Now you may be thinking, “passive! I love passive! No work!” That’s not the case at all.
Let’s take an example outside of the small business world. Let’s say you currently have a 9-5 day job. You work 40 hours a week and every 2 weeks you get paid. That is active income. You have to show up and do the job to get paid. When you show up, you get paid. If you stopped showing up, you’d get fired. But let’s say you have a 401(k) at this job. You put money in and invest it. The market goes up and you generate more money. That’s passive, right? Whether you showed up at work or not, had to call in sick, took a vacation, the market did the work for you. And to be clear, this kind of passive income is the only truly passive income. You did the work once of putting money in the market, you do nothing else, it makes more. Done.
For your small business, how does that work? I’m going to use my example as an author but if you have a different kind of business, I think you’ll be able to follow along pretty closely.
When I started really looking at my writing and my author business as a business, 90% of my income came from active sources. Now it’s down to 70%. I’m aiming to get it to 50% or lower. This means my passive income sources need more effort, which means active work to get them to be passive. It doesn’t happen overnight.
I hate to tell you this but, you don’t get to the passive part without a lot of the active part. It takes a lot of hard work to build an audience, to gain and keep their trust, to give you what you need to have that passive income. And passive isn’t “not doing any work.” The way I define it is that I have system in place that need regular maintenance, but that I’m not chained to my desk. That if I go on a vacation (ugh I need a vacation) I can still earn money. I’m self-employed I don’t get paid time off. But with passive income, I can kinda still get paid when I’m off the clock.
So what are the income sources for your business?
How much time are you spending on each, can you estimate an hourly wage based on that time you spend and the money it brings you.
Is it very active or passive income?
Think of some passive income lines you could add to your business? Do you have content that you’ve already created that can be monetized? Do you offer a service? Could you teach that service through a course – passive instead? Could you add affiliate relationships? Start with the companies and services you genuinely recommend anyways.
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