Home based business owners who specialize in selling a single product or service can market their product and often achieve some level of success while building a strong reputation and personal credibility.

Although one product specialization has its advantages, businesses that accumulate their profits from a single source are more susceptible to economic fluctuations and possible failure and are generally less profitable in the long term.

As a Home business owner you should seriously consider developing multiple sources of income to increase your revenue and to stabilize your economic future. A river has many tributaries along its way, without which the river level may fall and the river will dry up and disappear completely.

Revenue is like a river, which needs to be nourished with many income sources, not just one. If that one source dries up the negative impact on the flow of revenue is dramatic.

Generating multiple streams of income can have a major impact on your finances. Even an extra income of $500 each month could go a long way to paying down debt or increasing your investments.

We often hear about the importance of diversifying our investments, but diversifying our income streams is just as important, particularly in difficult economic times. Let me show you just how valuable even an extra $500 per month can be.

The value of a second income

Yesterday I was discussing with a friend the income I earn online, which now is about $1,500 per month. He asked why I get so excited about this income given that it is a lot less than I make from my job. So here are a couple of different ways to look at an extra $1,500 per month:

1. Savings account: To earn $1,500 a month ($18,000 per year) in a savings account at 4%, you would need to save $450,000!
2. Investment account: To earn $18,000 from investments at 10%, you would need to invest $180,000.
3. Employment: For many, to get $18,000 in raises could take several years of dedicated service to your employer.
4. Financial Freedom: Extra income of $1,500 per month could cover car payments, help pay down credit card debt, or cover some or even all of a mortgage payment.

The point is that even relatively small amounts of extra income can go a long way.

What makes for a great source of extra income

We could all go out and get a second job at a building supply or retailer to earn some extra income. As you might imagine, however, that’s not what I have in mind. When assessing how you can generate multiple income streams, consider these factors:

Flexible: The ideal source of extra income will allow you to call the shots when it comes to your time. Particularly if you have a full time job, the last thing you want is being tied down to working a set number of hours each week at a second job.

Scalable: Look for income sources that have at least the possibility of generating substantial amounts of income.

Sustainable: The ideal extra income source will continue to generate cash even when you’re not working at it. The idea is to build something that can eventually function without you.

Enjoyable: Generating additional sources of income is a lot of work, so you might as well enjoy what you’re doing.

Inexpensive: I don’t like income generating ideas that require massive investment.