We live in a new era. It is possible to start a business with a laptop and an internet connection. As a long time consultant and entrepreneur, I have come up with a framework that works for me. When evaluating who to work with and what project to work on, I think of PPEAR or “pear”.
R(Rule of 25%)
- Does this action lead to passive income: books, products, investments?
- Do you own the customer? Ideally, you focus on owning the customer.
- What is the royalty relationship?
- Predator (20% or lower)
- There should be a very compelling reason to work with a predator. Perhaps they get you exposure or they take a chance on you.
- The downsides of predators are they often have bloat in process. How many layers of people do you have to interact with? How long does it take to get something done? It could be 10-100 times longer than working by yourself.
- Partner (50% or higher)
- There is a lot to like with an equal partnership. The partner has “skin in the game” in terms of money and their time.
- Platform (80% or Higher)
- There are pros and cons to using a platform. The pros of a platform are that if you are self-sufficient you can retain most of the revenue.
- The cons are that if you are not experienced you may not have a framework for what good is. You may want to work with a predator and see how they do things before going right to the platform.
- Predator (20% or lower)
Note: Not everyone wants to be an author, creator, but everyone can be an investor. Maybe this is putting 50% of your W2 income into an index fund or renting out a house.
When working on a project or working with a partner it is important that it is a positive experience. Even getting paid very well eventually gets old if the environment is toxic. Some questions to ask are:
- Am I happy every day?
- Do I respect the people I work with?
- Are the people I am working with high achievers with a track record of success?
- Does my health increase or maintain: sleep, fitness, nutrition?
- You are the average of the five people you spend the most amount of time with
Another important question on a project or working with a partner is autonomy. If you are good at the way you do you need autonomy. You know what good is, your partner may not. How much autonomy do you have? Are you able to completely bet on yourself or is success in the hands of other people.
- Does this action increase autonomy or create a dependency?
- Do I learn and grow? A new skill, new prestige or brand affiliation.
- Is it automatable or manual? Avoid tasks that cannot be automated.
- Am I betting on myself or I am dependent on others for my success?
Another important question on a project or working with a partner is exponential potential. Perhaps you have decided to work with a predator partner because of the exponential potential of the project. If you are working with a predator, but the project doesn’t have exponential potential, then perhaps it isn’t a good project.
- Does this action lead to an exponential reaction?
- Press or Prestigage
Rule of 25%
What color is the money you make? If you are an employee this may be valuable to you because you are learning skills and building a network. Keep in mind that this is “red” money though. This red money can disappear at any time. You are not in control.
Consulting is “yellow” money. It is a huge step in the right direction. You can do some consulting while you work as an employee. This takes away some of the risks of being an employee. As a consultant though you have to be careful to never have one client that is more than 25% of your total income and ideally not more than 25% of your consulting income. Familiarity breeds contempt. The best relationships are when people are on their best behavior and they know the relationship is only there to solve a problem.
Investments like real estate, index funds, and digital products are “green money”. This income stream will always pay you. The ideal scenario is to make 80% of your income with green money and limit consulting or employment to 20% of your income.
- One revenue stream cannot exceed 25% of gross revenue for the year.
- What color is money: red, yellow, green? Optimize toward green money.
- Red == Employee
- Yellow == Consulting (see the rule of 25)
- Green == Passive