Screw Passive Income – Try Active Income Instead
Everyone dreams of passive income when first starting their online business.
It’s ok…we did it too.
The dream of sitting on a beach on some tropical island while the money rolls in is enticing for obvious reasons. The “earn while you sleep” message is drilled into our heads by the same people who would rather sell you an ebook or have you click their affiliate link rather than providing actionable advice that can really help you get there. So…is it really possible?
Tim Conley from Foolish Adventure brings up an excellent point describing how the term “leveraged income” is a better description of what we’re looking for than “passive income”. I prefer this term and think it more aptly describes our process of putting systems in place through the use of human machines to do the heavy lifting for us. There’s always an “active” piece involved in our revenue streams…the difference is between us doing the work and effectively replacing ourselves with capable team members within our organization.
Question: So how does someone just starting off take advantage of leveraged income and process to build themselves a revenue stream requiring very little work?
Answer: They don’t!…at least not to start.
“Leveraging systems or automation before you’ve done it yourself profitably is a sure-fire path to epic failure.” – Click To Tweet
You have to do it yourself first to figure it out. There is no other way…at least not for you. (or us!) I’m sure there are exceptions to this rule…but it’s much more likely you’re the rule and not the exception here. That’s why we are constantly hammering this point home in blog posts, podcast episodes, interviews, and presentations.
- Have an awesome idea to automate great travel discounts for expats? – Great! Do it manually first to test market viability and get user feedback.
- Want to build the next keyword research tool that will blow away Market Samurai and Long Tail Pro? – Great! Offer to provide keywords (that you’ve researched manually using your process) to market leaders to test through the process and build evangelists.
- Want to sell websites directly rather than using a 3rd party platform? – Great! Slap up a spreadsheet with a PayPal button and see if people buy from you. (Yep…that’s exactly what we started with.)
Did it work? Awesome! Now automate, put systems in place that take you out of the equation, improve your margins, etc.
This isn’t pie-in-the-sky bullshit from a couple of guys with a bit of success. Some amazing online businesses started with little more than a crappy design, vague plans, and a “buy now” button.
Take a look at CD Baby in 1998:
Wouldn’t win any design awards, right? And yet this company was actively built up, leveraged with automation and an awesome team, and ultimately sold for 22 million.
Let’s talk business plans. You’ve probably heard of a little company called INTEL? Check out their original, one-page business plan:
That poorly-written, vague document got them $2.5M in funding and jump-started their growth to a $115 Billion valuation. (In 2011)
Actively pursuing an income stream by doing it yourself isn’t nearly as sexy sitting on a beach with a drink in hand, raking in millions of dollars…but it is a touch more realistic! Here are some of the real advantages in pursuing “active” income:
- Easy To Iterate/Pivot – The first thing you start with will look quite different from the monster you’ve built when you really start rolling in cash. It’s MUCH easier to learn, make changes, and adjust when there are less people involved. Use this important period to really nail the process down.
- Active Engagement Opens Doors – Many people mistake our business plan as simply building/monetizing/selling niche sites and that’s not the case at all. The reason we have this blog, the podcast, etc. is so that we can actively share what we’re doing. This has brought us a ton of opportunity and value outside of niche sites…something we wouldn’t have had if we did this privately/secretly.
- Easier To Scale – Understanding the intimate details in the process makes replicating it through automation or your team much easier and lets you avoid some of the mistakes that come with the “Chinese Whispers” problem.
I had the opportunity to meet Simon Black of SovereignMan fame while I was in Bangkok. He’s a fairly controversial guy and brought up a few points I wasn’t fully onboard with, but there was one thing he said that REALLY resonated with me. I’m paraphrasing here, but when asked a question about the “lifestyle” part of lifestyle business he said something to the effect of:
“F&$% THAT. I’m in the prime of my life right now and have a chance to really make a difference. Why would I sit around and not do everything I can to create the most amount of value with what I have?”
Look, I love to travel, sip fruity drinks poolside, and settle in for a good movie as much as anyone, but I absolutely, 100% agree with the sentiment here and aspire to do the same through actively pursuing value chains and revenue streams.
Where do you stand on this? Do you agree with the pursuit of active income or am I off base? Let us know in the comments below!