Passive income has proven to be one of the most effective strategies for all those seeking financial freedom. I being a very big believer of passive income have started several businesses that have provided me with financial freedom. I have gained all I have today through digital marketing and affiliate income. I have recently started a blog – www.SMTPServers.co on marketing automation where I do an affiliate for automation tools to increase my passive income.
The concept of passive income describes the generation of sales without having to work for it. But is that really possible? How does passive income work and which success factors need to be considered? What business ideas are possible?
In this guide to building a passive income stream, I have described the procedure step by step and given successful examples of passive income.
The problem: if you want to earn more, you have to work more
Make money without working for it. Don’t we all dream a little about it? The principle of passive income is described on the Internet on mostly dubious sites as a concept that enables money to be made without real labor – so to speak, become a millionaire overnight. But what is really there about the concept of passive income?
The origin of the idea of ??passive income is based on our supposedly inefficient use of labor. A self-employed craftsman who wants to double his turnover, but already works 50 hours a week, has a problem: His turnover increases proportionally to the work done. If he works less, he earns less. If he works more, he also earns more. The same applies to a freelance web designer. If she accepts four orders a month and is thus almost fully utilized, she can no longer increase her sales significantly without having to sit in front of the computer during the night.
Passive income: the theory
Anyone familiar with the concept of passive income will quickly notice that one has to break away from the basic pattern of work efficiency that we are familiar with. To put it more simply, if you want to earn more, you don’t necessarily have to work more.
By automating work steps, it is actually possible to achieve higher sales with little or possibly even no additional effort. Thanks to the success of the Internet and digitization, a large number of processes can be digitally mapped and thus automated. There are plenty of free autoresponder tools available online which you can use to automate your client interaction.
In addition, there is the enormous reach of the Internet, thanks to which, the potential customers from all over the world can reach us with just one click of the mouse.
The concept of passive income looks complicated at the first glance, but it is actually quite simple to implement. The following is an example of the four steps involved in building a passive income stream:
1. Step: Develop the product
A freelance web designer writes a book on the development of modern websites on vacation and needs three weeks to do so.
2. Step: Selling the product automatically
She self-publishes the book as a print edition and e-book on sales platforms such as Amazon & Co on the Internet. The books-on-demand provider takes over the entire book production.
3. Step: Generate passive income
With every book sold, she receives an author’s margin – for the next few years. All processes are automated, she has no work whatsoever.
4. Step: Regular product maintenance
A book about the development of modern websites should of course be revised regularly so that it remains up to date and is also sold frequently in the future. A little time must be invested in product maintenance.
These four levels are the basis of passive income. However, in order to be really successful, it is important to orientate yourself on the following success factors.
Success factors in passive income
In order to generate passive income, there are three factors to consider that are decisive for the success of passive income:
- Digitization of the product
- Automation of the processes
- Distribution to an existing reach
With the concept of passive income it is necessary to create a product that can be reproduced without additional effort. Only in this way is it possible to decouple the relationship between workload and sales result. Digital products such as texts, e-books, images, videos or software have this property and are therefore ideally suited for use as a product for passive income.
The next step is to find sales processes that can be automated. After all, as a self-employed person, you don’t want to sell your book (if we go by above example) yourself, but rather be able to distribute it automatically without your direct involvement. The Internet serves as an excellent automated sales channel. The management consultant could sell his e-book fully automatically via his own website, with every process step being digitally mapped: from acquisition via online marketing to sales initiation on the website to payment processing and e-book download.
The automated sale of a digital product via your own website can already generate passive income, but this requires the implementation of appropriate online marketing measures, for example with Google AdWords or Facebook Ads . The creation of such campaigns costs time, money and is not an easy matter for the inexperienced. For this reason, the third success factor with passive income is the use of an existing range of potential customers. Internet marketplaces such as Amazon or Fotolia (selling photographs) are predestined for this: Millions of people can be reached through them without having to invest a cent in marketing.
Examples of passive income
But enough of the theory. The following examples are among the most widespread and most successful implementations of the passive income principle:
- Becoming an author: Selling books and e-books
- Selling photos and video clips: Success with online marketplace for photos
- Templates and construction kits: passive income for web designers and developers
- Successful through online advertising and affiliate income
Becoming an author: Selling books and e-books: Let’s be honest. Who wouldn’t want to publish a book? As part of the passive income, the self-employed now have the opportunity to make this dream come true. The main effort lies in the writing of the book, a reproduction is relatively cheap. E-books as digital goods can easily be multiplied. All processes are outsourced inexpensively through production and distribution via self-publishing, so that in the end the e-book and print version can be automatically sold via Amazon.
