Did you ever dream of finding that magic button on your computer that unleashes a torrent of money into your bank account?
If so, you’re not alone. “Passive income” is hyped all over the place as an effortless way to get rich.
We see it in headlines and come-ons that offer a six-figure income with just four hours of work a week, or a way to earn thousands of dollars per week with a set-it-and-forget-it website.
Sadly, that’s more like the myth of passive income than the reality.
So let’s talk about what passive income is — and what it isn’t.
What Is Passive Income?
Passive income is income you earn without having directly to trade hours for dollars.
So, yes, you can earn in your sleep.
But is it effortless? Hardly. . .
In order to earn “passive” income, you need to first invest serious amounts of time, money, or both to:
- Find or create a product or service to sell
- Locate your audience
- Attract your audience
- Sell to them
People of my generation were told, “build a better mousetrap and the world will beat a path to your door.”
That doesn’t work any more (I’m not sure it ever did). There’s too much noise, and people today are inundated with a firehose of information and advertising, and they’re drowning in too much email.
Getting attention is hard.
So, if you’re looking for the magic button, you can stop reading right now, because I sure can’t tell you where to find it.
Passive Income Isn’t Easy
No, you can’t earn a legitimate income online without work and/or investment. If you want effortless, you might as well spend your money at the gaming tables or buy lottery tickets.
(Done right, though, you can earn a lot more, without the downside risk, by building a business online).
That said, I’m not here to be a total buzzkill, but to show you what you can do, with a bit of planning, work, and, yes, a little luck thrown in.
Some Good Places to Start
You don’t have to spend hundreds of hours developing a product to sell. If you’re just starting out, you can create products from tools and systems you’ve created for your own use.
- Planning spreadsheets
- Budget spreadsheets
- Workflow templates
- Specialized journals or diaries
In the article 7 Totally Legitimate Ways to Make Passive Income From Your Blog, SmartBlogger states:
You may have created some resources for your personal use that would be useful for your readers, too. In fact, maybe you’ve created a resource that they’d be happy to pay for.
“For example, if you blog about weddings and you’ve created your own invitations, you can sell them as printables. If you blog about graphic design, you have probably created Photoshop templates that you could sell. Or if you’re a travel blogger, you could sell bag-packing checklists or trip-planning worksheets.”
This works well if you already have an audience.
If you don’t have an audience yet, you’ll need to attract people to your product or service.
Be prepared to spend money to boost posts on Facebook or Instagram, purchase PPC (pay per click) advertising, or find some other way to reach large numbers of people who’ll be interested in what you’re offering.
Or, instead of spending money, become adept at content marketing. It involves less out of pocket spending, but takes substantially more time.
No matter the income source you’re interested in, there’s no way to get around the fact that you’ll have to put in the work to attract and grow your targeted audience.
What sources of income should you look at, and what sort of effort will you need to generate income from them?
#1. Provide a Service
This is the fastest way to start earning from your website, but it’s totally an exchange of time for money. You’re not going to earn in your sleep this way.
It’s an excellent way to get started earning online, but it’s not scalable. Eventually, you run out of time.
If you want something that scales, look at one of the other four suggestions.
#2. Affiliate Links
As an affiliate, the company that provides the product or service pays you a commission for bringing them a buyer or a qualified lead. You might get paid a little bit (a very little bit!) for a click, and somewhat more for a qualified lead that turns into a buyer.
It’s an easy way to start earning an income online, but again, you need to:
- Have an audience
- Affiliate with products or services that your audience needs and is willing to pay for
This is a good place to start when you’re creating passive income streams.
If you decide to go the affiliate route, it’s vital that the products or services you promote be interesting to your audience. Think about how totally weird it would be if, on the Anywhereist website, you saw ads popping up for wedding dresses, or plumbers. Or if I wanted to sell an e-book about how to train your dog.
Instead, you must integrate your affiliate offerings tightly into your niche. On my WordPress Building Blocks site, I include affiliate links to my two go-to WordPress theme designers, StudioPress and Elegant Themes. (And yes, they are affiliate links! Is it weird to have them here? I don’t think so, because if you’re reading this you’re probably interested in having a website which will quite likely be WordPress. If I’m wrong, leave a comment below!) I also link to three trusted web hosting services.
It’s not the place to try to sell travel, or cars. Here on Anywhereist, though, travel links would be totally appropriate.
To make a decent income from affiliate links, you should do more than just throw a link into an article. Affiliate links work best when you put your own personal stamp of approval on them. That means writing about your experience with the product, why you like it, why you recommend it, and being honest about any drawbacks.
I like to do it by writing reviews of the products.
Chris Lema, who works in the WordPress space, is really good at promoting affiliate links with stories. Take a look at this article, for example, where he’s talking about the Genesis Framework. (Just do me a favor, though – if you want to buy the Genesis Framework, don’t use Chris’ link, use mine!! ?)
Ten years ago you could make some decent money with advertising on your site. Because the internet is so much more crowded, that’s not so true today.
To earn real money from advertising you need huge amounts of traffic — tens or even hundreds of thousands of visitors per month.
You can get ads onto your site by joining an ad network, or by negotiating directly with advertisers. The latter involves more work and takes more time, but can pay better. The former is quick and easy and doesn’t generally require any technical skill.
#4. Subscriptions and Recurring Revenue
Recurring revenue is definitely something to work toward — that includes membership sites, private communities, subscriptions to a paid e-letter, or access to premium content.
To earn from subscriptions, you have to consistently provide quality content or a quality experience that people are willing to pay for month after month. A private community or membership site takes some technical skills and money to set up and maintain, as well as your ongoing creative involvement. A subscription newsletter or premium content must be created.
#5. Sell Physical or Digital Products
They can be products you make, or you could become a retailer of others’ products where you buy at wholesale, sell at retail, and pocket the difference. Because sales happen online, you can make sales 24/7, but it’s hardly passive income.
Digital products are easier than physical products because buyers can simply download them — there’s no question of storing or shipping.
If you want to sell physical products, you don’t need to get down and dirty with storing and shipping product. Use a third-party site like Amazon to handle the order taking and shipping for you, or contract with a fulfillment center to do the grunt work.
The amount of effort involved will depend on whether you’re selling your own self-created products, and how you’re handling the order taking and shipping.
How Do I Earn My Income?
At this point, the lion’s share of my income — about 80% — still comes from providing services. My goal is to turn that around within the next 12 months, so that 80% or more comes from passive sources.
My current mix includes:
- WordPress sites
- Affiliate links
- My own products
I have an e-book for sale on Amazon, and I’m also putting together a course (which is a form of digital product) that I’ll be offering soon.
When I started Anywhereist.com, I began — as any new website does — from scratch. The last time I started a new site was in 2012, when WordPress Building Blocks opened its doors. Back then, it was easier to get traction online than it is now, so part of what I’m doing with Anywhereist is actually experimenting to see what works (and what doesn’t!) so I can share that with you.
I’ll give you updates from time to time, letting you know how I’m doing with switching from a service-based income to more passive income types.
Do you have questions about passive income? Ask in the comments below!