Passive income, receiving money without working more hours, is appealing. After reading books like “The 4 Hour Work Week” by Tim Ferriss, many who start an online business want the passive income lifestyle. As a freelancer, you’re probably used to working for clients. If you work a lot of hours, your income goes up. But what happens if you take off a few weeks for vacation? Your income will probably suffer.
Two Approaches To Passive Income: Investment and Business
Fortunately, there are several ways to add additional forms of income to your business. Before going further, it is essential to clarify a few points. Truly passive income is quite rare. For example, you might have dividends and interest passive income if you have a significant investment portfolio. In that case, managing your investments might require very little time. However, producing a $100,000 income exclusively through investment assets is difficult. For example, $1 million invested in Procter & Gamble stock would yield approximately $21,600 in dividends per year based on a 2.16% dividend yield. Consistently saving money in an investment account is the path to generating passive investment income.
Saving up a multi-million-dollar investment portfolio that generates passive income is not your only strategy. You can also create business assets that generate income. For example, you can create a website with a large amount of traffic. A high-traffic website can generate income in several ways, including display advertising. In addition, you can also create products and sell them on a variety of platforms. Creating and selling a digital product means that you put effort into creating an offering as an ebook or course, and then you can sell it over and over again.
To get started today to add passive income to your business, check out this guide to a passive income for freelancers. You will learn about the advantages and disadvantages of each strategy so you can learn which method appeals to you.
Passive Income Strategy 1: Blogging
Generating passive income through blogging is one of the most powerful and well-established strategies. Digital marketers and writers are particularly well suited to using a blogging strategy to earn additional income.
Advantages
- Income Potential
There is potential to earn a six-figure or multi-million-dollar income from running a blog. For example, travel blogger Johnny Ward has earned over $1 million in 3 years from his blog One Step Forward.
- Writing Focus
For freelancers who love to write, blogging is a natural fit with your skills. You probably already have a computer and an Internet connection, so no additional equipment is required.
- Multiple Options To Generate Income
Running a blog opens the door to several ways to generate income. Affiliate marketing – earning an income by recommending products – is one way to go. For example, you can participate in Amazon’s affiliate program by promoting books, household products, and many other types of products. In addition, several bloggers generate income through display advertising. Using an advertising network like Mediavine, advertisers pay you to display ads on your program. In addition, you can use your blog to promote other products.
Disadvantages
Earning passive income from a blog also has some significant disadvantages that you should understand.
- Blog Competition
There are millions of active blogs on the Internet. As a result, getting attention and earning income is more challenging. Almost every idea you have for a blog has probably been tried in some shape or form. According to TechJury, more than five million blog posts are published per day. Standing out against this level of competition is tough.
- Long Term Income Potential
A blog is unlikely to generate results if you need income later this month. Many bloggers state that they do not earn an income from their blog in the first year. If you are particularly experienced in blogging and search engine optimization (SEO), it may be possible to earn income more quickly. That said, if you are looking for additional income to cover your rent or mortgage payment this month, a blog is unlikely to work.
- SEO and Social Media Knowledge
A blog can only generate meaningful income if you have plenty of visitors. For most blogs, the main ways to get visitors are social media or search engine optimization. If you lack skill and knowledge in these areas, you will need to learn those skills before your blog grows.
Passive Income Strategy 2: Online Course Creation
Selling online courses is a significant opportunity because many people desire to improve their skills. For example, there is a thriving industry of course creators who help people achieve high scores on professional tests like the MCAT (i.e., a medical school test) and the GRE (i.e., an MBA entrance exam test).
Advantages
- Earn Income From Expertise You Have
Do people regularly ask for your advice in a specialized area? For example, you might be the most accomplished salesperson in your city. Or you might have a track record of winning prizes for growing amazing roses. If you have achieved significant success in your career or personal life, you may be able to put your expertise into a course.
- Build Once And Sell Many Times
Once you create a digital course, you can sell the course to hundreds or thousands of people. You can use CheckYa to accept payments automatically. Best of all, you don’t have to invite people manually to your course. Many popular online course platforms automatically admit students after they register.
- Potential To Sell At High Prices
Digital courses have high perceived value. For example, sales expert Josh Braun sells an online sales course for $197. James Clear, the best-selling author of “Atomic Habits,” offers a digital habits course for more than $299.
Disadvantages
- Production Effort
Creating an online course, especially audio and video elements, takes significant work. If you lack those skills, you may also need to outsource certain parts of the course, like video editing. To reduce the production effort, consider creating online tutorials instead. An online tutorial can be a single short video or short video series. For example, you could record yourself using complex software like Microsoft Excel and create tutorials based on those recordings.
- Market Demand
Many authors, bloggers, and experts have online courses, and there may be similar courses available. To address this disadvantage, you will need to find a unique approach to your topic. For example, instead of offering generic weight loss advice, it might be more helpful to offer weight loss guidance for mothers.
Passive Income Strategy 3: Produce Podcasts
Do you prefer to speak instead of write? Podcasts – audio shows on the Internet – might be the perfect format for you. Some podcasters like Joe Rogan and Tim Ferriss have made millions of dollars through their podcasts.
