Issue #1 • January 2017

The Truths and Myths Behind Passive Income

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Passive income- myth or miracle?

Maybe it’s a little bit of both.

I think we can all agree that money doesn’t grow on trees, that there’s no such thing as a free lunch, or whatever your parents said when they were teaching you the value of a dollar. But how do you feel when you hear the phrase “passive income”?

It’s a polarizing topic in the online blogging and business community that comes with a lot of baggage and honestly a lot of confusion. The name can promise quick and easy riches for anyone who doesn’t do enough research to truly understand the concept. But for those who tackle it with wisdom, know-how, and a little guidance, passive income is actually an amazing revenue stream that can help bloggers exponentially grow their business.

Since it’s so misunderstood, let’s first establish what passive income actually is before we talk more.

What is passive income?

According to the king of passive income, Pat Flynn, it’s “building online businesses that take advantage of systems of automations that allow transactions, cash flow and growth without requiring a real-time presence.”

Let’s unpack that, shall we?

What Pat is saying is that a passive income business is one that has created processes that do the manual, daily tasks for it so that the owner doesn’t have to. That means that aspects of the business can run freely without anyone needing to monitor it from a computer screen.

What I would add to that definition to clear it up even further is:

Passive income is a recurring revenue stream that does not involve constant hands-on work from it’s creator. A business owner can create passive income, only after investing time and hard work upfront to create valuable products and those automated systems to keep it running.

So it’s not about how little you work or finding ways to not work at all. Passive income is about leveraging your time to have greater impact and grow your business. It’s about investing a lot of time in your business at the beginning to create products that people can’t ignore and processes to keep your customers feeling cared for so that you can benefit from it all later. It’s all about learning how to scale your business so that as you make more sales you don’t create more work on your end.

The benefits of passive income

Every blogger should have at least one stream of passive income for their business. Bills, insurance, rent, product creation, paying team members – it all adds up. When it’s you against the world and you’re working for yourself, you need all the extra income you can get. These extra revenue streams can be just what you need to provide for your family, contribute to your vacation fund, or take your blogging from a side-gig to a full-time job.

The biggest pro for passive income is the freedoms it can offer you. Of course the first thing that comes to mind is the financial freedom. The more successful passive income streams you create, the more financial stability you can build for you and your family. That kind of freedom can reduce stress and fears about the future. It can also help you hire amazing, talented team members.

But the benefits go far beyond the financial freedoms. These streams of income can free up your time, your focus, your passion, and your creativity as well. Once you’ve set up the right automated systems to scale your business, that means you have more time on your hands to think about bigger picture things. You can step away from the daily tasks of product fulfillment, customer support, and bookkeeping to think about the high-level strategies that will continue to grow your business. You can spend your time doing the creative things that got you there in the first place.  

It also means you have freedom to create even more passive income businesses. After you’ve done all the work necessary to secure that first business, you can start thinking about the next one. The better and more systematic your automations, the more talented and numbered your employees, the more passive income streams you can create.

The myth of passive income

It may sound sneaky, but passive income is not entirely passive. Aspects of it are, but in reality, there is no way anyone can run a successful business at an entirely passive rate. No matter how efficient, forward-thinking, or experienced you are, there will always be work to do.

There will always be marketing that needs to be done to get new subscribers, updates to old products and services to keep up with trends, emails and questions to answer, every day maintenance to do, and new products to create. A completely hands-off business just doesn’t exist.

It’s not about finding ways to not work, and I think it’s that misunderstood “hands-off” concept that leads to so many passive income businesses failing. You can’t create something, forget about it, and then expect it to thrive. Nothing works like that. Your plants will die, your food will mold, and your business will tank.

The days of being able to sell an information product for hundreds or thousands of dollars and not provide any real support are limited. People are done spending their money on programs where they feel like a number and can’t get actual support from someone who knows about their life or business.

The refund rate alone in the online information product market backs my thinking here. For many high-end programs, refund rates run as high as 10-12% because people are sold one thing and then realize they don’t just need the information – they need real support to implement what they are learning! Rachael Cook

Why passive income businesses fail

The inherent flaw in all failed passive income businesses is the mentality behind it’s creator. If a business owner is focusing on how fast they can walk away from and stop working on their business it’s never going to get the opportunity to succeed.

