The most *dangerous* type of income

There are TWO types of income: Recurring and Windfall.

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And Windfall income is SEXY.

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But… It's also dangerous.

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Windfall income is seductive. It lures entrepreneurs into a false sense of security…

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Tempting them to include that one-time revenue into future income projections.

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So that new project or unexpected boost in sales suddenly FEELS like the new norm.

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You may feel like you’re smart enough NOT to do this.

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But let me ask you:

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After hitting a record high month, quarter, or year.... Have you ever felt disappointed when the following month, quarter, or year was lower than that high?

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Yeah. That’s the principle playing out in your real life and business.

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No judgment here because it’s simply human nature for this to happen.

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But here’s the problem: treating windfall income like recurring revenue results in making decisions based on faulty assumptions.

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You may hire more staff…

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Invest in new, flashy equipment…

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Or even splurge on a new house for yourself and your family.

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All in the name of “growth.”

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But what happens if that one-time revenue dries up? You’re left with the ballooning expenses that quickly can outpace your actual sustainable income.

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The truth is, windfall income can expose risk for the untrained entrepreneur.

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So, how do you protect yourself from the deceptive lure of windfalls? Awareness. Proper categorization. And vigilance.

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I recommend you explicitly categorize income as windfall or recurring. Even if you feel like you know which is which -- seeing it on paper makes it even more clear for yourself and your team.

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Do NOT use windfall income to fund RECURRING expenses.

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Be both careful and ruthless here.

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Build your growth strategies around your stable, predictable income streams.

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Predictable income streams like: subscription services, long-term retainer contracts, or loyal customer foot traffic.

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Things you can count on to hit your bank account every single month or year after year.

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And when those windfalls do come in, treat them as opportunities to fund ONE OFF initiatives, like a bonus to key team members or distributions to yourself to fund your goals .

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If you’ve got questions about how to best invest a windfall, reply to this email. Your questions help me curate content that is most beneficial for you.

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Here’s to your success and financial certainty,

Warm regards,

Dan Nicholson

Founder, Nth Degree CPAs
Author of “Rigging the Game”

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