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Passive income – is it all it’s cracked up to be?

I’ve received some emails lately and had a couple of discussions with clients on setting up passive income so they only have to work a couple of hours a week.  This is a topic that seems to keep rearing it’s head, and there’s a lot of myths, rumours and some truths floating around on what passive income is and what it does.

What is passive income

It’s where you create a product once and sell it forever.  Set it up on your website with your shopping cart and people buy it from you without you having to do any more work or spend any further time on it in the future.

Ebooks, e-courses, recordings, reports – they’re all forms of products that lend themselves well to passive income.

Affiliate sales is another form of passive income, however in this post I’m focussing just on the sale of information products as passive income.

What makes passive income passive?

Think Tim Ferriss and his Four Hour Work Week – he recommends outsourcing everything in your business to India, setting up some streams of passive income and living happily ever after without having to do any work.

It’s a great theory, and very attractive at that, after all, who doesn’t want to have money coming in with no effort? But when you really start looking at what’s involved in so-called ‘Passive Income’ it’s not the mecca of riches that it’s purported to be.

Yes, it works to a certain point.  But not as well as the get-rich-quick guru’s would have you believe.

It’s not really passive

You’re going to put a lot of work into the product to begin with.  A good product that will sell over time isn’t going to be thrown together as fast as a blog post.  Nor is it something that you can hand off to a VA or copywriter to produce 100% for you.  YOU are going to have to put time, effort, hours, blood, sweat and tears into creating a kick-ass product.

You’ve got to promote it.  Sure, there’s the initial launch and promotion that everyone expects to have.  But what’s after that?  Once you’ve launched it, how do people find out about it afterwards?  Google searches and adsense/adwords?  Not techniques that I’d want to be relying on exclusively.

Today’s product won’t work tomorrow

Information and products become redundant over time – often a very short time.  Technology and knowledge advances and a advice that worked well only a few months ago may now be totally useless.  You’re going to have to update your information and products and keep them current.  How often you update depends on the product.  The point is though; you can’t create a product and expect it to sell long term in a constantly changing world.

If you’re planning to make your main income from passive income then you’ll need to be constantly creating new products to sell and updating older products.

You can’t outsource everything

If you’re in a business for the long term then you’ll have to spend time building your business yourself.  You can’t outsource your knowledge and experience.  People who buy from you are paying for YOUR knowledge and experience, in a form that they can learn from.

It’s one thing to use a copywriter to turn a ho-hum piece of work into a great selling ebook.  It’s quite another to be paying someone from India a pittance to write an ebook for you with information gleaned from a google search.

If you’re looking to build a community, build long term trust and loyal clients who love your product, then you can’t outsource the substance of your work.  You’re the one who is going to have to put in the mental effort required to create the products to sell.

So am I for passive income or against it?

Yup, the tone of this post has been fairly negative hasn’t it?  Information products as passive income does work, however it’s not a way for you to sit back and take ten months holiday a year while the dollars pour in.  Anyone who tells you that it’s that easy is a snake oil salesman.

Heck, I have information products for sale on this site – that’s passive income like I’m talking about in this post.  I’ve also got thousands of dollars in information products on my computer and my ipod.  I’d be a real hypocrite if I said they didn’t work.

What I am saying is that information products aren’t a get rich quick scheme.  It’s a way – and a good one at that – to leverage your work and maximise the return on investment of your time.

If you’re going to do it well though, then you’re going to have to work at it.  It’s not set and forget, it’s continually tweak, upgrade, innovate and create.

What do you all think?  Do you sell information products?  Agree or disagree with what I’ve said?  Come and comment and let me know what you think.

Melinda Jameson

Melinda is the founder of SuperWAHM.com and started this site to share her best work from home ideas to help other Work At Home Mums become more financially independent and able to spend time with their families.

8 thoughts on “Passive income – is it all it’s cracked up to be?

  • It’s so funny I’m reading this now (found you via Men With Pens) because this is something I’ve been thinking about for a while. I DO sell and information product and I’m in the process of writing an eBook. But when I do private consulting I realize that there isn’t one size fits all for everyone and that many people really do need personalized advice and not another online course than can watch and then forget about.

    I realize it’s not my job to monitor my clients after they buy my product, as it’s up to them to do the implementation and hard word. I’ve found it to be much more effective when it’s ME talking to THEM rather than a video of myself giving good – but general – advice.

    BUT, I just recently did a huge sale, offering up a very specific consulting service for so cheap it made my head spin. So for the past week I’ve been doing 2 or 3 consulting sessions a day and even though it’s personalized, I’m essentially telling people the same things over and over again. It’s frustrating and exhausting to say the least. So I wonder if I should focus more on information products and see how that goes. That said, people are willing to pay more and do more when it’s one-on-one.

    Phew! Sorry, long comment. Thanks for this post, it’s really given me a lot to think on!

  • Passive/Residual income is not for everybody. The amount of work and the time to build residual income is huge. Most people don’t have the energy, focus or time to do it, but it can be done.

  • That’s a really good point Marc and one I didn’t include. It is passive income in that it’s sales that you probably wouldn’t get otherwise, but you still have to do all the work upfront to create a quality product.

  • Well said Mel.

    What about affiliate marketing from the other end of the scale? i.e. affiliates promoting your stuff. That would be another form of passive income.

    Is that something you do?

  • @ Rhonda – that’s my whole point, although I didn’t touch on affiliate marketing in the post. I had a friend who paid several thousands of dollars for training to be an Affiliate marketer. When he was telling me about it he was like, “You put up the website and people buy from it and there’s your income”. Nothing about marketing it, driving traffic etc. Needless to say he didn’t make any money.

    I’m not against passive income at all, just the scammers who tell people it’s so easy and they don’t have to put any effort into making the big bucks.

    @ Marina – I think I’m going to go buy a trampoline… LOL. I’ll check out the Publishing Queen, thanks for the tip.

    @ Trece – the funny thing is that most of the ‘big guys’ don’t outsource that because they know the value of what’s in their head. They might use copywriters to spruce it up but the knowledge is theirs. I actually meant to say something about outsourcing to non-native english speakers but didn’t. Thanks for making the point for me. 🙂

  • As a mom of 3 boys and not a lot of extra time, I focus on building passive income mainly through affiliate marketing, but I also sell some info products of mine own as well.

    One thing you can depend upon is that it will take some real work initially. So I encourage those who start to keep learning about different internet marketing techniques and see which ones work the best for you because without traffic there will be no sales… and don’t give up! You’ll soon see the results you want will a little persistence.

  • You are so right Mel,

    A business is a business and unless you can create your team of raving fans who wait on your every word – your passive income isn’t going to give you a holiday at a caravan park, let alone the bahamas!

    The product must have value – lots of it for the word of mouth factor to kick in. Your contact with buyers must be special for them to feel a genuine connection.

    Bottom line – a business is a business and there needs to be promotion and followups – but the great thing is I can create something that I work on while the kids are asleep, I can promote at night, and during the day – be there for my kids.

    The trampoline provides my best inspirations!

    A brilliant service to ensure your product is up to scratch is The Publcishing Queen, Kylee ensured I didn’t miss anything (did you know to sell on Amazon your product must be registered) I almost left out an About me page, which is the perfect introduction to the next project I’m doing!

    Good Luck every one. Marina.

  • One thing that really ticks me off is the outsourcing to people whose native language isn’t English. What do I mean? If I’m going to download something, it is infuriating to see the typos and grammatical errors that abound. For crying out loud, please hire a proofreader.

    If the Big Guys are going o be outsourcing everything, they won’t stay top dogs very long.

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