Four Types of Income


There are four types of income available to your business. You must be intimately familiar with each type of income and create a strategy to maximize the most beneficial income type for you.

This video is a brief description of each income type and how you can leverage them to make a great living and live a great life®.


Hi. I’m Dave Lorenzo, Chairman and Founder of Valtimax Consulting and our time together today is going to be spent focusing on the four types of income in your business or professional practice.

Now the type of income that you earn in your professional practice is critically important regardless of whether you’re a doctor or a lawyer or you have a business like a corner store. The reason that it’s important is because you want to build equity in your business or your professional practice so that someday you can sell it.

Contrary to popular belief, it is possible even in a solo or small practice law firm or a solo or small practice medical, dental, accounting group. You can build income or you can build equity if you focus on the right types of income.

So let’s talk about the four different types of income that are available to you in any business or professional practice.

Now each of these types of income is dependent upon labor intensity which means the amount of work required to attract the client and relationship need, how much of a relationship do you personally as the owner of your business, as the owner of your professional practice needs to have with the end-user, with the client, with the purchaser.

So we’re going to look at this through the lens of labor intensity and relationship need.

The first type of income is what I call ad hoc income. This is very transactional in nature. A client comes to you. They have an issue. They have a problem. You resolve the issue or problem. The client goes away. If you’re in a corner store setting, a customer comes see you. They buy something. They go away.

This ad hoc income is the least valuable because you only handle one transaction for that person and then they go away and the reason that it’s not as high end value as the other three types of income is because the labor intensity required to not only attract this client but to service this client is very high.

Also the relationship need for this client is very high as well. You have to develop trust from basically nothing. They don’t necessarily know you. They don’t like you. They don’t trust you yet. You have to start from ground zero when it comes to your relationship. So the labor intensity is high and the relationship need is high and that’s called ad hoc income.

Second type of income is called repeat income or income from repeat customers or clients. Now a repeat customer or client is somebody who comes to you for a second time to either buy a different product or partake in a different service.

So the only thing that you have in common from your last experience is you and the client. So the labor intensity is medium because you don’t necessarily have to do as much work because this is work that you’ve done in the past for this client. So the client comes to you and they come to you for repeat work again.

The relationship need is medium as well because they’ve done some stuff with you before. So they trust you a little bit and they’re coming back to you again. So there is a medium relationship need there as well. So repeat income definitely better than ad hoc income.

The third type of income is recurring income and this is the same client coming to you for the same exact thing over and over again. Recurring income is great because the relationship need is low because this client already trusts you. You’ve done this type of work for them in the past. The labor intensity is medium because you’ve done this type of work for this client in the past as well. So labor intensity is medium. Relationship need is low.

The final type of income and I’m going to talk over the people doing the landscaping outside. Final type of income is passive income and this is the best form of income.

The reason is because the labor intensity is low and the relationship need is low. So you don’t have to do any work to attract the client. They come to you automatically and passive income essentially is income that you don’t have to do any marketing to it. It just comes to you. Maybe somebody else on your team brings them in or they come in through an ad or they just show up out of the blue as a result of seeing you at a seminar.

So labor intensity is low. The relationship need is low. They have a relationship with somebody else on your team so you don’t have to actually do the work. You don’t have to actually do any attracting. They have a relationship with someone else who works with you. This could be a referral situation to a really high quality referral. Somebody brings the other person to your office. You sign them up right there.

Passive income is fantastic. No work required, no relationship needed. That’s the ultimate and that’s what builds the most equity in your business.

Now really quickly, why does passive income, recurring income or repeat income build more equity in your business or professional practice than ad hoc income? Because you actually have something to sell.

You have a relationship with these clients. You have a relationship with these customers that you can sell to someone else at some point in the future. With an ad hoc business, all you have is your processes, your systems. It’s all goodwill. You don’t have anything beyond that.

When you have relationships and you have the processes and systems, then you really have some significant equity built up.

I’m Dave Lorenzo and for more great information just like this, you can find me at Thanks for watching and have a great day.