I have a bit of a soapbox for you all about passive income vs scalable income in this short episode. I feel really passionate about this because I really love entrepreneurs. (We are an amazing group if I say so myself!) And I love our community so much that I hate it when we’re fed lies about different business models, and when we’re only told half the story. I also hate it when terms are used wrong to make something sound flashier for a sales page.
One thing this happens with is the concept of passive income. It’s so flashy right now — who wouldn’t want money while they sleep with zero effort ever? But, what people are calling PASSIVE income, isn’t actually passive — it’s scalable.
So, I’m sharing what passive income actually means — plus, plenty of examples of real passive income. And, then I’m sharing what template shops, courses, memberships, and all the other things touted as “passive income” *actually are*.
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Let’s start with the definition of passive income:
Passive income is income that requires no effort to earn and maintain.
We often hear of things like digital courses, online shops, and other online-equse business things being called passive income, typically by the person teaching you how to do it.
However, from my experience, things like courses and digital products are anything but PASSIVE. Other business owners can tell you the same thing.
These offers require a lot of work upfront to create and even after that if you are doing it right. There is also a ton of effort in selling it and promoting it.
After people buy, you then are serving those customers. This typically includes things like customer support, Facebook communities, maybe even coaching with you, especially if it’s a high-end course. I’m not complaining about any of this! I just want to make it clear that when you hear people selling their course and calling it passive income, it just isn’t true.
What should we be calling these streams of income like template shops, courses, membership programs?
This is scalable income.
What I think of as scalable income is simply the one-to-many model. You make something once and that thing can serve many people in your business. You are not guaranteed to make any money but there also is not a limit on your earning potential.
You are not limited by your time to do the work, which would be limiting your income. Instead, you can have the capacity to “scale it” by as many people who want to buy it. This offer is built for big numbers if you can get it there!
This is exactly what courses and membership sites offerings look like. If you create a course and sell it, you put in the same amount of effort to create it whether 5 people buy it or 500 people.
The maintenance of an offer like this and serving your audience can be more work with more people, but not that much more work because the offer was designed to be SCALABLE.
A great example of this from my business:
Take my website template shop for example, where I spend the same amount of time creating a template regardless of how many people buy it. But the maintenance does change because of things like customer support and marketing. When there are more customers, there is more support needed. If you want to sell more, you need to market more.
Why does passive income vs scalable income matter?
It is important to know the difference between these two things, passive income vs scalable income so you can be educated on “passive income” that isn’t passive.
You can know for yourself that if you’re creating something like an online course business and it’s GOOD, that doesn’t mean you will have thousands of dollars rolling in a day with zero work on your part while you lay on the beach.
The idea behind passive income is that when you aren’t working on it and paying attention to it, it still works.
What is actually passive income?
Here are 4 types of income that I have myself that I’ve found to be “passive”.
- Affiliate income and ad revenue. This is not always passive. You might need to promote and share to make money from affiliate marketing. Some of this is passive for me because I make thousands a month consistently from affiliate marketing without much work and sometimes without sharing about the products I am an affiliate for that month. The income comes from work I set up in the past with blog posts. Ads work similarly to this because you can set them up and let them run without much effort.
- Real estate investing. Now, this isn’t always passive. It isn’t truly passive for us right now, but we will eventually be in a place where it’s more passive and possibly completely passive if we were to hire property managers for our 3 properties.
- Small offers with Facebook ads. The “tiny offer” concept can be close to passive. Especially if you aren’t managing the ads yourself.
- Income from stocks, cryptocurrency, and other investments. Things that you buy and can just sit on are also passive.
I’m sure I’m forgetting some here but those are some more truly passive income streams.
Scalable is really what we are after because there is so much opportunity there. You might earn nothing from it. You hear of people all the time launching courses to no audience and then no one buys.
But if you do make money, the opportunity is limitless and not based on your time availability like service work is. Masterminds can be scalable just like memberships, courses, and digital product shops!
I hope you have enjoyed this soapbox on passive income vs scalable income. I share all this because I want you to be educated and leery of people telling you that courses and membership sites are ways to make money with no effort.
I know I left plenty of thoughts and details out. But, I hope this gets your mind spinning on ideas and gives you clarity as you navigate growing your online business.
August 3, 2021