Potential Income versus Real Income
Potential Income and Real Income are two different things. In models I & II, the difference is usually not as much as it is in the other models. If you work for a company for an agreed upon salary of $100,000 per year, you can expect your annual income to be very nearly that figure.
If you work under any other model and accept a consulting job that pays $100 per hour plus expenses. You could extrapolate that hourly rate to an annual total of $208,000 based upon 52 weeks per year at 40 hours per week. The dirrerence between the potential income and the real income could be very large.
If a consultant working under any model other than I or II, completes one project during a year and has a gap before their next project starts, they will experience a drop in real income that year. If a consultant earns $100 per hour and has two gaps in income during the year totaling 4 months, their real income will be $60 – 80,000 less than the potential income.
If a consultant works an average 50 hours per week and does not suffer any gaps in income during the year, their real income could also exceed their potential income. If a consultant worked 50 hours per week for 52 weeks a year at $100 per hour, their real income would be $260,000.
Vacations and Holidays
This entire analysis does not include any consideration for vacations or holidays which will reduce real income if they are taken. The reduction of real income is only part of the story here. You will likely see an increase in personal expenses if you travel during these periods. If you travel or have expenses related to vacations or holidays, you will be increasing your expenses while reducing your real income. If you take a one week vacation costing $4,000 and your your hourly rate is $100, your real cost of your vacation will be $8,000 which is made up of $4,000 of direct costs and $4,000 of lost income.