Residual income is revenue that occurs from work done one time. Some examples of ways through which you can build a residual income are: An insurance agent who gets commission every year when a customer renew his policy; A network marketing or direct sales rep’s income from her direct customers when they reorder product every month; An aerobics instructor who produces a video and sell it at the gyms where she teaches; A marketing consultant who creates a workbook and sell it in an e-book format on the internet; A photographer who makes his photos available through a stock photographer clearing house and get paid royalty whenever someone buys one of his images; A restaurant or retail owner who has grown to the point of hiring a trustworthy manager.

As you can see, there are many different ways to build residual income across a wide variety of business. It may be recurring income from the same customer, it may require no personal involvement whatsoever, such as an e-book sold on a website, or it may require some personal interaction, like the insurance agent calling its customers’ to remind them about their renewal and ask them if they want to change any of their coverage. Often, residual income is something that you can delegate to an assistant. Note that: this is different from merely recurring income. Recurring income may still require your direct involvement to earn the income, e.g. a coach or consultant on a monthly retainer or a caterer who delivers lunch every Monday to the local school board. While this “active recurring income” offers welcome stability, it also tends to tie you down and you still limit on your earning capacity based on your own personal production capacity.

It leverages the work of other people to build income for you. Some examples of leveraged income include: An e-book author selling her e-book through affiliates who promotes the product, a network marketer who builds a downline and receives commissions in the sales made by people in his downline, a general contract who makes a profit margin on the work done by sub-contactors, franchising your business model to other entrepreneur (the ultimate leveraged income). Again, there are many different models. They key is that you are making money off other people’s labour, rather than primarily your own. Note that leveraged income may or may not be residual. When you combine both, that’s better.

Now is the time to think about how to apply this in your business. Can you create a product that people will buy over and over again? Can you engage others to sell your product? How could you make money off the work of others?

Active leveraged income is a term I use to describe income that requires your direct participation, but you can make money by having more people involved. This generally involves a one-time event, such as a seminar or class, a conference or convention, concerts, dance recitals and raves, and other parties. Although these require your direct participation, your earning potential is much higher than if someone were just paying you a direct hourly rate. Fill a room with 1,000 people paying $ 50 each and you can cover your facility cost, promotional cost, staffing fees and still have a nice chunk of change left over.

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