Home / Money Blog

Is that side gig worth it?

---

THE SCENARIO When people consider whether or not to pursue a new money-making venture, we often think of it in terms of 'is giving this thing a shot worth it?' This post takes a look at one example situation I found myself in recently and the thought process I used. A few years back, I went to a meeting at an insurance agency with an emphasis on recruiting new insurance agents. There was a one-time up-front cost of $100 to get started with them, and then you'd go through training (call it $150), take your licensing exam and pay for your license (around $250 overall), and some immediate Continuing Education (CE) requirements that cost about $40. Once you got all that taken care of, you had to get an Errors and Omissions (E&O) insurance policy so that if you accidentally messed something up while selling a policy, you weren't sent to the poor house. These policies cost about $35 per month at the time. The license lasts for 2 years, and for the sake of this example, I'm going to completely leave out the value of my time and effort - the training alone is over 70 hours between pre-licensing and continuing education requirements, to say nothing of the time and effort spent to find a customer and sell them a policy. For the sake of simplicity, I'm going to assume that I could do turbo-training and get all of my one-time up-front costs done right off the bat, so I'm going to lump those costs into a single 'PV' figure. I'm also going to assume that I will only sell one policy, all the way at the end of the two years over which the license is valid. The commission for this policy (i.e. what I'd be paid) would be $1,500 (this is a round number that's in the range of commissions for people selling the types of policies that the company specializes in). My question is, what is my return on investment (again: dollars only, leaving out the value of my time) if I sign up and everything works out as planned?

---

THE SOLUTION First things first, make sure the calculator is using 12 Payments per Year. N: 24 I/YR: (this is what I'm trying to find) PV: -1 x (100 + 150 + 250 + 40) = -540 PMT: -35 FV: 1500

When I plug everything into the calculator, I learn that the return on my dollars invested is 6.06 %.

If it were you, would you consider this a good thing to do? How many hours would you be willing to spend to make a return like this?