Most people will sell you the “dream lifestyle” of passive income. I won’t. While entirely attainable, you need a realistic strategy… which I’ll reveal right now.
How to Start Earning Passive Income
My advice? Don’t overcomplicate things. By following these 3 essential steps, you’ll be on a straightforward path to success.
1. Choose Your Passive Income Stream
Passive income streams are plentiful – from online courses and stock dividends to real estate investments and eBook royalties. Each stream requires a unique mix of time, effort, and sometimes capital investment.
For example, digital products like online courses, coaching videos, or eBooks may be less capital-intensive compared to streams like real estate, but they require a lot of time and effort in content creation and digital marketing. This is especially true if you want to build a loyal customer base that values your products enough to want more of what you have to offer.
So how do you choose between a more capital-intensive passive income stream and a more labor-intensive one? First, evaluate the market and find a sweet spot between your strengths and what the market wants.
It is true that there’s no one size fits all here, but aligning your choice with your interests, skills, and risk tolerance, while also considering the market’s wants, is your best bet at finding something that is already proven to work. You can do this by targeting niche markets, which have less competition and a more engaged audience.
Here’s your no-nonsense guide:
- Assess your skills, resources and interests. Are you great at writing? Do you have a natural talent for talking to people? Are you that “tech friend” people call when something breaks? Your strengths can guide you to the most suitable passive income stream. You might also have certain resources at your disposal that will give you a leg up, such as a professional camera, or a friend who’s willing to create a website for you at a discount.
- Next, do your market research. Search for your niche on platforms like blogs, social media, email lists, Amazon books etc. Find out what your audience is talking about, what their problems are and where they hang out the most. This can also lead you to the best kind of product or service to sell. I recommend digital products like online courses or eBooks, or coaching. You can also buy similar products to scope out your competition and learn what your market is seeing.
- Consider the initial investment. You have two resources, time and money. Which is more important to you? If it’s money, start something free like a blog or Youtube channel. If it’s time, consider hiring someone or investing in software to give you a headstart.
- Pick the right platform. Once you have a decent idea of your market and what you want to start with, pick one platform and stick with it. You’ve likely already uncovered this during market research. Set yourself up, and don’t worry too much about things like branding or names. You can always change it later.
If you want more ideas on streams of passive income you can try, consider taking a look at my post about 16 Passive Income ideas.
Or, if you want to save thousands of dollars a month to invest in your ventures?
In this video, I’ll share three key saving strategies that I believe you should focus on. I call this my “CEO approach to saving money”.
2. How Much Money Do You Want To Make?
If you don’t have a plan, you’ll get lost along the way! Start by defining clear, achievable objectives that provide you with measurable goalposts.
- Work backwards from your Rich Life: Have some fun with this! Dream up whatever you define success to be. Then, get specific. How much money do you need to fund your Rich Life? How much is that per year, per month, per week?
- How fast do you need to make this money? If you’re in a time crunch (though hopefully not) you’ll want to start with something quick and easy. Otherwise, mark out a realistic timeframe according to your money goals. Put down a minimum, ideal and stretch amount – if there’s only one number and you don’t hit it, it can be quite discouraging. Make sure to adjust these as you go along to keep the targets realistic.
- Now, mark out the actions you need to take to achieve your money target within your desired timeframe. Let’s say you want to make $1,000 from an online course in 3 months. You might spend your first week doing market research, setting up your platform, outlining your content, and planning your strategy. Your next 1-2 weeks might be building out your course. Following that, you’d lay out your traffic and monetization strategy.
3. Create And Profit!
Here’s where most of the “wishful thinking” comes in. In order to make a passive income, you need to make an “active” income first.
By doing your research upfront you should have a good idea of what to create and how. Then, all you need to do is market it!
What you need to focus on is qualified traffic. These are people who would be your biggest fans and customers. And this is the power of niching down. Instead of competing in the massive beauty market, you might focus on teaching people how to create natural, homemade beauty products.
To start marketing, you might go with free tutorials on the social media platform where your ideal customers hang out. Check out this guide on social media marketing. I also highly suggest pointing them to an email list where you can speak to your audience one on one.
If time was your more important resource, you can also try advertising directly. We have a YouTube ads guide here. Since traditional ads can be tough to master, an easier starting point is to look at sponsoring ads from people who already reach your target audience, or sponsoring influencers.
Either way, test, test, test! You never know what will work for you and your business until you try.
Once you’ve landed your first customer, make sure to ask them for feedback, and ideally a testimonial. Then you’ll simply cycle through phases of improving your offer to better build your audience and satisfy your customers, to getting feedback to improve.
Initially, your income might be a slow trickle, but by following these steps, you’ll hit your passive income goals sooner than you think!