenue you can make on your own. You can increase this amount by sub-contracting, or if demand for your services reaches a point that you can raise your rates.
- Project pricing: Getting paid for the project instead of the time commitment means you get paid for the results. One upside is finishing earlier than expected gives you extra time to work on other paid projects or your own endeavors while not losing money, although you still don’t receive a share of any profits that you help create for your clients.
- Percentage pricing: Working for a percentage of the profits that your work helps create puts you squarely in the line of money and lets you share in the rewards of a successful project. Percentage pricing can be added to project pricing as a bonus and an incentive to do great work.
- Proprietor pricing: This is the rung that you should consider your ultimate goal – ownership stake. Of the self-made millionaires I’ve surveyed, 85% either have or had a substantial equity stake in a business venture and nearly all of them believe that equity is essential to building wealth. Equity is at its greatest value when it represents an accomplishment that can’t be easily duplicated and is something that can produce income for future owners.
Remember, you can be on multiple rungs of the Line-of-Money ladder at the same time. In fact, straddling multiple rungs is a smart way to spread your risk out among several different projects.
Set Out Your Income Path
What skills do you currently have that you would be able to pursue on each rung of the Line-of-Money ladder? Try to come up with three activities per rung – what kinds of jobs are you qualified to do? How much could you charge? For project pricing, how much would it cost to hire someone on an hourly basis to help you, if you had to? For percentage pricing, what kind of a project could you create that would create so much value for a client that they would agree to pay you a percentage of the proceeds? What are your three most likely equity plays, based on this list? The projects that you come up with during this exercise is a map of your future income path.
Find out how to build a 7 or 8 figure business around your personal strengths in my newest live training based on interviews of over 1,100 self-made millionaires and billionaires. Click here to reserve your seat at a date and time that works for you.
Where do you stand on the Line-of-Money ladder? Do you know how you’re going to climb to the next rung?