As I have been trying to narrow in on my specific strategy to making a living from my online efforts, I keep coming up with this notion that bigger is not always better. On Monday, I mentioned that I keep building and buying more blogs. It was an addict’s first confession. I have bought into the belief that if I start a lot of projects now and continue to build them up over time, eventually my online income will take off like never before – and that’s saying a lot considering my most recent income report. Yet, even as I build up my online portfolio of blogs or empire (as many call it), I have a strong conviction that many are over-doing it. Here’s what I mean…
When Vision Comes with Lots of Overhead
For those who don’t know, I am a huge fan of Mike from The Financial Blogger. Mike has been around in the blogosphere for an eternity. He writes about his similar vision to build up a company of blogs while keeping his day job. I admire his ambition and he was part of the reason that I was convinced that I could be successful as a internet landlord (and am grateful). Just recently, he announced that he bought two more sites. While that is great for him, part of me disagrees with his approach to owning blogs.
Here’s what I mean. A few weeks before this, he posted about how someone could sell their site for 4x the annual income from it. At the time, I questioned the reason he would publicize this if he was still in the business of buying blogs. Why push up the price if you are a buyer, right? Well, in hindsight, it only makes sense – to a certain degree. Whether it was intentional or not, Mike probably landed these two quality sites as a result of his image as “internet landlord”. As I have talked about, having a professional image is important in any business.
While his status certainly gave him the advantage in buying these sites, it isn’t without a cost. He has signed a confidentiality clause, but I have reason to believe that he paid a pretty penny for these sites. If you follow Mike’s site (as I do), you would find out that he has a high tolerance for debt and even takes out loans to help his business grow.
The problem with Mike’s business model, as I see it, is that it comes with too much overhead costs. One of the best advantages of owning a blog as opposed to physical real estate is the low upfront or overhead costs. Instead, because of his commitment to his high-paying full-time job (understandably so), he is forced to pay a at least one virtual assistant and outsource many of the tasks. I am a firm believer in outsourcing some tasks in order to generate passive income, but we have to realize that it comes with the cost of a lower return rate. Mike’s ambitious business model and commitment to his day job forces him to pay a LOT of money in expenses. With his expenses at nearly 50% of his income, I often wonder if it would be better to reduce his debt, perform more of the responsibilities of himself, and bring in more direct income.
How My Smaller Scale MIGHT Outperform Mike’s
I thought there would be no better way than to compare our different models. I take on more direct responsibilities, pay far less for websites, and do not take out loans to build my online portfolio. Whose model is better? Let’s let the numbers say it all. I’ve gathered some stats from February and wanted to do a comparison. I would like to point out that since Mike has been at it longer than I have, he has a slight advantage and at this point, his income is more reliable/sustainable (but not for long 😉 ). I have less income reports to use as data points. (Thus the reasoning for comparing only February – to try and level the playing field – yes, it is biased, but I am the one writing the post).
|Personal Gross Income||5346.275*||5351.76|
|Personal Net Income||3346.275||4328.48|
Going just off of February’s income reports, it seems that I out-performed Mike in one area – net income (before taxes). Yet, as anyone can tell, it most likely results from my larger time commitment. I am probably investing 30 hours a week to blogging and my hourly rate does not compare to Mikes. This again speaks to how more established Mike is and how much I need to focus on scaling my business model. At the same time, I am only investing the free time that I have. It’s time that I am not doing other things anyways, so why not save a few extra bucks that I can then use to invest back into my empire. While my efforts do not beat out Mike on all fronts, I am going to take this as support for my smaller-scale business model and work on improving it’s scale.
What do you think is the better model?
*Mike shares his company with a business partner, so in order to compare the figures, I divided his gross income and expenses by 2 to have his share of both.
#Mike says that he only puts in 10 hours a week, but it sounds like he has been investing more time. 15 hours a week is just an estimate. I have no idea how accurate this is.