What Is Passive Income and How Do You Do It?
Basically, it’s the opposite of trading dollars for hours. Most people have been raised on the concept of trading dollars for hours and so they try to find jobs that just increase the hourly rate.
They go to college to get a higher paying job and never really grasp the concept of passive income.
The only difference between the fast food worker and the doctor or lawyer is how much the get paid per hour. The doctor goes to college and then medical school so they can charge more per hour for their time, but it still comes down to billable hours or how many patients they can see in a day.
Why do you think waiting rooms are so busy? (they try to rack em and stack em).
The smart doctors and lawyers realize there’s only so many hours in the day so they develop a practice and bring in junior partners where they get a cut of their time.
Really this is the basic concept of any employee based business… to hire employees to work for them in an attempt to generate passive income or a piece of their time.
However, anyone who has owned a business with employees knows that having employees is anything but passive.
On the other hand, some folks think a little differently and realize there might be a better way.
A viable passive income stream is the dream of many small business owners, freelancers, and/or Solopreneurs. This is a system where you don’t have to be there and work every minute for the money you earn.
Passive income is the “Holy Grail” of income sources. You put in the work to set it up and then, as it runs, you earn. In other words, you don’t just earn money equivalent to the time you put into your work (dollars for hours).
Another example would be a content writer who gets paid by the word. This means that if you write a certain number of words, you get a certain number of dollars. The rate you receive might be excellent and your earnings high. But there’s a ceiling that you’ll never break through because even at a good rate, you only have so much time and there’s only so much work you can do.
So instead you write an eBook. You do some background work to create the book, publish it, and advertise it. This includes building a website where people can purchase and download your eBook, and efforts to drive traffic to this site. The site is totally automated. People land there and buy, and the cash rolls in without you doing anything further.
What a Passive Income Isn’t
There are some widely-believed myths regarding passive incomes, so let’s look at what a passive income isn’t.
A passive income isn’t a lazy way to make money. There’s work to do to set up a passive stream of income. There may also be some light maintenance. Be prepared to put in this work.
Passive income streams also aren’t just about making money. A passive stream of income can help you deal with economic insecurity. It can give you a “salary” that releases you from having to work for every penny. You can give yourself a financial cushion that allows you time to focus on other aspects of your business.
Passive Income Ideas
So, how do people create passive income? Here are some of the common ways people do this.
- eBooks. You can create eBooks and publish them on platforms like Amazon Kindle. They can be selling on those platforms (as well as your website) while you take care of other business.
- Evergreen Online Courses. Offer online automated courses and webinars. These aren’t live courses, but pre-recorded and automated, and on “evergreen” topics that are always relevant.
- Digital Products. Create other types of digital products such as video tutorials and podcasts that teach your audience how to do something. These can be available for purchase and download.
- Membership Sites. Create a membership site that charges for membership or runs on a subscription basis.
- Affiliate Marketing. Sell similar products offered by other vendors for a commission.
- Ad Revenue. Offer ads for your high-traffic website or blog.
There are many other ways to create a passive income depending on your audience, your expertise, and your sales funnel.
Here Are 6 Reasons Why You Need to Start Building a Passive Income Streams
Here are the six benefits of creating passive income streams.
- Reduced Workload – This is the obvious one and the first one most people notice: You don’t have to work so much. With passive income, you beat the pattern of time and work equaling earnings. However, it can take considerable planning and upfront work to create your system for passive earnings, and there is usually some maintenance along the way. But once established, you earn potentially 24 hours a day without trading time or labor for it.
- Fewer Working Hours – You can use your passive income streams to reduce your working hours. Since you don’t have to work for every penny you earn, you can work less and use the extra time to restore your work-life balance and spend more time with family and pursuing other interests. Or you can devote that time to other aspects of your business. If you’re a freelancer, for example, you can focus more time on marketing, growing your skill set, and nurturing relationships, rather than just working.
- Less Stress and Money Worry – A steady stream of income, even if small, can function as a small salary to help you get through lean months. You have a base income to keep you afloat when hard times hit. You can also use this income to sustain you when you want to make some changes to your business and have to take time off from regular work.
- Save Money – Many people set up passive income streams to use as savings for retirement, higher education, or healthcare emergencies. In many countries today the social safety net is shrinking, leaving people to fend for themselves for their basic financial needs. With a steady stream of income on autopilot, you won’t find yourself stranded.
- Establish Your Reputation – One of the most common strategies for passive income streams is to create and publish information products. These digital products teach people how to do things using your professional expertise and experience. Releasing products such as these helps you establish yourself as an expert in your field and raise awareness for your brand.
- Maximize Profits – Many businesses and freelancers find that they hit a kind of ceiling with their earnings. Working at full capacity, they’ve reached the most they can possibly earn. Passive streams of income allow you to break through this ceiling and earn more.
What Are The 3 Reasons Businesses Fail at Creating Passive Income
Building a stream of passive income is the natural next step for small businesses and Solopreneurs once they get established, but many are hesitant to take that next step.
Why do so many companies fail to take this next step?
1 Where’s the Excitement?
Setting up passive streams of income often doesn’t produce results quickly. And somehow, that lack of speed doesn’t offer the sense of challenge and excitement that other areas of your business often do.
However, the truth is that many businesses feel this way because they’ve never done it successfully before. It takes various skills to set up streams of revenue in this way. You have to come up with a good idea, drive traffic, build relationships, write copy, experiment with monetization strategies – it really has all the same challenges of any online marketing endeavour.
