Passive Income Strategies
OK, so you've gotten beyond worker bee mindset and developed some new money beliefs. Now for some practical ideas. Here are some different systems to generate income and how I've applied them in my own businesses.
1. Create systems to serve your clients more efficiently
- Figure out a particular type of client that has a particular set of needs. In my case, small e-commerce sites, gallery sites, or portfolio sites have a similar data model
- Create a system for meeting those needs. I built a little database and admin system that is flexible and can be modified for each customer.
- Streamline it so it is easy to set up and customize for each client.
- Charge a flat fee for each project. The more efficient the system is, the less custom work you do on each project, and the more your hourly rate works out to be.
- Principle: custom work never pays much, so only do it if you love it. To make more money, focus on work that you can re-use and build your business around that.
- Turn some of your creative capital into a packaged product that you can sell again and again. One example of this would be to write a book: you can sell a potentially infinite number of copies. Ebooks are a popular idea right now because they involve very little overhead to produce or distribute.
- Principle: work once, get residual income forever. Leverage your "creative capital" for ongoing income rather than one-off income (custom work).
Examples:
- Photography: selling your photos through a stock photo site and getting a royalty every time an image sells
- Royalties from any creative product like a CD or book
- After I graduated college, I put up some of the term papers I'd written on Academon.com and made a few hundred dollars (they pay half of their selling price)
- Set up a regular product store but automate fulfillment through drop shipping or similar solutions. Principle: make a system that is automated for low overhead, and then invest in marketing to increase the volume.
- Find a service to sell that is paid for on a recurring basis, and sell it. In my case, I started selling web hosting. It's like a utility: you have to pay every month or year.
- Try to find ones with minimum recurring work to go with it. For instance, most of my hosting customers, once they are set up, have few questions. However, I do have to support them in an ongoing capacity.
- Outsource or hire people to do the recurring work (like support), making sure it is cost-effective. Create automated systems for billing, etc.
- A classic model of this is rental income: buy a property, charge rent, and hire a property management company to deal with the tenants. You have to make sure the rent covers the cost of that for it to be generating income. If not, it could still be a good way to build capital (equity).
- Affiliate marketing: promote products to your customers that you get a commission from. Many stores have these programs - Amazon.com Associates
is probably the most famous and extensive. You can link to any of their products and get a commission from them (and they sell a lot more than books). Commission Junction and LinkShare
offer vast collections of affiliate programs to choose from.
- Preferably, find recurring commission opportunities. Example: I recommend a merchant account company on my site, and get an ongoing percentage of the sales of anyone who signs up through my link, for as long as they use their merchant account.
- Think about the people you already come in contact with, your existing customer base. What do they need? What could you recommend to them?
- Develop a popular website and try Google AdSense. With a few simple lines of code inserted into your site, you can serve ads that are relevent to your content and get paid for each click.
- This is when you use the work of other people to create income for you. Example: a contractor who makes a profit from work done by sub-contracters.
- A related concept are things like seminars or classes, where you can charge $20-50 per person per hour, and if you get a lot of people in the room you can make a very high hourly fee. You have to cover facility cost and promotion however. Not exactly passive, but you can make a higher hourly rate than just doing custom work.
- The example above of Academon.com, where I sold some term papers - flip that around and imagine you run that site - you are leveraging students work and making a nice profit.