Before launching a podcast, study what is currently offered in your area of interest. For example, many podcasts are dedicated to history, business, leadership, and marketing. Within these popular topics, you may find a new topic or a creative format. For example, John Lee Dumas created a seven-day-a-week business interview podcast called Entrepreneurs on Fire. There were other interview-based podcasts, but none were published seven days a week. That original approach has helped propel the Entrepreneurs on Fire podcast to become a multi-million dollar podcast.
Advantages
- Deeper audience connection
When a listener spends half an hour or a longer listening to your voice, they are likely to feel a stronger connection to you than reading a blog post. As a result, podcasters sometimes find it easy to build up a loyal, trusting audience.
- Multiple monetization options
There are multiple ways to generate income through a podcast. The most common method is to sell sponsorships. You can approach companies directly and sell sponsorships on your podcast. Or you can use a platform like AdvertiseCast to find advertisers. The amount you can earn from a sponsorship generally depends on the topic of your audience and the size of your audience. For example, a 30-second ad on a podcast with 1,000 listeners could earn $18, according to Influencer Marketing Hub. With a larger audience, the amount you pay could be much higher.
Disadvantages
- Audio Editing and Equipment
Podcasts have exploded in popularity in the past decade. There are over 500,000 active podcasts, according to data reported by Podcast Insights. These podcasts are produced by organizations with significant resources and expertise like the BBC and NPR. As a result, high production standards are necessary to stand out. You may need to spend $100 or more on a new microphone and headset. Further, keep in mind that editing your podcast will take time.
- Production Consistency
The most popular podcasts tend to follow a consistent release schedule. For example, you might release a new episode every Monday. Keeping to that release schedule is vital to maintaining your audience’s momentum and keeping engaged. Having to release new episodes constantly can create stress and pressure. The way to reduce this stress is to record a backlog of podcast episodes each month to release episodes still if you take time off.
Passive Income Strategy 4: Setting up an Online Store
Setting up an online store to sell products is another way to earn passive income online. Like the other strategies outlined here, you will need to put in upfront work to set up your online store. The upfront work includes developing product ideas, creating the products, and marketing the products to customers. While you can sell digital or physical products, let’s focus on digital products for now because digital products are highly profitable.
Advantages
- Earn money while you sleep
Once you create a digital product and offer it for sale in your online product, you can earn sales at any time. With CheckYa, you can accept payments and orders from customers worldwide.
- Potential to sell your company at a profit
As you scale up your business, you may earn millions through your digital store. While challenging, it is more than possible to scale up to this level. For inspiration, read “The Million-Dollar, One-Person Business” by Elaine Pofeldt. Once your business is earning significant revenue, you may want to consider selling the business.
Peak Business Valuation estimates that the ecommerce businesses typically sell for 0.3 to 0.5x revenue multiple. This means that a business generating $500,000 in annual revenue could sell for $250,000. You will have money to invest and earn a fully passive income by selling your online store business.
Disadvantages
- Technical Store Setup
Establishing an online store takes time and effort. At a minimum, you will probably want to create your website and domain name. Fortunately, accepting payments from customers is a simple part of the setup process. You can add CheckYa to your website in minutes.
- Customer Service
Running an online store means you will have some customer service responsibilities. For instance, a customer may not understand how to download a digital product and use it. A customer may be disappointed by the product and request a refund in other cases. You can probably handle customer service tasks yourself when your online business is small. As the business grows, consider outsourcing customer service to others.
- Marketing
For an online store to produce passive income, you need consistent traffic to your website. That means you need marketing skills to drive traffic. This disadvantage can be overcome if you are already skilled with social media, SEO, and other methods. However, website traffic is never guaranteed because new competitors and the Internet changes over time. That said, driving Internet traffic is a high leverage skill. A few hours spent on SEO can drive traffic for months or years into the future.
Passive Income Strategy 5: Selling Your Skills To Clients Who Find You
As a freelancer, prospecting for new client projects can take a lot of time. For instance, you have to identify prospects and then create a plan to contact them. By creating an online presence, you can save time on your business. Instead of spending 10 hours a week hunting for new clients, you might be able to reduce that time to an hour or two. That time saving means you can spend more time growing your business or enjoying your life.
Advantages
- Faster revenue
Unlike some of the other strategies covered, selling your skills on a freelance or consulting basis usually quickly generates cash. You perform the task for a client, send an invoice with CheckYa, and receive payment the next day.
- Leverage your existing skills
When you sell your skills to clients, you earn income with the knowledge you already have. That is a significant advantage compared to other strategies that may require you to spend time learning additional skills.
Disadvantages
- Relatively active Income
Selling skills to clients is a relatively active source of income. If you take a vacation, your revenue is likely to decline. Working with clients is the path forward if you need income this month.
- Marketing
You need an online presence that attracts clients for this strategy to work. For example, you might create a highly optimized LinkedIn profile to attract clients. Or you might spend time creating and optimizing the content on your website to draw in clients via search engine optimization.
The One Tool Every Passive Income Strategy Requires
Whether you are selling courses, digital products, or using other strategies, you need a way to accept payments. CheckYa is a powerful way to accept payments from sponsors, clients, and customers worldwide. You can send unlimited invoices and accept payments in multiple currencies. Click here to sign up for PeachPay.
