Why Entrepreneurs Should Spend Time Earning a Passive Income
It’s a familiar occurrence. You’re taking a quick break from work to watch an inspiring video, such as a TedTalk, on YouTube. Before the video starts, there’s an ad from a charismatic individual promising that you can earn money while you sleep. And, by doing so, you get to live the life you want without having to deal with the nine to five grind. Same old crap right?
As entrepreneurs, we know that passive income isn’t a scam, though some of these videos do promote unproductive advice. In a previous Entrepreneur article, Kimanzi Constable explained this correctly. These are “entrepreneurs trying to sell you on one of their programs. You see what they’re offering and understand that the way they travel and make an income is through people buying their course.”
In other words, the person in the YouTube advertisement is earning a passive income. They may have developed a system that allowed them to thrive in the real estate industry, for instance. Now, they’re sharing their secrets of success with viewers via an online course. Selling real estate was their primary source of income. Now, they have a supplemental income through the educational course they’ve created.
But, is earning a passive income something that a respectable entrepreneur should really spend their resources on? In my experience, that’s a resounding yes.
A passive income is earning money through little active involvement. Unlike your “day job,” a passive income isn’t tied to how many hours you put-in. For example, you published a book five years ago. Ever since its publication, you’ve been earning money off of the sales of your book. While you did all of the work on the book years ago — you had to write it, after all, but you’re really no longer involved with the book. It’s there online for people to purchase while you’re sleeping, building your startup, or traveling.
For starters, it creates multiple streams of income. Extra or other ways that you make money may not sound important when your business is raking in the six-figures. But, from personal experience, understand that you could lose everything in a blink of an eye.
I’ve shared my story multiple times, so I’ll give an abridged version. My first business was shut down by Amazon, and in a matter of months, I lost everything.
While a passive income wouldn’t have prevented my business from closing, if I had been earning an income from multiple sources it wouldn’t have been as stressful. It wouldn’t have hurt my family, and I could have temporarily stayed current with my bills. It would have helped get me back on my feet faster.
Even if you don’t experience failure, entrepreneurs can use this extra income to pay off their debt faster. How much would your life improve if you didn’t have student or business loans hanging over your head? Not having this debt is a weight off your shoulders and gives you an opportunity to take that money and invest it in your business, vacation fund, or retirement.
Having more than one income can increase your chances of becoming a millionaire. Tom Curley, the author of “Rich Habits,” found that 65 percent of self-made millionaires had three streams of income.
Of course, it’s not all about the benjamins. When you’re able to earn some extra cash on the side, you’re ready and able to focus more on the other things that really matter. It frees up your mind to hustle better. You’ll be able to think more creatively about ways to improve your business. You’ll find ways to spend more time with your family, working on a hobby, learning something new, or traveling.
While I’m all for passive income, it would be remiss of me to discuss and debunk some of the most common misconceptions. Most notably is a myth that maybe it doesn’t take any type of investment. In reality, it will take an initial investment, either of time or money, to start earning additional income. The idea is you are front-loading your time and money.
Again, take the example of releasing a book. You can continue to earn royalties from your written work for the rest of your life after it’s been published. But, you still had to take the time to write the book. You still had to hire an editor, and you definitely had to do some promotion to let others know where and why they should purchase your title.
Lucas Miller adds in Entrepreneur that, “generating passive income isn’t as simple or straightforward as some of the world’s richest people can make it seem to be. Figuring out how to generate a steady flow of cash requires a fair amount of work.”
“Even more importantly, it requires that you dedicate your own time and investments in the right areas,” continues Miller.
There’s no shortage of ways to create several different streams of income. It ultimately depends if you want to invest more of your money or time.
For example, if you’re strapped for time, you may want to invest your money. Maybe you will take some of your money and invest in the stock market, opening a high-yield saving account, peer-to-peer lending, or becoming a silent partner of a company.
If you have spare time, you can start a blog, write a book, create an eCourse, or sell digital products. If you go this route, the key is to use your existing knowledge and resources to your advantage. For example, a consultant could create their own online course or package existing blog posts together for an eBook.
What if you want to start your own side business? As with your startup, you need to do your research to understand your market, how you’re unique, and the best ways to promote the side gig. Most importantly, be patient.
You aren’t going to start earning an additional income overnight. It may take months, even years, before you can finally start earning a passive income.
Originally published at https://www.calendar.com on May 13, 2019.
Why Entrepreneurs Should Spend Time Earning a Passive Income
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