So you’ve made the decision to create a new life and start a business that lets you work from home.

Congratulations! That’s the first major step in securing your financial future and living life on your terms. I know you’re excited and probably a little nervous, but that’s ok.

There are tons of home based online business opportunities you can choose from, and we’re going to make sure you start the business that’s right for you.

In this post I’ll outline two examples of how to calculate the earnings potential of online businesses.

See this post for more about earning money online.

### Calculating Potential Earnings

A business’ earnings potential is a way of evaluating whether or not the business has a realistic chance of meeting your income needs, and what level of work it will take to get there.

Calculating the potential of a hypothetical business isn’t always easy or accurate, so I use a system I call “napkin math.” That’s right, it’s a rough estimate you could scrawl out on the back of a napkin.

To do the napkin math I use a few simple metrics:

1. Market Availability
2. Work or Capital Needed and Available
3. Potential Revenue

### Two Examples of Home Based Online Business Opportunities

Now let’s apply those elements to two different examples.

For example, for a consulting business, you might write down your hourly wage, say \$60, and multiply it by your available hours per week, let’s say 20. That gives you an earnings potential of \$1200 per week.

You’ll notice that in this example I’m using what I think are very reasonable numbers. For consulting, you’ll spend a significant portion of your time doing unpaid work promoting yourself, so your actual number of billable hours is going to be far less than the hours you work in a week. Hence the number 20…you’ll probably be working 50 hours to bill those 20!

Let’s use another example. Affiliate sites often generate \$100 in revenue per thousand visitors. If you assume you can get 200 clicks per post per month (a reasonable estimate), then you need 5 posts to earn \$100 per month, or about 2500 posts in order to match the revenue used in the consulting example above.

At about 30 minutes per post, that’s 1250 hours of work (6 months of full time work) to create an income stream that will continue to produce a nice salary month over month.

That’s the beauty of affiliate revenue compounding!

Which business model would you rather use?