And for whom is the book concept suitable? Ultimately, it comes into question for all those who have accumulated special specialist knowledge in a field and can put this into words accordingly. Management consultants, web designers, doctors but also craftsmen with specialist knowledge and a good writing style can generate passive income in this way. The great thing about it, by publishing a book, you create a brand for yourself and position yourself as an expert in a certain area. This can lead to appearances in various media, which in turn strengthen your own brand and generate additional orders.
Sell photos and video clips: Success with online marketplace for photos: Photographers, cameramen or motion designers can take advantage of the digital properties of their products by selling them to a large number of different customers from all over the world instead of the usual one to just one customer. On online marketplaces for photographs and moving images, such as Fotolia or Shutterstock, artists can post their works and offer them for sale worldwide. Once you as a photographer have built up a certain portfolio with high-quality images, an attractive passive income can be generated.
Passive income for web designers and developers: Self-employed web designers and programmers are usually paid on an hourly basis. If you want to earn more, you have to acquire additional customers and do extra work. Fortunately, the concept of passive income is particularly suitable for the software industry. By developing website templates for well-known content management systems such as WordPress, TYPO3 or Joomla, a web designer can sell one-time work to a large number of customers. As a sales channel, he either uses his own website or uses marketplaces with an existing reach that have focused on the sale of website templates.
The programmer can also take advantage of marketplaces by bringing his developed WordPress plugins, Java classes or shop modules to the man there. But the development of Android or iOS apps and their sale via the respective app stores, possibly also as part of a freemium model, can generate attractive passive income with a corresponding added customer value.
Successful with online advertising and affiliate income: Are you an expert in a field and have unique knowledge? With the appropriate content and a little know-how in search engine optimization , you can find a source of passive income via your own website or blog by using advertising banners or for your visitorsPlace affiliate links on your website. In order to generate attractive income, the number of daily website visitors should be at least 1,000 – this is usually only possible after a year at the earliest. It is therefore important to show perseverance with this type of passive income.
Even college students can generate passive income. Are you a college student? Click here to learn about passive income opportunities for college students.
Get rich with passive income?
If you have understood the concept of passive income, it is best to get to work straight away. Because for a successful passive income stream some time and work will be necessary. The belief that passive income means turnover without work is therefore wrong. Especially at the beginning, a lot of energy has to be invested in the development of a product that has the properties necessary for passive income and also offers potential customers real benefits . Only when the product has been created and all processes have been automated can you at least lean back a little and hopefully celebrate your first successes.
But can real wealth be accumulated with the concept of passive income? In principle, this is certainly possible. A few, such as successful author Timothy Ferriss, who describes his approach in the book “The 4-Hour Week”, have made it to a successful entrepreneur with passive income. However, this remains the exception. The concept of passive income should not be considered the unprecedented Path to Wealth, but rather as a new, efficient tool for the self-employed, in which working time can be used more efficiently and in accordance with the current state of technology, so that more time remains for the important things in life.
Alternatives to passive income
Do you like the idea of passive income? In the following, I present two more concepts that make it possible to generate additional income with the same amount of work:
Passive income through growth
If you are already self-employed as a freelancer or business owner, you can generate additional income without any additional effort, given the corresponding order situation. By hiring employees , you can take on additional jobs that should earn you more than the new employees cost you. Growing your own company is therefore an attractive opportunity to receive passive income.
Generate passive income with seminars and lectures
Even if the concept of passive income is not entirely correct here: If you, as an expert on a certain topic, have a lot of know-how, then you should pass your knowledge on to others. You can reach a large number of customers at the same time through paid lectures or seminars, but you only have to do your work once. In addition, you strengthen your personal brand at the same time and can enforce higher hourly rates for individual orders.
And now let’s get down to work – I wish you every success in building your passive income stream!
About the Author
Aabhas Vijay is a seasoned entrepreneur and digital marketer, who loves to explore tricks and tips on how a business can use a free SMTP to automate most of the user interaction and increase his passive income.