In the previous post on Leveraging the American Dream I addressed a key challenge affecting lower and middle-income workers: they have no effective leverage to obtaining higher wages.
The hourly worker may indeed work more hours, but they cannot work 24 hours per day and the employer must agree to the additional work – assuming they have a need. The salaried worker may negotiate a higher salary, but unless their perceived market value greatly increases, any salary increase is likely to be modest.
There is a solution for these workers. They must modify their circumstances so that they can begin to leverage their skills for much greater income (hereinafter, I’ll refer to this concept simply as ‘leverage‘).
In this post, I’ll address the solution to leveraging increased income for workers, how they may modify their circumstances.
The solution is to start up a small business part time. While this statement seems to be merely stating the obvious – the devil is in the details. Simply starting up any business is unlikely to provide more leverage, the business needs to be strategically aligned such that it gives the worker leverage they do not have at their job.
Below are two small business options that can provide real leverage to workers stuck in the wage-stagnation trap:
- Become a consultant – be paid to solve important problems
- Become an inventor – license your product for royalty income
Become a Consultant – be paid to solve important problems
A consultant is any person who has valuable expertise that can be leveraged to help their clients solve problems or issues that are affecting their business.
The consultant typically will charge an ad hoc hourly rate (for example $150 per hour) or a fixed rate for a specific project. Consultant businesses often have high profit margins as there is no inventory or product to buy, the consultant sells his or her skill. There are many types of consultants: marketing, management, financial, legal, tax, and real estate consultants to name just a few.
Determine what your strongest skill sets are and find a creative way to match those skills with identified problems that clients will pay to have solved. If you are good at getting “warring” factions to find agreeable solutions – you should consider being a mediator part time – and being paid well for your services.
The primary benefit of a consulting business is you have minimal costs to start up: your home is your office, and you just need access to a computer and printer to get started. Also, you can frequently manage your time where your work can be done at night and on weekends. It is not easy, but nothing worth doing is ever easy. But, as your consulting business picks up you might hire contractors to multiply your efforts or be able to go full time in the business. A consultant is able to leverage their time in ways an employee cannot.
Become an Inventor – license your product for royalty income
Becoming an inventor is easy – becoming a successful inventor is difficult. It is often said that less than 3% of patent holders ever profit from their inventions. An inventor is more accurately described as a product developer – you must first invent an innovative new product and then develop it into a product that can sell in large numbers in the marketplace.
Just as a consultant must be strategic in leveraging valuable skills to solve client problems, an inventor likewise needs to be strategic in developing products that millions of people will want to buy – because the products meet a key need or solve a problem for them.
As an inventor you can choose to do it all yourself, to build a business around your product: manufacture it, package it, distribute it and sell it to retail and other buyers. If you really enjoy taking considerable financial risk, working very long hours to keep your business afloat you may end up with a job with low pay and very long hours – just what you were seeking to avoid or get away from.
Instead, you gain leverage if you license your intellectual property (IP) – patents and trademarks – to a licensee company that will manufacture, package, distribute and sell your product in large volumes (you hope) into the marketplace. The manufacturer gains a new innovative product their competitors lack and the inventor gets paid a royalty each quarter based on sales of the product. If the product sells successfully in the market, the inventor may collect lucrative royalty income and do whatever he or she likes with their time. The more success your licensee enjoys, the more success you enjoy. That is leverage!