It’s time to debunk some widely held myths. Ready? Napoleon Bonaparte wasn’t short. There isn’t an elephant graveyard where elephants go to die. Mice aren’t particularly keen on cheese. Sunflowers don’t always follow the sun. You can’t catch a cold from going outside in winter without a coat.
Also, you can’t be passive and make passive income. Understandably, there’s confusion surrounding that point, given the implications of the name. But passive income doesn’t just magically float into your bank account. You need action on the front end and you’ll do a fair bit of management along the way.
Does this mean that passive income isn’t an amazing opportunity for entrepreneurs? Absolutely not. Knowing how to make passive income is a skill that can supercharge your success.
What Is Passive Income, Exactly?
We’ve established that passive income isn’t exactly passive. Now let’s look closer at what it is. There are all manner of passive income streams, but they share the fact that they provide consistent money to your bank account and don’t require nearly as much work as a more traditional stream of income.
In its most romanticized form, passive income continues hitting your bank account while you go on vacation, work on other projects, or take a much-deserved nap. As you can imagine, it takes effort and skill to build up enough momentum for this to occur.
To get more perspective on what’s required for passive income and how much can be earned, let’s review some key details from a case study focusing on Pat Flynn, founder of the Smart Passive Income blog.
While the term passive income may sound like it’s about getting something for nothing, Flynn’s not a fan of “get rich quick” schemes or unrealistic promises. He’s quick to acknowledge that making money online is hard, and that passive income requires a lot of upfront work. His first online business took about a year before it generated enough income to support his family. While there are many different definitions of passive income, Flynn’s definition is: “Building online businesses that take advantage of systems of automation that allow transactions, cash flow, and growth to happen without requiring a real-time presence.”
Flynn makes millions of dollars a year in passive income, so he’s a standard bearer for its awesomeness. Yet, he’ll be the first to acknowledge that it can take months of work on the front end.
The only way that you can convert all that legwork into passive income is with what Flynn refers to as “systems of automation.” It’s like building an airplane that includes an autopilot feature so that once it takes to the skies, you can typically let it soar on its own. As the pilot, you’ll still be near the controls when needed. But your beautiful creation does most of the hard work independently.
How to Make Passive Income Work for You
The sure-fire ways to make passive income all include strategy and application. You’ll need to first identify a prime opportunity aside from your full-time gig, then analyze it to determine whether it could eventually be set to “autopilot.”
Here are 5 key questions to ask:
- Do I have the experience necessary to launch this initiative?
- Will I be able to launch it in a reasonable period of time?
- Do I have the experience necessary to run this initiative in the future?
- Can this initiative be automated so that it largely operates without my help?
- Can this initiative grow without my help?
If you answer yes to all these questions, you have likely discovered the best passive income stream for your unique situation. If you answer no to one or more, you’ll need to do your due diligence to ensure you don’t get into a situation where the investment of time, energy, and resources fails to be outweighed by the potential return.
Going back to Pat Flynn’s case study, it’s worth noting that it took him a year to get his first online business running at the level he desired. But he had done the research in advance and knew that it would be an extended period of time before he reached that goal. He understood the timeline and felt comfortable with when the return would be realized. Remember, his business began making money right away. But it didn’t make enough money to support his family until 12 months of operation. As long as you’re at peace with what’s required and how much will ultimately be delivered, you’ll be in great shape.
8 Ways to Make Passive Income
Now that we’ve covered the fundamentals of passive income and the action required to get it running, let’s review some of the popular ways that entrepreneurs develop passive income streams. Some of these suggestions are general, meaning just about anyone with a business background could make them work. Others are niche, requiring specific skills such as music production or writing.
Passive income never comes from a shotgun approach, because it takes concentrated effort to launch a successful initiative. If you were just going to “put a bunch of irons in the fire” to see if any of them take off, you’ll never be successful. Instead, hone in on 1-2 options that meet the criteria provided above.
To help you begin the process, here are 8 of the best passive income streams for modern entrepreneurs.
1. Launch an Online Store
The beauty of online entrepreneurship is that you can avoid all the hassles involved with a brick-and-mortar store. There’s no rent and utilities to pay, no need to shovel the sidewalk in the winter, and no risk of catastrophic water leaks due to faulty pipes. Best of all, you don’t have to deal with store hours, because your shop is open 24 hours a day year-round.