Businesses take work, dedication, and passion. When the focus is on making quick money so you can walk away from your business, you’re missing out on all the things that will make your business successful and thriving. While there are many aspects of business that are skipped over with this misguided mindset, the main ones are:

Customers. Anyone working toward a passive income business with the wrong focus forgets all about their customers. Customers want to know that you care about them and you have to build that kind of trust. They want to know that you’re there for them and that you’re excited to teach. It’s shows them that you believe in your product and brand and goes a long way to establish your authority and credibility.

As soon as your audience starts to feel like you’re not in it for the long haul, they’ll turn to someone who is. And they’ll pick up on those feelings quickly. If you’re only putting in a marginal effort, you’re not giving them enough reason to trust anything you could offer. If you’re only in it for the quick dollar, it will show. And if you don’t truly believe in your product, neither will a customer.

And without customers, no one will be there to buy you what you’re selling. You need that loyal following of people who believe in you and your brand to keep coming back for more. No business can succeed without it.

Competition. You are not the only player in the game. Successful business owners keep up with their competition to stay in that game. They’ve got to know new trends and what motivates customers to choose other brands. They’ve got to do research on their own products to find out why purchases are being made (or why they aren’t). Staying relevant requires constant updates to your product and websites, analysis, and time for high-level thinking as well as daily upkeep work.

Honestly, the work is endless. Keeping up with the competition and the industry should keep most business owners on their toes, but if you’re off pretending that your business can run without you while still making millions, you’ve probably forgotten that other people exist at all.

Expansion. Realistic passive income businesses work because their owners have figured out how to scale production by growing their business with capable, talented team members. However, if you’re constantly vacationing on the beach, never checking in, and leaving your team to do all the work for you, you either won’t be able to keep your team or you won’t even hire one from the get go.

A team that gets the job done right and well is a team following an invested, hard-working, and caring leader. If you’re not there in body, spirit, and excitement, your team won’t be either and your business will not grow.

What it takes to build a passive income business

The Internet is overflowing with people devoting their careers to building passive income streams for their business. The business potential is limitless, but I don’t think everyone who tries has the potential to succeed.

So what does it actually take to create a passive income stream? Here are a few things I believe you need.

The right mindset

By now you could probably guess that the first thing you need to build a successful passive income business is the right mindset. Before you start any kind of business, you need to check that your motivations are geared toward creating value for your customer.

Are you in this only for the money? Are you only considering your personal gain? Are you trying to hand off all the hard work to someone else and take all the credit? If so, you will not be a successful passive income business owner.

To make real money, to see big growth, and have a realistic passive income business, you have to come in focused on creating value for your customers. You have to want to be in the trenches (not forever, but definitely at the beginning), doing the hard work. You have to have a heart to see your customers learn and grow from what you offer and you have to be so passionate about your topic that you eat, sleep, and breathe your work.

If you don’t have that value-centered, customer-loving, passionate mindset about your work, your customers will smell the fake on you and run the other direction.

Good work ethic

You have to show up every day because there’s no such thing as an overnight success. Behind every successful passive income business there are years of building audiences, failed products, and slow but sure growth. A successful, realistic passive income business owner knows and is prepared to put in a lot of work…and I do mean a lot.

It takes an incredible amount of work and discipline to build the products and systems that allow you to earn passive income. And the people who have that drive and motivation in the first place, generally are not the types to “rest on their laurels” once the money starts coming in. – Mariah Coz

Scalability

Beyond your personality, work ethic, and actual products, there is one thing you must be able to do well if you want a realistic passive income business. I’m talking about scalability. If you want your business to grow and still be able to step away from being completely hands-on, you have to hire a solid team and then set up the right systems to automate the work for you.

All successful passive income business owners have learned how to leverage their time by delegating daily tasks to team members and automating processes so they can grow their audience and provide more value to more people.

As the saying goes, the difference between a six-figure business owner and seven-figure business owner is how many checks they’re willing to write.

Are you ready to scale your business using email marketing automations? To help you get started, we’ve created a handy How to Make Email Marketing Work For You Toolkit. With this Toolkit about automations, you’ll find out how to use automations to streamline your email list and put email marketing to work for you while you sleep. 

Dani Stewart

As a daughter of an entrepreneur, the wife of an entrepreneur, and an entrepreneur herself, Dani has lived and learned all sides of creating and growing businesses. She is excited to bring all that life experience as well as a decade of crafting content to the ConvertKit community. She is a part-time baker, dinner-party planner, and lover of good bourbon living the simple life in Nashville with her husband, Sean.

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