Welcome back to today’s episode of Many Hats of Business – The podcast. Today I want to talk about passive income. In the online business space. There’s a lot of talk about making passive income. But I’m here to tell you that there’s very little in life that is a passive income, without hard work at the start.
In this business space, we hear a lot about making courses or digital products. That can earn you a recurring income with no effort. The problem is the initial outlay of work is often underestimated. And if you don’t have a large audience, that can take a lot of time to build as well to sell these products.
Other formats available
Watch on Youtube: https://youtu.be/J-XycHJnzhI
Listen on podcast: https://podcasters.spotify.com/pod/show/many-hats-of-business/episodes/004-Tanya-Talks—Theres-Nothing-Passive-About-Passive-Income-e2nnmij
Passive income and ads
You can go down the ads route, and you may have seen our episode with Facebook ads expert Chris London. – If you haven’t, I highly recommend you listen to that. But in it, we talk about how you really need to test the viability of any of your products in an organic space, before you waste money on ads. Because that is a strong chance that that is what you’re doing. Wasting money, if you start the ad spend before validating your product.
Passive income through creating online courses
Then you have the online courses. That’s a large outlay to get that going, and the same thing. You still need an audience to sell to. You’ve still got to get your messaging right, which takes time. And you’ve got to get all of your tech sorted behind the scenes to be able to sell it. There are more simple ways to do things, and if you’re particularly having one course. It might be a good idea to look at simplifying where you can. And then using ads ONCE you’ve validated your offer. If you want it to be more passive.
But let’s not forget that there is a lot of competition in this online space at the minute, so you’ve really got to stand out from your competition. I feel like a lot of people berate themselves for their lack of passivity in their passive income idea because they’ve been told it will be easy. I think a lot of the people that were saying it would be easy have actually started to acknowledge that it isn’t as easy as they perhaps first thought, albeit not necessarily publicly because that makes it harder to sell their thing.
Other passive income routes
Now, let’s talk about other things that people consider passive, other than the passive income digitalized products. There’s lots of things you can do – e-books as well, which is still digital. You could write a book, a real book with real pages, and earn income off that. But obviously, if you’re writing a book, you just certainly can’t say that that is no effort at the start.
Let me share a quick story about a friend of mine who thought she’d hit the jackpot with passive income. She created an online course, thinking it’d be ‘set it and forget it.’ Six months in, she was still working on marketing, updating content, and answering student questions. It was passive alright – passively eating up all her free time!
Property investment for passive income
The other things I like to talk about with passive income, because people talk about it a lot, is property investment. There is not a lot of passive about property investment unless you have everybody doing stuff for you. Which obviously has an initial cost upfront.
Renting houses on a longer-term basis – obviously, you’ve got the problem with potential voids, you’ve got potential problems with repairs and things. And of course, inevitably, you never know when they’re going to come through. So suddenly you’re off on holiday and someone’s boiler’s broken. So the reactive nature can be hard.
Potential problems with property for passive income
Or you pay more out because you have a management company, but you can see that is not wholly passive. Plus, you’ve got to buy the house in the first place. And realistically, that’s not stress-free anymore because buying houses tends to take forever these days, with solicitors and searches. So, not wholly passive.
Property investment is heavily taxed so gone are the days of putting 10% deposit in a regular rental and it growing by x% a year with rental income on top. You need to be prepared for voids and repair/improvement costs. It certainly feels like everything is on the side of the renter. Not the landlord so do your homework. It is why many are going into the HMO (house of multiple occupancy) side of things or Airbnb/holiday lets.
I know of a couple of different people who have had a nightmare down both of those routes. So again make sure you are prepared because it isn’t the easy ride people would have you think.
Other passive income streams – investments
Even with passivity such as investments – I invest in VCTs (Venture Capitalist Trusts) from time to time. You’ve still got to earn the money to be able to invest in those. But in my opinion, that’s about as passive as it gets.
Because we get an offer emailed by the financial adviser, this is available if you want it, and we send an email or have a conversation to confirm we do want it, and we transfer the money.
That actually gives a passive income because we do nothing and you get dividends returned from that. And it’s tax-efficient in the first place. So that’s about as passive as it gets.
But that isn’t what people talk about most of the time with passive income. Which is a shame, and interestingly one of the things that isn’t talked about enough when going into business is the ‘risk’.
Risk in business
A lot of people have a low attitude to risk with investments. They don’t feel that these large companies on the stock exchange are ‘safe investments’.
I find it curious that those same people trust that their business journey will be profitable. Even when the knowledge often isn’t there in some areas. And they don’t have shareholders to answer to. And highly experienced people in many departments. Plus a shed load of money in the company/from shareholders to invest in the business when required.
I have been in business for many years and historically would have thought the same. Now I understand that selling your business for large amounts of money isn’t the only route to financial freedom. and I’m using tax efficient wrappers to do that alongside. Such as building a good pension pot.
Maybe we should rename ‘passive income’
Anyway back to the passive income we hear about and think of in the business industry. Once you build up your passive income side of your business, yes, it can give you a fantastic return.
But I think the term ‘passive income’ is part of the problem because people assume it means there’s no work involved. Similar to the VCT thing, and obviously, there are massive differences between the two.
I think we need to rebrand ‘passive income’ to something like ‘delayed gratification income’ or ‘front-loaded work income.’ Because let’s face it, there’s nothing passive about the blood, sweat, and tears you put in at the beginning.
It doesn’t have quite the same ring to it or appeal though so won’t sell so well. Truth has historically been a bit thin on the ground in sales though, remember those double glazing salesmen or used car salesmen.
Spread your risk
I personally believe it is important to spread your risk in business by not having all your eggs in one basket, and of course, this makes sense with this passive income of having more strings to your bow. But it doesn’t mean that no work is involved with it.
As you can see, it’s really important because so much work is involved up front with any of these passive income schemes that you might want to implement in your business. It’s really important that you do your due diligence. And look into what it is you really want to create and do the research to make sure people want to actually buy it. Because you don’t want to just build it and then hope to sell it, because that’s going to be quite demoralising if it doesn’t work.
Don’t count on overnight success.
Equally, it is important to consider that you might not get a million sales overnight at the start. And it might take a while to build up. So if you’re really passionate about it, you need to keep putting it out there and keep going.
Because I’m a big one for building sustainability in our businesses, and there’s no such thing as an overnight success anyway. So even these people that are telling you that it can be done easily. They’ve been working for years at it in most cases. So it isn’t some overnight success.
Yes, you get an element where some people are in the right place at the right time, which does help. But in the most part, there’s a hell of a lot of work going on behind the scenes to get this passive income stream of their business up and running.
I’m not trying to rain on anyone’s passive income parade here. It can be a fantastic addition to your business model.
But it’s like planting a tree – you’ve got to nurture it, water it, and wait for it to grow before you can enjoy the shade. So, pack your patience along with your entrepreneurial spirit!
Passive income in life and business
So if you’re thinking that you want more passive income in your life. I would consider if you want to do a bit of both of passive income in your life and your business. Separately so that you can build up some assets outside of your business.
I would also consider if you’re getting all of your eggs in one basket in the sense of niching. And whether you can apply what you’re writing to more areas and industries. Because if you get a problem in one area of industry, you want to be able to sell to others.
Think back to COVID – certain trades just couldn’t trade altogether. So if you had been massively helping hospitality, or consulting for the hairdressers industry. It was very difficult for you to make money and you had to pivot because of that. So if your product is usable across multiple different areas, that is very helpful. And it might be that you need to have more websites or Facebook pages attracting a different audience. But if your main product is similar and only takes a little bit of tweaking. It is a potential thing for you to do that.
My advice for passive income
If you’re dead set on creating a passive income stream, here’s my advice: Start small.
Don’t quit your day job and pour all your savings into a grand passive income scheme.
Test the waters with a mini e-book or a small digital product first.
See how it goes, learn from it, and then scale up.
Remember, Rome wasn’t built in a day, and neither is a sustainable passive income stream.
At the end of the day, whether it’s ‘passive’ or not, any income stream that diversifies your business and brings in money while you sleep is worth considering.
Just remember to keep it real, do your homework, and be prepared for the work.
Because in business, as in life, there’s no such thing as a free lunch – but there are some pretty tasty ones if you’re willing to cook them up yourself! – or you can pay for someone to do it for you to save time of course but that takes money.
And you don’t always get the same gratification you get from a nice lunch cooked yourself.
What’s next for Many Hats of Business – The Podcast?
The next episode is with the amazing Graham Short who is the world’s best micro engraver, you absolutely don’t want to miss it. He shares some amazing stories of his 60 years of experience and celeb stories too. I can’t tell you how much I enjoyed talking to him.
The next episode of Tanya talks will be talking about how we can stop spending time on the bits of business we don’t like – not in a just ignore it and hope it goes away way, people do that I notice, particularly with finances and that is a very bad idea, as I’m sure you can imagine – see you next time and don’t forget to follow so you get notified when the episodes land.