You find a great item to sell either in your own website or on a platform like eBay. It sells well and you get a big payout. But then… that’s it.
No matter how much money you made from that sale, once it’s done, so’s the income. If you want to make more money, you’ll have to list something else for sale.
Even if you’ve got lots of this great item to sell, you’ll still need to do the work every time of listing, packing, shipping, dealing with customers, etc to reach that payout. And once you run out of that item, that income stream is gone. For that matter, you’ve got to put in just about the same amount of work every time to reach that profit.
But there’s another way of earning income. One where you do all the work of setting it up, sure, but then, once it is set up, you don’t need to touch it. Income just rolls in without your having to do a single thing about it.
Passive income is an income received on a regular basis, with little effort required to maintain it.
I’m going to use some examples from my own business to help illustrate this. In one corner, we have a popular item we sell on eBay. It makes us money, sure, but I have to earn that money every single time by packing it, shipping it, dealing with customer emails, processing returns and refunds and doing listing maintenance.
In the other corner, I have one of my eBooks such as Beyond Amazon, eBay, and Etsy. It was a lot of work to write that book, set it up for sale, etc, obviously, more work than listing the item mentioned above on eBay. But, unlike the aforementioned eBay item, once the work was done on the eBook, it became passive income. Other than occasionally updating the info in the eBook and doing some promotion (which I rarely do, unless just mentioning it like this counts), the eBook requires nothing of me. The eBook distributors handle all the “shipping” and also deal with all customer issues such as returns. From my perspective, money just appears in my hand from this product without my having to do anything on a daily basis. Granted, I make a whopping 30 cents from every sale of that particular eBook but the more passive income streams I have set up, the more that hands-off income starts to add up.
In a way, the (small) income from this blog’s advertising is passive as well. Sure, I have to remember to write a blog post on the schedule I set but, once it’s posted, income from the ads just rolls in passively. If I stopped writing this blog tomorrow and never posted another article, I’d still make a (however pathetic) amount from it for all eternity. Every additional post I put up just increases my earning potential.
Let’s also take my play, The Love of Three Oranges. That one still involves lots of work to make income as someone needs to handling the licensing, contracts, interactions with schools and theatre groups as well as all the usual retail elements of shipping and selling a product. But, from my perspective, the publisher handles all of that. I wrote that play back in 2002 and have done just about nothing to it since then and yet checks still appear in my mailbox magically from it on a monthly basis.
As you may remember, I used to have to manually handle all the work from my play myself. Is there a product or service you sell now that you could turn into a passive income stream by hiring a person or company to manage it for you? Might it be worth it to make a little less from a product if you no longer had to do the work on it yourself? (Which is exactly the case I was in with my play. I make less than I did when I was handling everything, but, dang, it’s nice to not ever have to think about it and have it still bring in the bacon.)
How could you apply this idea to your business? The less hands on you need to be to earn income, the better it is for your business. The more passive income streams you’ve set up, the more it frees up your time to come up with new income streams to increase you potential earning exponentially. It also gives you a consistent income in the background of whatever else your business does which can really come in handy if you hit hard times where your other sales drop off or something happens where you can’t work. (Like, say, you randomly get whooping cough. Not like that happens to anyone these days. ;-))
There will always be elements of your business that will require your active involvement to generate money but, whenever possible, think about how you could automate earning. I gave you some of my automatic profit makers above. Would you be willing to share some of the passive income streams you’ve had success with?