There are few words in an online entrepreneur’s vocabulary that are more seductive than Passive Income. The term is widely used by multilevel marketers and savvy entrepreneurs across the web to close sales on eBooks and training programs for one simple reason: the vision (of sitting under a palm tree while your bank account effortlessly collects money) sells.
Wikipedia describes passive income as “income received on a regular basis, with little effort required to maintain it.” But is passive income really that passive, or is effortless earning a myth hyped up by really good spin doctors?
Learning the truth (and debunking the myths) of passive income has been a personal quest of mine since I started blogging in 2008. Over the years, I’ve watched so many friends and colleagues (including myself! ) set out with an entrepreneurial spirit only to experience frustration and demotivation when their passive plans yield no fruit.
It’s time we set the record straight and get to the bottom of what passive income is really all about. Let’s examine the evidence together.
A Crash Course In Passive Income
I was first introduced to the idea of passive income by Tim Ferriss in his book The 4 Hour Workweek. Tim’s position is that a smart entrepreneur will build a business that requires the least amount of time and effort for the most possible profit (hence the title). He spends many pages of his book discussing business models that rely heavily on automation so you can pursue other interests while money gets deposited into your account. Sitting in my corporate cubicle reading the book on lunch breaks, this strategy sounded pretty fantastic, so I started doing my homework.
When I Googled automated income, I was introduced to a host of new terms: affiliate sales, Adsense, eBook sales, and yes – passive income. I started reading about the success people like Yaro, Steve Pavlina, and Darren Rowse had making money – seemingly effortlessly – on their blogs through “passive income streams.” The possibilities started to dawn on me, and I realized that escaping the corporate grind to freelance alone was a recipe for chump change. If I really wanted to strike it rich, I needed to get on the passive income bandwagon.
Fast forward two months: my blog is set up, my eBook is written and available for purchase, my Adsense modules are in place, and I have several ads on my sidebar for affiliate products. I’m netting $0.01 per day in ad views, had one eBook sale (thanks, Mom), and average less than three clicks a day on my affiliate ads. What gives? I set it all up…now isn’t the point of passive income that I just get to sit back and watch the dough roll in?
Clearly I must have missed some nuance of this revenue strategy, so I re-examine the work of Yaro, Steve, and Darren for clues to their success.
Seeing What We Want To See
What shocked me when I revisited their sites was that they were perfectly clear about the work that they did – and had to continue to do – to cultivate their passive revenue channels. But I was too blinded by the possibility of retiring before age 25 to see beyond those two little words: passive income.
To get to a point where “passive” income was flowing into their accounts, these online entrepreneurs had to build and maintain blogs, develop relationships with other bloggers, create and manage email lists, and grow their traffic over time. And that doesn’t even count the work they had to do fine tuning ad placements, revising and polishing sales page text, or writing and editing affiliate product reviews.
I didn’t notice any of those pesky points the first time around when I ravenously consumed their informational posts on setting up passive income streams, and I certainly didn’t pay attention to the number one factor all of them pointed to: time. Growing a trustworthy online brand, developing report with your readers, and earning enough traffic to make passive income possible doesn’t happen overnight.
The first time I read through their information, I interpreted their material as “passive income is easy and effortless, all you have to do is set it and forget it.” When I revisited their material, I understood that their actual message is “passive income is a great revenue source that is earned from persistent, ongoing cultivation.”
As a stressed corporate worker hungering for freedom and the entrepreneur’s life, I saw what I wanted to see – that there was such a thing as free money, and in fact it was so easy to get I could justify quitting my job to get my fair share. Thank goodness my first passive income trial came before I took the big leap…
But I’m not alone in my self-deception.
The internet is full of websites developed by eager entrepreneurs who – like me – can’t see the forest for the trees when it comes to these effortless revenue streams. The result is hundreds, maybe thousands, of abandoned sites that never earn out.
The Truth About Passive Income
So what’s the truth about passive income – is there such a thing, or is passive income a myth that marketers tell to line their own pockets?
From my own experience, I say there is such a thing, but it’s a nuanced thing. Over the years, I’ve developed several successful “passive income” channels that slowly built up and now earn hundreds of dollars a month for just a few tweaks here and there on my part (The CLEAN Program affiliate sales have done particularly well over the last few months). But these passive income triumphs required a significant up-front investment of time, effort, and tinkering on my part, and in many ways I see them more as delayed payment or ongoing dividends.
I’m still learning and perfecting my passive strategies, and as my website and audience continues to grow so does the “passive” profit – who knows, a year or two with consistent and increasing earnings might make these streams truly feel passive.
But today, I still feel conscious of the work required to develop them, and would tell any fledging entrepreneur that the simple truth of passive income is this: passive doesn’t mean effortless.
Here’s to your Entrepreneur’s Journey,