There’s No Such Thing As “Passive Income”

~ 11 Minute Read

 

Make Money While You Sleep!

With the popularity of books like “The 4-Hour Workweek” and Pat Flynn and his massively successful blog, it is easy to see that passive income is desired by many a millennial.  You can hardly turn around these days without hearing about different ways you can sit back and make serious bank from your biz.  No wonder this message is popular, doing nothing and making a livable income sounds like a dream, right? Well, that’s cause it is.

Certain types of products and business models are equated closely with the idea of passive income.  Some of these include blogs, ebooks, online courses, etc.  Most who tout passive income as the holy grail of business use phrases like “Make money while you sleep!” and “Leave the rat-race behind!” I admit, if you’re working the typical bullshit 9-to-5 then this is certainly enticing.  There’s no doubt that a lifestyle business is better than most jobs, but the idea of pure passive income is nothing more than a myth.

I should know it’s a myth since I participate in the exact money making strategies that are promoted as passive income on other sites.  Do I make money when I sleep? Check.  Have I left the rat-race? Check.

I’m involved in both affiliate marketing and Amazon FBA, two very popular monetization strategies on the web.  For me I could work a 4-hour workweek (and on occasion I have), but doing so regularly will cost my business dearly.

 

Make Money While You Manage

 

Let’s take my BestOutdoorBasketball.net site as an example.  Having started this site in 2013 I could ride the wave of this site and it would continue to earn months down the road.  That means adding no new content or updating any of my rankings for basketballs or basketball hoops.  While this continued earnings potential is great there will come a time when Google recognizes that my site is no longer active and begins to lower my site’s rankings, and in turn lowering my earnings.

Because of this I have to add quality content on a regular basis to continue proving to the search engines that my site is the go to place for basketball reviews.  This is where the idea of passive income starts to fall apart when it comes to even small scale affiliate websites.  Many would say just hire some writers, let them take care of everything, buy a boat and do some solid day drinking.  Unfortunately, the reality is a bit more complicated.

The truth is I do hire writers, almost exclusively from Upwork.  As with most things, you get what you pay for when it comes to freelance writers.  You can find quality writers on the cheap that are just starting out who are looking to get positive reviews, but what happens after they’ve built a reputation?  They raise their prices and you will either have to pay more or move on.

If you are set on paying writers as little as possible you’ll either get some subpar content written by a non-native speaker (better sharpen up on your proofreading skills) or you’ll be spending valuable time continuously looking to contract with new freelancers as your old writers get too expensive. Both of these scenarios are total time wasters.

Even when you do hire a quality writer there is a lot of work to be done up front.  You have to decide a topic for them to write about and which products you want them to write about (if it is a review article).  This means researching products and sources to send to your writers.  Not exactly passive.

 

If It’s Not Passive Income, Then What Is It?

Instead of thinking of income in completely black and white terms (passive vs. active) there is a spectrum to earnings.  There is no doubt that some money takes more work (and time) to earn, but none of it is truly passive.  Even the oldest “passive income” model, rental properties isn’t really passive.  Repairs, finding tenants, evicting tenants, paying bills, all of these things take time, especially if you own multiple properties.  Is it on the passive end of the earnings spectrum?  Yes.  Is it passive? Hardly.

So what is the difference then between working a regular job versus being a micropreneur when it comes to how your money is earned?  While passive income is a myth, there are certainly differences between these two earning models.  Employees trade their time for money, which is the worst way to make money in my opinion.  For the most part, employees are paid a specific rate per hour.  In the world of microprenuership (and entrepreneurship in general) you don’t make this precise trade of time and money.  Instead, you put in a lot of work upfront and hopefully this pays off down the road with greater gains than you’d realize from a job.

When you start a job you immediately make your hourly rate, while business owners may not make money for several months or in some cases years.  But once the business owner gets momentum and some luck (that they created by taking risks) they quickly surpass their employee peers.  I certainly prefer how micropreneurs earn money,  but this isn’t passive income. This is delayed gratification.

 

Why This Myth Matters

 

At the end of the day arguing about whether or not business income is passive is sort of like arguing with your significant other about who leaves more hair in the sink. But here is what I find truly damaging about the passive income myth: It creates unreasonable expectations, which leads to disappointment and discontent.  To me the idea of passive income is the new get rich quick scheme.  In this case, instead of getting rich quick you are going to be to live a life without work, offering you total stress-free freedom.  The truth is that once you get to where you can do this full-time you quickly realize that there is still stress and there is still work.

This isn’t to say that all is bad when it comes to affiliate marketing and selling products on Amazon.  Actually, quite the opposite.  I love making money 24 hours a day, 365 days a year.  I’m incredibly lucky and could never go back to a job I hate. But the truth is that I put time in just like everyone else.

Now I should preface that there is one type of purely passive income, and that is investments.  Things like stocks, bonds, and other investments I do consider completely passive, but the common narrative that business passive income exists is about as accurate as me pissing with the toilet seat down.

 

The 4(0)-Hour Workweek

 

As a final whipping of this already dead horse, let’s take a look at the author of “The 4-Hour Workweek”, Tim Ferris.  To be clear, I like Tim’s Tribe of Mentors book, it is certainly worth a read.

But let’s take a look at what he’s into shall we? First off, he has a podcast which takes planning, scheduling guests and executing the podcast itself.  He has written five books that I see for sale on Amazon.  This is all after getting his start founding a shady brain enhancing supplement company called brainQUICKEN. Does this sound like someone working 4-hours a week? Did he make a robotic copy of himself with the help of the Blue Book CEO in Ex Machina?

Business Models With High Passivity

Since we’ve got that out of the way let’s look at some business models that are on the passive end of the earnings spectrum.  All of these can be started on a part-time basis and if successful can lead to big time earnings.  Of course, none of these are truly passive and you should plan to work regularly on each if you want to be successful.

1. Affiliate Marketing

Affiliate marketing is pretty passive once you’ve got some traction.  Be prepared to put in a lot of work upfront to build a website and master your SEO and marketing skills.  Once you’ve got this down, then your workload will become less and earnings will grow over the long-term.

If you are a social media influencer consider utilizing the power of affiliate marketing on networks like Instagram, Facebook, Twitter, Youtube, and others.

2. Franchising

People seem to either love franchising as a business opportunity or hate it.  But if you have the money to start and are willing to put the work in the beginning you can create an empire of franchised units that will earn you money while you put day-to-day managers in place.  You’ll still have to have a keen eye on operations and making sure to keep your franchises running smoothly

3. Rental Property

As I mentioned earlier in this post, rental properties are one of the oldest ways to earn income that is on the passive end of the earnings spectrum.  You’ll need to have the money and credit to get a mortgage for the property and be able to have some backup funds for any unexpected repairs that may need to be done.  You’ll also want to be extra careful in picking tenants to lessen the chance they leave your property a funky mess.

4. Online Courses

The online education and teaching market has become a big time market.  To have success here you’ll need to have knowledge or expertise that people are willing to pay to learn.  The beauty is that once you front load your efforts in creating the course, future efforts will be focused on updating material and interacting with your course participants.  This is about as passive as business income can get.

 

Why You Killing My Dreams, Bro?

 

My point isn’t to discourage you from pursuing your own micropreneur journey, but to help you be prepared for what this actually entails.  It’d be easy for me to “sell” this lifestyle to you, but that would not be truthful.  If you think that once you start a business it will be work-free then it is time to end that delusion immediately before taking the leap.  Embrace the challenge of building something special, knowing that you are genuinely providing a service or product that helps others.  At the end of the day that’s what gives life purpose.

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