Is Passive Income Real?
Is passive income a real thing? In this post I aim to answer that question (as well as entertain you with memes), and open up the discussion for everyone to share their opinions.
People in the internet marketing world are often heard boasting about their passive income, and experts everywhere shamelessly sell their business models as being the key to achieving it.
They talk about it as that income where money simply flows in as you lay on the beach, smashing down cocktails (or Sangsom buckets for some of you I know).
I’m guilty of using the ‘passive income’ phrase myself. I even have a video on this website called My Passive Income Blueprint.
But is it all marketing hype, or is passive income a real thing?
I think it’s a bit of both.
Before we go any further, I think we need to define what ‘passive income’ is.
What is ‘Passive Income?’
Investopedia defines ‘Passive Income’ as:
Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved.
I saw a conversation online recently where people were debating what passive income really is. I saw people claiming that even a rental property was not truly passive because it involved potentially managing the property yourself, and even if you outsourced that, you’d have to stay in communication with the manager and handle things like maintenance, repairs, and keeping on top of tax payments.
Investing in the stock market on the other hand was considered 100% passive by some, especially if you had invested in shares that yield a dividend.
But, if you’re an intelligent investor it’s highly unlikely that you’ll just invest and forget. It’s more than likely that you’ll be keeping a keen eye on the market, and the performance of your investments.
The same can be said for investing in absolutely anything else.
Although these investments can be highly passive, there will be still be some small amount of maintenance work involved each year.
With that being said, the amount of maintenance work required is very minimal. I’d personally classify these as Passive Income Instruments.
But can you have a business that brings in passive income?
My answer to that is, sort of.
This type of income is more what I would class as ‘Semi-Passive’ in nature.
When I talk about a passive income business, I really mean semi-passive. For a business, I think semi-passive is about as good as you can really hope for.
(Semi) Passive Income
If you’re running a business and you want to work zero hours a month to maintain or grow it, you’re probably not going to have a business for very long.
An online business (or any type of business, really) is like a child. When it’s young it requires a lot of attention and care. You need to invest your money and time to make sure that it grows up healthy and strong.
As it matures, it can become more and more self-reliant, AKA passive.
You can put strategies in place such as hiring staff members and managers, outsourcing the bulk of your tasks, creating automation systems, and so on to remove yourself from the day to day operations.
That’s how Richard Branson is able to own over 200 successful companies. He delegates and systemizes. He’s obviously not heavily involved in the vast majority of his companies on a day to day basis, yet they continue to succeed without him.
Not all businesses really fit into this model. If you’re providing a service such as consulting, and you’re the expert in your business, it’s not really a scalable model. Your time spent working is still in direct correlation to your income. Personally, I don’t know if I consider this to be much of a business. Rather, I’d think of it as more like a job that you’ve created for yourself.
Luckily, a lot of online business models can be automated and have the potential to provide you with a semi-passive income.
So if you’re still with me and you’re hungry for that online, semi-passive income, then what are the best business models to pursue?
Best Online Business Models for Semi-Passive Income
I see so many people claiming that their business is making them ‘passive income’. Every single month there are income reports posted about how much ‘passive income’ was made from their online ventures. Some of these are legitimately semi-passive, but most are clearly not.
But out of the actual semi-passive business models, which ones are the best?
I don’t have experience with every business model out there, so the ones I’ll be talking about here I have either implemented myself, or personally know people that have done so.
If you have any suggestions of your own for what may be better methods, please leave a comment below. As my knowledge and experience stands however, these are my top 3 picks:
1. Book Publishing
As a self-publisher I might be biased, but I think that Kindle publishing is possibly number 1.
Along with investing, I believe that book royalties are one of the closest things we’ll ever get to real passive income. This goes for royalties of any sort, really.
Obviously there is maintenance work involved, but I’ve personally found that a good level of income can be maintained with very little time spent.
I’ve taken weeks off at a time without even checking my sales, only to log in to see that I’ve made more money than the previous month.
But be warned, publishing can be a tricky business. You are at the mercy of Amazon (or whichever publisher you use), and it can be a ruthless business.
I’m not going to lie to you and tell you it’s all easy. I don’t want to be seen as a ‘guru’ who’s only message is that the grass is greener on my side. It’s bloody hard work.
I’ve personally spent over 3 years learning this business, and it’s constantly changing and evolving. While it may be very passive most of the time, you still need to keep an eye on the competition, and your finger on the pulse of what’s new in the publishing world.
2. Affiliate Marketing
Affiliate marketing can be very passive, or alternatively, very time-consuming – all depending on your methods.
If you have managed to build yourself a following and have a popular blog, a good affiliate income can potentially be maintained without a lot of work.
Spending a few hours per month writing new blog posts can be enough to bring in a large sum of cash – provided that you’ve already put in the hard yards to build yourself a sizeable following that is.
I know some people who get 100,000+ visits to their website each month, and maintain a 6-figure income just from writing a blog post each week.
