MRR From Royalties Is The Ace Up My FIRE Sleeve

The more I develop my graphic design business the more I’m convinced that earning money from royalties is a magic trick. 

If you’re not familiar with how my business works, I simply create digital graphic designs and upload them to various websites that sell them on t-shirts, coffee mugs, hats, pillows, or any number of other products. 

I’m basically licensing my artwork, although I have no licensing agreement with the sites I sell on.

Every time someone chooses an item with my design, I get a royalty payment.  Sure, I could make more per sale if I had the hats or t-shirts made and printed myself and sold them on my own site. 

But if I did that I’d have to hold inventory, buy boxes and packing tape to ship out merchandise to customers, and deal with returns and exchanges.  And oh yeah I’d have to run a website and most importantly get traffic to it, the latter being a very difficult thing to do. 

All that stuff would take time, and time is money.  I’d probably make less per hour if I did that.

No thanks, I’ll pass.

 

MRR

What is MRR?

Monthly recurring revenue (MRR) is income that a business can count on receiving every single month – in other words, predictable revenue. It represents the value of all your customer relationships, normalized to a month.

MRR is most often collected by companies that have contracts or subscription services with their clients.  Your cell service provider collects MRR from you, as does the gym that you pay a monthly membership to but likely don’t go to often, haha.  Netflix has MRR from it’s more than 220 million subscribers.

So to be fully clear, I do not technically have monthly recurring revenue by it’s strict definition as I do not have any subscribers.  No one subscribes to any of my products and agrees to buy them every month. 

In fact customers could just stop buying products with my designs for a month, leaving me with little to no royalties.  That happened briefly in March-April of 2020 when COVID hit full force and customers weren’t sure if the economy was going to collapse.  I made very few sales for a month or two, but they came back quickly. 

But after 6 years of doing sales on print-on-demand sites, I’ve found my monthly royalties to be quite consistent.  Sure they do vary a bit and do often follow consumer confidence measures, but in general my royalties behave very similar to subscription income, or MRR. 

I’m able to predict my monthly revenue to within 10 – 15% most months based on previous years sales and what’s going on in the stock market and geo-politically.

 

Way Better Than Freelancing

I realize everyone has their own preferences for the kind of business they want to run.  Many folks choose the freelance route to start a lifestyle business.  They might write articles for blogs or other publications or do freelance graphic design.  I think my royalty based model is much better, for me at least.

If you decide to FIRE and focus on being a freelance writer, you’ll probably gain increased autonomy over your time and have the joy of being your own boss.  But if you spend 8 hours working on an article and get paid for it, that’s it.  It’s a one-time payment and you traded your time for money. 

Unless you have a special arrangement with the client you won’t get paid every time someone reads that article.  Some of your articles might get 500 pageviews and some might get 500,000.  But you’ll be paid the same amount for each article and only once, at your going rate. 

Royalties on the other hand are magic because they keep paying you for your work every time it is purchased.  With royalties more popular works make more money, as they should. 

Another huge advantage to my royalty based business over a freelance business is that I don’t have any deadlines.  When a freelance writer takes on a job, they likely have a deadline.  That’s stress I don’t want in my life.  I had enough of that in my 25+ year career at my main job.

I create designs when I want to, and don’t when I don’t want to. 

One exception to this is when I do custom logos for businesses or blogs.  I sometimes have a deadline for those, and if I don’t I strive to be prompt and responsive anyway.  But custom logos are a very small part of my business revenue.

 

Inflating My MRR

Inflation in America topped 9% recently.  How does this affect my royalty based business?

My royalties increase with inflation since the price of hats, pillows, and t-shirts does too.  To use one site as an example, a design that netted me a $3.50 royalty when it was sold on a shirt in 2017 now pays me $4.05 per sale.  And I’ll get more for it in the future. 

Some of the sites I sell on allow me to adjust the price of the goods with my design on them.  For instance I can raise t-shirt prices with my designs on them from $18.99 to $20.99 any time I like.  When I do that I increase the royalty I receive for every sale. 

But of course the higher price carries the risk of getting fewer sales, and the market is competitive.  To be honest it’s fun to experiment with product pricing and observe the results.  I’ve learned a lot about consumer behavior and those skills undoubtedly can transfer to other businesses in the future. 

 

Evergreen Assets

Even though I don’t technically have MRR for my business by the strict definition, I have evergreen assets that produce steady income.  And the income is not tied to how many hours I work.  I could stop working on my designs for good and it would keep coming in. 

Just as a musical artist can create one song or album and keep collecting income from it for years and decades in the future.. 

It’s magic, like compound interest.  And it’s the ace up my FIRE sleeve.