The 3 Keys to Making 5-Figures per Month Without Breaking a Sweat (or the Bank)
This system will give you the runway to take calculated risks in the best long-term interest of your entrepreneurial career.
I’m not going to beat around the bush: You’ve been inundated with flashy headlines telling you how overnight success stories made their millions — and they purport that you can do it, too, following their failproof formula.
You might go so far as to make a schedule, set weekly milestones, and mark your progress by lofty — but “attainable” — earnings goals. If things don’t work out, there’s one simple blanket solution: Keep going; it’s a volume game. More hours equals more progress, which inevitably will soon equal significantly more income.
You’re not afraid of hard work — you have a formula, after all. Success is surely less than 10,000 hours away — so long as you keep on trucking.
As someone who’s observed those stories, written my own, achieved those goals — through a mix of trial, error, failures, and some successes — I’m here to expose the key components they forgot…or so conveniently left out. There’s more to success than an “hours to income” formula.
The money you’ll waste vs carryforward ROIs
In my first business, I spent over $100,000 creating a tech product that never made it to market. Want to know how much I spent on marketing that tech product? $0. Was that $100,000 on designers and developers a total waste? Maybe…but I was able to repurpose that tech product (and the IP behind it) and sell it to an operator-investor years later without even trying.
In a subsequent “failure-turned-success” business of mine, I spent over $100,000 just on marketing — 90% ineffective marketing over a two-year period. Was that $100,000 spent on ineffective marketing a waste? Judging by the fact that I fired three marketing teams and decided to DIY it for a much higher return (instead of spending hundreds of thousands of dollars, I started making hundreds of thousands of dollars), I’m not sure that two years and $100k of marketing spend was the best use of funds or time.
What’s the difference and how can you determine which investments are worthwhile stepping stones versus money sinks that are draining your savings and shortening your entrepreneurial runway?
Invest in tangible outcomes or teachable experiences — to a point
If you’re pursuing a hefty project with a clear outcome that requires a significant upfront investment, you should be creating something of value — whether or not it succeeds in the market.
Tangible things, intellectual property, and content libraries are a few examples of upfront investments (of time and/or money) that hold intrinsic value. Just because you don’t have access to the right customer audience or lack the marketing chops (or necessary budget) to achieve that product’s earnings potential doesn’t mean you’ve wasted your time or money creating it.
On the contrary, when you invest in intangibles that don’t offer a “carryforward ROI”, you may be wasting your limited funds. I’m defining a “carryforward ROI” as an investment today that builds ongoing value into the future. Here’s a perfect contrast between a one-time intangible ROI and a carryforward ROI with unlimited upside potential:
- Conversion-focused advertising that doesn’t collect user data or build a customer audience (that you own). If a user doesn’t “bite” (purchase your product) from these ads, your potential ROI is pretty finite. You won’t make more money on that user to recoup the initial advertising cost and increase the ROI unless you continue to spend more money on retargeting ads to that user — since all you’ve generated is the pixel data of how they did or didn’t interact with your ad, website, or landing pages.
- A content library that you own — whether self-produced, created by a hired freelancer, or built by an SEO team or other expert group — has the potential to generate sales, attract clients, and be repurposed and sold as a product of its own. This type of investment can yield ongoing, unlimited revenue and can be monetized in a myriad of ways for both one-time and recurring earnings.
As an early-stage or aspiring entrepreneur, freelancer, or self-employed creator, you’re going to be tempted to invest in two things:
- Tools to build your product or hone your craft
- Channels to market those products and generate sales
I would caution that being financially “overweight” in category two can spell trouble. That doesn’t mean you should avoid marketing spend altogether, and some marketing investments can in fact pay dividends in the future. However, for those that offer a finite potential ROI, make sure you’re getting something more than just one-time sales to make this cost worth your while. That could be education, valuable user data, or even the determination that that marketing channel may not be the most cost-effective option for your business.
The bottom line? If you don’t start your business with a built-in audience, niche-targeted influencer partnerships, or viral marketing that closes 50% of cold leads to sales in seconds, you’re probably going to find the audience-building piece of generating sales the most time-consuming and costly. Focus on building and investing in assets and channels that create “carryforward ROIs”, so you’ll never have to worry if you wasted that time or money.
Hope is not a budget — here’s what those “overnight success stories” aren’t telling you
You have two options: Go all-in on your entrepreneurial journey and hope you generate some profit before your savings dry up or keep the side hustle to a “nights and weekends” grind until your side hustle earnings outpace your main gig.
For every entrepreneurial or freelancer success story that tells the tall tale of quitting their job, going “all in”, and making $7k in month one of self-employment, here’s what they probably don’t tell you:
- They have a spouse paying the rent or mortgage
- They’re living at home with parents (who still cover their health insurance)
- They didn’t actually quit their job; they got fired — they’ve just put a different entrepreneurial (and purposeful-sounding) spin on it
- They’ve been dabbling in a few extra streams of side hustle income for months or years, possibly already making 4-figures, building a client base, growing a following, and honing a marketable expertise
- They have a very close partner, friend, family member, former colleague, or other connection in their network who has paved the way and is helping them out by lending their credible name, expertise, or large audience to give the entrepreneurial newbie a boost to their launch
If they don’t mention any of the above, they may be in the position I was when I first quit my 6-figure job to pursue entrepreneurship: They may have been saving tens or hundreds of thousands of dollars for years in preparation for this career risk, as well as building a resume of impressive credentials and keeping the door open for lucrative and respectable backup plans in case their entrepreneurial journey doesn’t achieve the success they seek.
Taking “calculated risks” isn’t being an insecure wuss; it’s being an astute, informed entrepreneur who balances out the pros, cons, and the cost-benefit analysis before jumping off the ledge into carefree entrepreneurship.