These people seem to be the exception to the rule however. The number of broke travel bloggers I’ve met in the past 12-months is staggering.
Be warned: going the blogging route is a very long-term game that may never pay off.
Building niche websites is another method I’ve seen that has brought people in a good level of semi-passive affiliate income. Once again, this takes a lot of work to set up and you need to keep an eye on your website’s performance.
You’re also at the mercy of the products you promote.
As an example, Amazon recently announced changes to their Affiliate program which is going to severely cut a lot of affiliate’s incomes by an estimated 30% or more. It’s passive for a while, yes, but this business can change very quickly.
3. Amazon FBA
Leveraging Amazon to build a business is all the rage right now. It’s officially the largest retailer in the world, and it handles so much of the work for you. It stores and ships your products, and handles all of the payment processing.
I’ve seen first-hand just how much money a physical product on Amazon can bring in, with very little work involved to maintain that income.
I’ve come across people with what I would consider to be very little business-savvy make this work, and make it work on a decent scale. Making above average wage selling a single private label product from China, while working only a couple of hours per week appears to be achievable.
But once again, this method has its risks. You’re at the mercy of Amazon, the 600-pound Gorilla, who can shut you down at any moment if they so choose.
You also need to keep a keen eye on your inventory levels, reviews, and competition, all while maintaining a good relationship with your suppliers.
This can be made fairly passive, but if you fail to take the time to do the basics I listed above, it’s likely that your income won’t last for too long.
BONUS – A Note About Dropshipping
In the Internet Marketing and Digital Nomad communities, dropshipping is a hot topic.
I have nothing against this business model, and have personally met dozens of people who thank dropshipping for getting them out of a 9 to 5.
But 9 times out of 10, this is NOT a passive income model.
Just because you made a sale while you were asleep doesn’t mean it’s passive income. That just means you’re not physically trading your time for money anymore.
My first business venture was selling products on eBay. I vividly remember the feeling of excitement I got whenever I heard that “Cha-Ching” sound.
But just because I sold a product while I wasn’t sat at my computer didn’t make it passive. I still had to package the product, and take it to the post office. There was still plenty of work involved.
Dropshipping is very similar. You still need to fulfil your orders each day, answer emails, make phone calls, set up ad campaigns, and keep in touch with your suppliers.
It might not be a 9 to 5, but it’s not passive. I know people who spend a couple of hours per day on their dropshipping business, which compared to a regular job is awesome! That’s much better than an 8-hour work day, but it’s still time that you need to be sat at a computer, each and every day.
The only slight exception to this is if you have a wildly successful store (or multiple stores) that make you enough money to outsource the vast majority of operations.
At that point, this business model can possibly enter the discussion of being semi-passive. But I’ve only come across one or two people so far who’ve hit that level of success with dropshipping.
While it can be a great business model for many, dropshipping isn’t the key to passive income it’s so often promised as being.
So, Is The 4-Hour Work Week Possible?
It seems that every second entrepreneur I’ve met out in Asia refers to the 4-hour Work Week as their motivation. For some, it seems to be more like their Bible and Tim Ferriss in their eyes is the second coming.
But is the dream of a 4-hour Work Week possible, or is it all just marketing hype?
In short – yes it’s possible.
I’ve had some weeks where I’ve not worked and have still earned a great income. But it took me a long time to get to that point, and I wouldn’t dare take too many 4-hour work weeks in a row.
I’ve been working online now for 5 years. During that time, I’ve had many 40, 50, and 60+ hour work weeks to reach the point I’m currently at.
While the 3 methods I mentioned in this post can provide a level of semi-passive income eventually, they all require A LOT of work to reach that point.
For some people, it will take months, for others it will take years – and for some, it will simply never happen.
People quit too quickly. In the past 18-months that I’ve spent travelling through South East Asia I’ve seen a lot of people quit. I’ve seen a handful of people make it, a lot of people in the process of hustling to make it work, and a whole bunch more people who just weren’t willing to do what it takes.
If you seriously think you can build a semi-passive income business in a couple of hours per week, you’re kidding yourself.
The ones that I see succeed at this goal are typically a bit crazy. They love the hustle. They secretly enjoy the 60-hour work weeks fuelled by way too much caffeine. They love the competition, and the challenge that building a business represents.
If you’re one of these kinds of people, you may very well succeed at building a 4-hour Work Week business.
But if you’re anything like me, you’ll probably spend most of your time working 40+ hours instead, growing your business further, and creating new income streams. Getting too comfortable and complacent is something I’ve experienced myself, and it has cost me thousands of dollars. That’s a mistake I won’t be making again.
If you work hard, work smart, and don’t quit – building a great income that can be maintained in just a couple of hours a week is very possible.
Just don’t get too complacent, or one day soon it might just disappear…
I’d love to hear your thoughts on this topic. Please leave a comment below to continue the discussion!
Thanks for reading,
Adrian IngramShare This Post: