What “Passive Income” Really Requires

Passive income isn’t really passive unless you are already rich and are investing in stocks, and then you are probably not trying to figure out how to make money online.

In the online business world, when you hear “passive income” it usually means income from products, residual income, recurring income, or income from ad sales. In all these cases, you are working for this money, it’s just that the money you earn isn’t directly tied to hourly work. Instead, you are building value into a product or service that you can resell over and over (like an ebook), or license for royalties (like software themes or plugins) or display ads on (like a site with info about a hobby). In some cases these fees may also be recurring.

All of this requires work. It’s not passive. There is no free money in life unless you inherit it.

You can earn money while you sleep, but you still have to earn it.

The passive part comes in after you have created the value, and built the system to deliver it. If you’re smart and you create a good system in the right niche, you can earn relatively passive income for awhile. Until someone else comes along and discovers the easy money and you have competition. That’s how business works. Which doesn’t mean it’s not worth doing–just that you need to be prepared to be strategic and put in the time and work required.

So. Now that we’ve covered that, here’s how to start moving away from all your income being tied to the number of hours you work.

Here is my “passive income recipe” for newbies:

1. Keep earning money the way you know how. Don’t start any new business project with the idea that it will make you rich overnight, or in the next year. It won’t. It’s a long term investment. Stay grounded.
2. Start a blog on a unique topic that you are passionate about. Why a blog and not another form of website? A blog is the easiest tool to create content on a regular basis without having any technical knowledge. Blogging also lands you in a community of other bloggers, making networking and marketing a lot easier. Go to wordpress.com and set up a blog there–it’s free and it’s the best blog platform. Get your own domain name rather than whatever.wordpress.com. It’s not required, but it’s cheap ($15) and you’ll be happy you did later, because you will be building PageRank and incoming links in Google that will be attached to your domain, not to a WordPress subdomain. WordPress doesn’t need your PageRank, keep it for yourself.
3. Commit to three things:
   1. Write a new post at least once a week, more if you can swing it.
   2. Learn everything you can about blogging as a business. Start at www.problogger.net. Consistently apply what you learn to your blog. Research affiliate marketing, e-commerce, copywriting, SEO, ebooks, AdSense, and anything else that piques your interest.
   3. Develop your online presence. Comment on other blogs in your niche or related niche. Find out where your audience hangs out online and be there. And most importantly…
   4. Understand your audience and what they need. What problems do they consistently have? This will tell you what they will pay for and what business opportunities exist in your niche.

If you do the above and sustain it for a year, you will have:

1. A blog with a decent readership.
2. Enough knowledge to start making some money with your traffic.
3. A good idea of where you want to go next.

If you decide after a year that you want to start an online store drop-shipping golf clubs instead, you will be starting with a much better knowledge of online marketing, and at least one site that gets traffic and has some PageRank which can provide a substantial boost to other projects you wish to start, especially if they are in a related field. You’ll be a better writer, a better marketer, and a better person.