The Passive Income Myth

According to the IRS there are three categories of income: Active, passive, and portfolio.

Active is what it sounds like. You do income-producing activities that you get income.

Portfolio is also what it sounds like. You invest money into things like stocks, real estate funds, or other investment vehicles and — in the best of times — your investment yields gains, or income.

Then there is passive income.

The sacred cow of network marketing companies and continuity/membership site experts.

The goal of every over-worked, under-earning, praying-for-a-miracle self-employed type.

Passive intimates no work. You, on the beach, cocktail in hand, checking your Paypal account for the sales every few hours. Or, better yet, you, on your couch, in your jammies, binge watching GOT or House. Again.

I googled a ton of content on passive income and although there are some sound possibilities out there — lend money for interest for instance — many take a sound idea and run it right off the rails, like this one that admits you must frontload the work to get to passive: “first you need to haul ass and do something crazy, e.g. write a quality 20,000-word ebook (insane, not passive hahahah)”, but here is where it runs wild —“but then you get to sit back and enjoy seeing PayPal sale messages pop up on your iPhone each morning as sale after sale after sale is made… on an ongoing basis and without any additional work. That’s some seriously Pina Colada flavored passive goodness!”

There’s some seriously delusional-flavored thinking.

Let’s look at digital products. You write or create it once, set it up on a landing page, hook up the cart, drive traffic and you are off to the beach to collect your moolah.

A well done e-book or virtual program takes hours of research, writing, producing, formatting, etc. Those hours cost your time, and during those hours you are not making money. But ok, we can all agree, there has to be work on the front end right?

Right, but it doesn’t end there.

Now we have marketing. If your landing page is optimized, your copy is killer, and your ads are spot on — something by the way that takes daily monitoring — and your e-book/product/program is targeted to the right audience, you could see recurring revenue from this evergreen type product.

Phew. We’ve done quite a bit of work so far and there are lots of “ifs” from a marketing perspective. (If your landing page converts because you’ve got conversion copy and the page is optimized for SEO, and you are targeting an audience that wants what you’ve got from you, and on and on.)

And marketing doesn’t end if you want to keep the sales coming.

What about managing affiliate partners, returns, customer service? Even outsourced, there is still some active participation.

This type of income, as you see, is far from passive but it is leveraged.

Leveraged is good. It’s how businesses grow and in our case, entrepreneurs, how we get out of the income-capping trap in the fee-for-service-only model.

I don’t want to be Debbie downer, but part of my commitment to my clients and you, my readers, is to bring the truth; shine a light on traps, false gods, and naked emperors.

Am I suggesting not to do an e-book, a virtual program, or a continuity program? NO! (Well, I might in the case of the membership/continuity program, and I’m getting a few experts together to parse the good and bad and who should and shouldn’t and when. I’ll have details next week here.)

I am suggesting that you examine your attraction to a marketing idea before jumping in. No one idea will “save” a shaky business — sales is the exception here — and one idea that promises to “change everything” in your business is likely to fall short of its promise. What it really requires will only be found in the mice type — that tiny print at the bottom of webpages and print ads that gives you the disclaimer.

Always read the mice type.

And start researching leveraged income streams. Find out what it will really take to set one up and get started. It may not be passive, but it’s income that requires less of you one-on-one or one-to-many. And that means more time to work on your portfolio or pina coladas.