If I had been in any other industry but investment banking (or had worked a job that didn’t own 24-hours of my time seven days a week), I’m 90% certain I would have held onto that job as long as possible, until I could secure consistent (at least 4-figure monthly) income from my side hustle.
If you have a job you find “boring” or “tedious” but that doesn’t require 80 to 100-hour weeks and pays decently, I’d probably suggest keeping that job for as long as you can while building out your entrepreneurial venture. If you can look at your 9 to 5 paycheck as your startup marketing budget, you may develop a deeper appreciation for that recurring income. Plus, getting it from an employer is going to be a lot easier than getting it from a venture capitalist — especially if you’re still ironing out the kinks in your nascent business plan.
The unpopular opinion I stand behind
No matter how unpopular of an opinion it is, I firmly believe that having a second job or multiple diverse income-generating activities makes a person a better entrepreneur. I’ve written an entire article about why a second job is the key to startup success, but here’s the gist of it:
- Building in revenue streams outside of your primary entrepreneurial goal minimizes your financial desperation: It frees up your mind to stop worrying about paying the bills and spend more time building the best long-term business, product, or service possible.
- Diversifying your daily to-do list among different jobs, tasks, or projects exercises various parts of your brain and enables you to return to your primary entrepreneurial project refreshed, renewed, and creatively inspired. It’s a great way to avoid burnout, while also developing robust, diverse skill sets.
The formula you’ve been waiting for (calculating your entrepreneurial runway)
“Runway” is a fancy way of saying how much time (or money) you can devote to this whole “entrepreneurship thing” before you have to pack it in, move home with the parents, or seek out investors to stay afloat. Most people make a giant mistake when calculating this “runway”, and that often leads to their entrepreneurial and financial demise. I’ve broken it down simply, so no matter your current financial situation, you can determine what that “runway” looks like for you and your self-employed business goals.
Step one:
Determine your monthly living expenses, including rent, food, utilities, healthcare, and some unforeseen technology repair costs — you know you’re going to need them. Let’s call that number X.
Step two:
Take a look at your savings account and see how much is in there. Let’s call that number Y.
Whatever you do, do NOT assume Y divided by X tells you how many months of entrepreneurial runway you have. That’s where most people mess up — and where many entrepreneurial dreams and bank accounts go to die.
Step three:
You really need to determine Z. Z is the amount of money you’re willing to spend every month on your entrepreneurial venture. This can be however much you want, but you have to pick a number.
It might seem to reason that Y divided by the sum of X and Z is the amended formula: Y / (X + Z) = Months of entrepreneurial runway.
Close, but no cigar. You’re lacking one critical variable: W.
Step four:
W is the amount of new income you’re going to generate every single month. You can make this money however you want — be it part-time nannying, working at Starbucks, keeping your primary 9 to 5 job, starting an OnlyFans — it’s up to you. The goal here is to do something to generate some ongoing income outside of your startup.
The second goal here is to make W more than the sum of X and Z. I know that’s hard, but if you can do that, you’re going to set yourself up for financial peace of mind and a startup journey that doesn’t deplete your savings as you’re getting your new venture off the ground.
(Y + (# of months x (W — (X + Z)))) / (X + Z) = Months of entrepreneurial runway
Here’s a quick example with some real (dummy) numbers:
- Let’s say my “X” is $2,500 — that’s rent, food, healthcare, utilities, and a small emergency tech fund.
- Let’s say my “Z” is $1,000. That means I want to allow myself to spend $1,000/month on my entrepreneurial endeavor.
- Let’s say my “Y” is $100,000.
- “W” simply needs to exceed X plus Z (or $2,500 + $1,000), so a minimum of $3,500/month. Let’s assume W is $4,000.
In month three of my entrepreneurial journey, this is what my runway could look like:
($100,000 + (3 x ($4,000 — ($2,500 + $1,000)))) / ($2,500 + $1,000) = Months of runway left.
($100,000)+(3 x ($4,000 — $3,500)) / ($3,500) = Months of runway left.
($101,500) / ($3,500) = 29 months of entrepreneurial runway left.
The secret behind that formula is simple: If you can maintain a W (or monthly recurring income stream) that is greater than your monthly personal and entrepreneurial spend, you’ll be able to maintain significant entrepreneurial runway without depleting your savings.
Once you build in the financial freedom and runway to pursue your entrepreneurial journey with an informed mindset, looking at the financials head-on, you’re able to think long-term about building products, services, and businesses with high and ongoing carryforward ROI into the future.
The 3 secrets: Financial peace of mind, calculated risks, and carryforward ROI
If you think the secret to successful entrepreneurship and fast profit is to go “all in” and assume every dollar you spend pursuing your startup dream is a worthwhile investment, you may be in for a rude awakening.
Not all entrepreneurial investments are created equal. Time and effort don’t always have a positive linear correlation with future sales, profit, or success. However, some investments today — be those honing your unique skill set, cultivating intellectual property, or creating a new product or service — may offer great potential upside in the future.
In order to build with that future ROI in mind, you’ll need to think clearly with a long-term vision. That entrepreneurial patience requires a realistic assessment of your runway and spending threshold. Most “overnight success stories” had some financial peace of mind or backup plan giving them the courage to think clearly, budget accordingly, and capitalize on their highly calculated risks.
Entrepreneurship and jumping into the world of self-employment is hard enough as it is; don’t make it harder by cutting off every backup plan, secure income stream, or source of help available to you. Most entrepreneurs don’t achieve success entirely on their own — and they surely don’t do it overnight.
This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information can be guaranteed to be accurate. Consult a financial professional before making any significant financial decisions.