And once you receive the first big payment that came into your account overnight while you slept, there’s no turning back.
2 It’s Actually Hard Work
Many info products and marketers promote the idea of passive income as an easy way to make money. You put up a website and then it’s time to relax on the beach while the money rolls right in. Then, you’re disappointed to discover that it actually takes a great deal of work to start earning passive money.
Creating passive income takes some work and time to set up. It also takes some maintenance once things are up and running. But if you compare your passive income versus working for pay directly, it’s easy to see that it’s a much better deal.
3 Where Are Those Huge Profits?
The third common reason people don’t start building passive streams of income is that the money doesn’t seem like it’s enough to make it worth it. The profit margin seems small. But with anything you do, you have to start small and build. You can’t expect a sudden jackpot the first time you put out an eBook.
The profits from a single stream of passive income probably won’t be anywhere near what you make in your regular business. Not at first, anyway.
The KEY is to create one system for automated revenue and, once it’s perfected and getting results, move on to the next. Each new stream brings you higher earnings, and this can add up considerably over a short period of time.
Success with passive income comes from having a good system in place. It takes some planning and background work. But once implemented, it can bring you considerable earnings with just a little maintenance.
12 Simple Passive Income Ideas You Can Start Today
A passive income can supplement your regular income and help your company scale. It takes some work upfront and maintenance, but you’ll get paid around the clock, even when you sleep. So, how do you set up a passive income? Here are some ideas that you can start today.
- Add a recommended product to your download page. When customers arrive at your download page, you can offer an additional product that relates to the one they’re purchasing. Another idea is to offer the product after the download page, once they’ve already purchased (It’s called an OTO or “One Time Offer”).
- Add a “Latest Product” to your email signature. Your email subscribers can see your new product at the bottom of your email, and click through to buy.
- Offer a product in your follow-up emails. When you follow up with customers who recently made a purchase, offer them a product they might like.
- Bundle multiple products. Take a group of products you released before and put them together into a bundle. This is a good way to repurpose old content to create something new.
- Create a membership site. Members can pay a monthly fee to share ideas, ask questions, and enjoy exclusive content. If the site is valuable, they’ll pay monthly and it takes little maintenance on your part.
- Try affiliate marketing. Affiliate marketing is where you advertise the products of others on your website or blog and get a commission. This involves some content writing, but if done well, you’ll send customers to the vendor you’re promoting then reap the benefits.
- Become a vendor. Rather than selling the products of others, you can create your own products to put on affiliate networks. You can let others do the selling for you for a commission.
- Recommend products and resources. Create a page on your website where you recommend tools, resources, and other products. You can offer both free resources here as well as premium tools and products that make you a profit.
- Sell advertising on your site. You have to have a high-traffic website or blog to do this, but you can sell space on your site for advertisers. Just make sure the ads are relevant.
- Sell space in your newsletter. If you have an email newsletter with a number of engaged subscribers, you can sell space on your newsletter to advertisers. Again, make sure the ads are totally relevant to your audience or it’ll turn them off.
- Automate coupons to boost sales. Send automated coupons for your products to customers after they’ve purchased. You can also send automated coupons to your email subscribers.
- Make recommendations inside products. Inside your products, advertise other products or offer discounts. You can also put out free products such as eBooks to lead people to your other paid products.
All of the above solutions leverage your current sales funnel and customers, and make use of automation so that you don’t have to do all the work manually. Consider your business and its goals. Which of the above ideas could you implement? It just takes some planning and background work to set up.
Implement Your Passive Income Stream Now and Avoid Kicking Yourself Later
Many people put this off for various reasons and end up kicking themselves later. If you’re ready to get started building a passive income, here are some things you should know.
- Planning Ahead Is the Key to Success
People make it sound easy to set up a passive income stream. The truth is that it takes a great deal of planning and set-up to get started. You need to understand your audience well and know what they want from you. You then need to match that with your own expertise and capabilities so you can offer it for them.
There are a number of different ideas you can implement to add a passive income stream to your sales funnel or website. You need to consider each one and match them to the needs of your customers and your current business.
- Returns in the Long Term
Passive income streams almost never bring a great deal of earnings at the beginning. It just doesn’t work this way. Instead, it starts out as a trickle and it may stay that way.
However, you can earn a great deal through passive income by building multiple income streams. If you create a product to sell on the side, it will bring you a trickle of income; but create an empire of eBooks, and you can see a pretty good regular pay check from the work you’ve done.
- Creating Content
No matter what strategy you choose, there will likely be content creation involved. If you’re earning extra income through affiliate marketing, you’ll need to blog and write reviews. If you’re selling information products, you’ll have to create the products first. If you’re planning to build streams of passive income, have a content creation strategy in place.
However, there are ways to make it easier for yourself. One is to outsource content. You can hire a writer to write the reviews and blog posts you need and recoup the expense later after it sells. You can also repurpose old content, bundling it into a new package, and sell this as an information product.
- A Little Maintenance
Finally, there will be some maintenance along the way. You don’t just set it and forget it. The truth is that most passive income strategies involve at least some routine maintenance.
If you offer a membership site, you’ll have to moderate. There might be technical glitches or customer service issues if you’re selling products. But it’s still not anything like sweating for every penny.
Setting up a passive income is a natural step for your business, but make sure you understand that it does take some work to set up.
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