Is Passive Income Your Goal?

My recent business mindset survey has revealed something very interesting about passive income.

It seems that doesn’t score very highly in peoples minds and isn’t something that many people are really interested in.

This surprised me a lot and prompted me to write this article, so I can clarify a few things and establish why this might be.

I speak very highly of passive income and consider it to be the holy grail of business, but I think the term is sometimes misunderstood.

What Exactly is Passive Income?

Let me start with a Wikipedia definition:

Passive income is an income received on a regular basis, with little effort required to maintain it.

Now, we’re not talking about “get rich quick schemes” or anything like that here. Sorry, but they don’t exist.

We’re talking about creating systems which make money whether we’re there or not, whether we’re asleep or awake and without us having to work for an hourly wage.

If you’re an employee or even self employed, this isn’t passive because if you’re not working you’re not being paid (allocated holidays excluded of course).

I guess one way of looking at it is if you’re riding a bike on the flat. A bit of effort here and there when you feel like it is enough to keep the bike (your income) moving along, even when you’re not peddling (although I don’t recommend falling asleep).

Normal income would be more like riding a bike up hill. As soon as you stop putting the effort in the bike (your income) stops.

Ideally you’d strive for the downhill analogy where the bike (your income) keeps going and even increases in momentum with no ongoing effort at all.

I hope that clarifies what passive income really is. Now let me dispel a common myth.

Passive Income Isn’t Just Online

Normally people associate passive income purely with online business and quite understandably. An Online Business is probably the easiest way to create it.

However, any system that produces income without you having to work directly for it is passive.

A conventional business setup where you’re the boss and you only turn up a day or so a week might be considered passive income too. You’ve been smart enough to put the systems in place to keep the business going whether you’re there or not.

Even a system which required other people to work for you is still passive income from your point of view. Not from the point of view of those doing the work for you, but from your point of view it’s still passive income.

This might be one reason why people don’t think they strive for passive income.

Maybe people don’t realise that if they’d like to earn more money but not have to be at work all the time, it’s passive income that they’re really aiming for, even if they don’t realise it.

Why You Need Passive Income Streams

Hopefully it’s pretty obvious by now why you should strive for more passive income but let me give you a real example from the survey.

Twice as many people are interested in growing their business than they are in passive income.

At first glance this seems understandable. We’re in economically hard times at the moment. People aren’t lazy and don’t mind working hard to keep their businesses going or to grow them.

However, you can’t grow your business without some sort of passive income.

Doubling the size of a small business within a year is quite feasible in many cases. Working 100 hours a week instead of 50 isn’t feasible.

Without getting too technical, if you also consider the law of diminishing returns then doubling the hours you work wouldn’t double the size of your business anyway.

So how on earth do you grow your business?

You create systems (some involving people working for you) than can handle your growing business and you aim to work less rather than more. Not only is this more desirable, it is far more feasible. In fact it’s how every big business owner operates, there’s no other way.

A true business which is growing requires passive income, you can’t keep working more and more indefinitely as your business grows.

So if you thought passive income isn’t for you then that’s fine, but you’ll need to accept that if you don’t have it you don’t really have a business, you have a job.

Whether you’re an employee, self employed or even a business owner, it’s still a job if you don’t get paid when you’re not working. That’s why you need passive income.

I guess when I carry out another survey and everyone ranks passive income at the top, I’ll know my work here has been worthwhile :)

If you found this interesting then you might find this interesting too, it’s a great method for creating growth and passive income that can be used in conventional offline businesses: Wash, Rinse and Repeat Your Business

Feel free to leave a comment and if you’re not already on my mailing list then join up today, I often email passive income related tips and ideas for you to use.