Apparently There Are Only 3 Steps to a Passive Income

According to my calculations there are only three things you need to do to create a passive income business.

Over the last couple of months I’ve really gotten into podcasts, specifically on the topic of business, and to be more specific the subtopic of passive income. Pat Flynn got me started, and in turn I’ve listened to shows and interviews featuring Brennan Dunn, Nathan Barry, Sacha Greif, Derek Halpern, Corbett Barr, Chase Reeves, Caleb Wojcik, Rob Walling, Patrick McKenzie…to name but a few.

I agree whole-heartedly with the usual naysaying that is levelled at many of these sorts of entrepreneurs and their cultish acolytes; generating a passive income from teaching people how to generate a passive income is nothing more than a thinly veiled pyramid scheme. However this doesn’t mean the advice these folks dole out is without merit, and they do indeed disseminate many nuggets of wisdom in their free-to-consume blogposts, podcasts and ebooks. Whilst I doubt that a true “passive income” lifestyle is suitable or even achievable for me, I have continued to soak up the free advice, and in doing so have absorbed all kinds of general business tips and kernals of guidance to improve my productivity in other areas.

A “passive income” is a revenue stream where the level of sales of a product/service is not directly proportional to the level of effort required from the proprietor to furnish these sales, hence in the classic example someone can earn money while they sleep as their ebook is sold and delivered electronically via their website. Essentially the product is created once, and then the thrust of the business becomes a marketing effort.

Assuming that one is going to build a website, attract an audience of newsletter subscribers through interesting blog posts, then sell appropriate products to these followers, the lessons I’ve learned from the various podcasts, blogs and ebooks can be condensed to just two steps:

  1. Build a mailing list of interested people
  2. Sell stuff to the people on that mailing list

To refine this further; when not selling, you should be either building new products, or expanding the mailing list. Therefore to finesse the above method we’ll increase the number of steps and reduce the number of words – we can now concisely say that there are only ever three jobs that need to be done:

  1. Expand
  2. Build
  3. Sell

Rinse and repeat. If you’re relying on blog posts to pull in an audience of subscribers you’ll need to knuckle down and get writing, because posting once a month won’t cut it – the frequency has to be at least once per week; you can’t generate a raving band of followers with sporadic spouts of knowledge, no matter how good it is.

The performance monitoring of a passive income business is pretty simple too; there are only really three metrics we need to worry about:

  1. Site traffic
  2. Subscribers
  3. Revenue & Profit

In the beginning, when we’re getting the website off the ground, we concern ourselves with website traffic; at this stage all that’s important is getting eyeballs on us. Once the traffic becomes solid we monitor the subscribers we’re generating; are those eyeballs giving us a passing glance, or are they attentive and wanting to see more? Finally, once we’ve converted visitors to subscribers, we convert subscribers to paying customers, and we start to monitor our revenue and profit figures. In a passive income business operated via a website our constant aim is to reduce variable costs, the target being to make the revenue and profit values as close as possible – the incremental cost of product distribution obviously being the main candidate for observation.

So if I can condense the process of earning a passive income into a single blog post why am I not earning a fortune through multiple revenue streams while I sleep? Whilst on paper the process might be easy, the actual doing of it is a nightmare. Picking a market niche to target is a minefield – how do you accurately pinpoint people’s passions, fears and problems? If anything the construction of the product is the easy bit – building a receptive and appreciative audience would seem to be the challenge.

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