Once your store is up and running, you’ll be able to reach customers from across the globe. And each time you decide to take a break to eat, sleep, exercise, or just crash on the couch to watch your favorite show, your store is still taking orders.
2. Leverage Affiliate Marketing
It’s easy to see why this is one of the most commonly referenced forms of passive income. With affiliate marketing, you simply promote somebody else’s product or service, then collect a commission any time a customer clicks your link and makes a purchase.
How do you go about doing these promotions? The possibilities are vast. If you’re a photographer, you could include a link to the lens you used in the caption of an exceptional photo. If you’re a small business owner, you might publish an online review of the best point-of-sale software, then include affiliate links for each of the products included. And if you’re an entrepreneur with a solid following on social media, you could post about a relevant training course and include an affiliate link as the call to action.
Whether you realize it or not, most of the links you click within online content fall into the “affiliate” camp. Getting involved allows you to earn unlimited profits from content that you’ve already created.
3. Create and Sell the Content Yourself
Rather than promote someone else’s online course, perhaps you should create your own. If you’ve got the expertise, there’s lots of money to be made in educational content. Popular examples include training courses, ebooks, and exclusive videos.
You’ll need to have a reliable platform from which to sell your products. For example, let’s say you create an online course on how to excel in business negotiations. Unless you already have an existing website with consistent traffic, you would probably want to sell it via a platform such as Udemy, Skillshare, Podia, or Coursera. You can direct traffic to your content through an array of methods including emails, social ads, display ads, and affiliate marketers.
4. License Your Photos and Videos
Photographers and videographers put so much heart into getting the perfect shot that it’s only fitting they should be rewarded for it over and over again. By submitting photos and videos to stock sites, you’ll make those images available to other creators around the world and consistent payments could follow.
Be advised that you should only upload your content to reputable websites. Check the reviews and talk to colleagues before choosing which service to partner with, because you never want to hand over your art to an unreliable source.
5. Rent Out Your Equipment
Another way that photographers, videographers, and other creative professionals can make extra money is by renting out the specialized equipment they already own. Let’s say you have a Red V-RAPTOR 8K Dual-Format Camera that costs $27,000. You can either let that camera gather dust on your shelf on the days you aren’t using it, or you can rent it out for thousands of dollars a week.
There’s an obvious risk involved when you let a stranger walk off with your precious equipment. Many professionals minimize the risk by drafting a contract that places responsibility on the renter. If anything is damaged, the repair or replacement would come at their cost.
6. Earn Royalties from Your Music
Just as photographers and videographers sell their content to stock sites, musicians can follow a similar process. After copyrighting your compositions, submit them to a stock music website or music licensing agency. Any time your music is purchased for a video, movie, advertisement, or other use, you’ll receive a royalty payment.
The more music you submit, the more opportunities you’ll have to earn a passive income.
7. Develop an App
This is obviously a heavy lift, as it takes extensive time and resources to create a worthwhile app. But once you’ve paid your dues, the earning potential is huge.
If you want your app to succeed, it must either solve a problem or provide delight. For example, you could sell an app that uses phones’ cameras to measure children’s feet and convert them into exact shoe sizes with popular brands. You’d likely have thousands of parents downloading your app, because shoe sizing is a constant headache due to size variances between brands.
An example of providing delight might be a game that allows people who ride public transit to locate various landmarks along their route. For example, each bus route would have its own user-submitted landmarks. When riders see one, they’d snap it with their camera and earn points. An app like this would liven up commutes and allow people to compete against the very strangers they’re sitting with.
8. Invest in a Rental Property
Wait, you might be thinking, it takes a lot of work to manage a rental property. Absolutely. That’s why it’s usually only considered a stream of passive income if you enlist a third party to handle the maintenance, repairs, and billing.
When handled correctly, a rental property can deliver consistent profit and requires little work. You’ll just need to do your due diligence on the front end to ensure you don’t purchase a property that has so many issues that it becomes a money pit.
If you have an idea for how to make passive income that didn’t appear on this list, good for you. What is passive income, if not the ultimate creative expression? The more unique your prospect, the less competition you’ll have to jostle with. Just make sure your idea can be carried out effectively and offer a good return.
Visit our library of free masterclasses to get the additional insights you’ll need to bring your passive income initiatives to life. From negotiating to advertising to hitting your sales goals, you’ll get valuable information from top-performing entrepreneurs.