When you move away from a more conventional kind of working arrangement at a more traditional kind of company and move toward running your own online business, you’ll need to shift your mindset and perspective on a lot of aspects in your life. One of the biggest and most important shifts is moving away from the “trading hours for dollars” mindset, for example. Just putting in the hours isn’t enough; you need to actually turn a profit. And working more hours doesn’t always result in more dollars either.
And while many of you may be nodding your heads in agreement at this point (or shaking your heads because you’ve heard this before), you’d be surprised how easy it is to forget or to overlook such necessary changes in how you think about work and business. A prime example of this is how much money you make, because revenue from your business is not the same as the income you earn from a job. And I’m not just talking about income tax implications either.
Cashing Your Paycheck
Let’s say you earn a fairly typical $50,000 salary from a fairly typical middle class kind of job. Maybe you earn more, maybe you earn less, but let’s use $50,000 as our hypothetical example. Now, let’s say that you decide to start a blog as a side hustle, which expands into social media, online video, email marketing, affiliate marketing, brand deals, and all the rest of it.
With some hard work in the evenings and weekends, coupled with a little luck on your side, you manage to bring in an impressive $50,000 in blog revenue in your first year. That puts you well ahead of the curve of the average blogger — as so many of them give up before even reaching their first AdSense payout threshold — and you’re pumped. As you should be. But is that $50,000 in blog revenue the same as the $50,000 salary you earned at your job.
No. Not at all. The relationship is far more nuanced and complicated than that.
It Takes Money to Make Money
To put it as simply as possible, broadly speaking, it doesn’t cost you any money to have a job. Yes, you might have commuting costs and such, but it doesn’t cost you a dime to have the opportunity to earn a paycheck. Not directly, anyway. Aside from the usual deductions (like income tax), that paycheck is wholly yours. It’s literally money in the bank.
Running an online business is different. It’s true that the basic costs of starting your own blog are fairly minimal. It’s also true that your costs can quickly increase as you start to look at the bigger picture. You’ve got additional bills to pay, like your own health insurance and contingency fund.
It costs money to run a business. You’ve got to pay for web hosting. Maybe you pay to maintain an email newsletter list or to use a premium social media management tool. Perhaps you invest in social media promotions and other marketing or advertising efforts, plus any work that you might outsource. Indeed, living on arbitrage might be one of the best business decisions you ever make.
But these costs and expenses all come out of that $50,000 in blog revenue. On the flip side, you can save a lot of money working from home too.
The Issue of Time
Here’s another big factor to consider when it comes to blog (or other online) revenue compared to regular income. When you work a more traditional kind of job, you can usually expect to receive the same paycheck every two weeks. Like clockwork. It’s reliable and consistent, with very little in terms of variability. Blog revenue isn’t like that.
Even if you get to a point where the actual numbers each month are relatively consistent, the payouts might not be. If you work with brands on sponsored content and influencer marketing campaigns, you might not see that money for 30, 60 or even 90 days in some cases. Even under the best of scenarios, many ad networks only pay once a month and your ad revenue can fluctuate wildly sometimes.
That’s why you need to save that contingency fund from the good times to ride out the low or laggy times. The simple fact is that not all money is made alike. Going into business for yourself has a lot of upside, but you also have to recognize that the money you earn from your blog should not be treated the same way as the paycheck you earn from an employer.