4 Ways To Generate Passive Income

Hey, everybody. This is ryan from capitalism.com and today we are traveling with a bunch of Internet entrepreneurs who are generating income while traveling and on vacation. So in this video, we're going to cover ways to generate passive income. Passive income in your business, passive income with your content, and passive income with your investments so that you have a way to make more money in your business and put it into investments that are going to pay you for years to come, whether you are traveling, whether you are at home, whether you are at work. So in this video, we're going to cover four sources of passive income. Let's dive in. So the first thing that we should cover together about passive income is when you, when you get this, it really helps set you free. The first rule to passive income is that there is no such thing as passive income. Now, big asterisk here. There is income that is generated passively for you, but income, you know, there's no money tree or money forest. There's no place where you can go pick money. Money doesn't just show up. Money comes from other people. Money comes from the purchases and the behaviors of other people. It comes when someone else purchases something. Even if that thing is advertising on your site or your blog or your podcast, someone has to purchase something. And in order for there to be any income at all, nothing happens until something is sold. So the question is really, how do we develop passive selling machines? What are passive selling systems rather than passive income streams? Because there is no place in which you magically arrive at a time, and money just flows automatically. Many entrepreneurs or business owners hope that one day they're just going to be able to sit back, kick around, and relax because they have passive income that's predictable and they. They never have to worry about it. And that can happen. It just doesn't happen in business. It happens with investments. And even when you invest for passive income, there can still be a doomsday scenario in which nuclear war hits and the businesses that you've invested in or the income streams that you've invested in go away. So there has to be some sort of income coming from personal purchases and people in order to keep a passive income machine generating revenue for you. So there is no day in which you are plugged into the river of income and it's passive forever. But there are places for you to have income and revenue coming to you to where you don't need to work for it, or you're working an hour a month or sometimes an hour a year on things. And in this video, we're Going to cover four very different types of mostly different passive income. And when you do all four, you create a very well balanced source of income. So if one goes down, the other is not affected. And so for many years to come, you'll have income flowing in whether you're working, on vacation or doing whatever you want. The first step of having passive income in your business is to have a product to sell. I don't mean to insult your intelligence here, but I work with a lot of entrepreneurs and new business owners who are wondering where to generate their first hundred thousand dollars or sometimes their first million dollars. And they have not answered the fundamental question of what product they're selling or who they're selling to. This can be a book, it can be a piece of software, it could be a physical product. Whatever it is, there must be some sort of an offer. Nothing happens until something is sold and nothing really gets sold until there is a clear offer. And many entrepreneurs will spend months, sometimes years, developing their sales copy or they will be developing an idea without ever going out and making an offer into the marketplace. An offer can come in the form of a sales page. It can come in the form of having a product listed on Amazon.com or it could be as simple as something. One of my colleagues, Moise Ali, did as he had an idea for a new physical product and, and it was for a new type of deodorant. He took that deodorant and he put it on an Internet forum and asked for feedback. And there was so much activity on this post about this product idea that he went and developed it and that became a hundred million dollar business. It's called native deodorant. It's in retail stores all over the place. And he started that with a few hundred, I think it was 500 or $1,000. He did the first run of the product and, and so many entrepreneurs miss just the idea of having a product and making an offer because that's feedback really, really quickly. Instead of spending years trying to figure out the perfect idea, do you have something that you are making an offer to a group of people in order to sell that? And when you do that, you can automate those systems to where it's passive income for many, many years. Last night we were sitting at dinner with an entrepreneur who had an idea for a weight loss product. There's a thousand of those, right? And what he did was he just had a book that somebody else helped him write. He put a sales page together on it and he put it into the marketplace and Started talking about it on Facebook. That's an offer. It may have not been a perfect offer, but it was an offer. It was a product in front of people. So take your book, your software, your physical product, and start putting it in front of other people and that's how you start generating the income stream. This individual started selling their weight loss, their weight loss product, their weight loss book, and it started doing several thousand dollars a month. So they did a follow up product, a version two, and they started doing more customized plans for customers. And now that person's making over a million dollars a year just putting up products in front of a hungry crowd. Are you taking your products and putting them in front of people? That's a product and that's how you start generating income in a business that can be scaled and automated for more passive income. Passive income source number two, your audience and your customers. I work with a lot of physical product entrepreneurs, especially entrepreneurs who are selling physical products on sites like Amazon.com or Kickstarter or their own website. And they get so focused on making the next sale or the next sale or the next sale that they forget that all of the money is in the audience and the people who have already given you money. The way that you start to automate and scale your business is when you stop thinking about just products and you start thinking about the people behind those purchases of the product. Your greatest asset that you have in business for passive income or for scaling a business is the people who are making purchases or the people who are following your business or your brand. The best way to start developing an army of eyeballs that will come back and buy your products over and over again and is through putting out content that actually helps your target market. If you put out a piece of impactful content that goes out to the ideal audience, they start following you and buying the products that you have in the marketplace. For example, I work with a few brands who are in the beauty space, in the health space, and they started off just selling one or two products on Amazon or their own store. And when they got tired of the highs and the lows of good sales days or bad sales days, we came up with the idea of, why don't you put together a monthly buyers club for your existing customers and they pay a little bit of money every month in order to get discounts on future purchases. You're going out to the existing buyers, list the existing audience, and turning that on with a decent sales process now generates thousands, sometimes tens of thousands of dollars in predictable passive income. In that business and, and it creates more loyalty with the customers and the audience. So they're coming back and buying those products more and more often. So instead of going out and just thinking about, how do I get more people to buy my thing? Look at who is already following you and your existing customers. They're your greatest source of potential income, even passive income. And the more you roll out products or offerings to that existing group of people, that the faster your business grows and the easier the money is. Now, if you're not selling physical products or you have no product to sell, you can still generate passive income just by having an army of eyeballs, just by putting content into the world and having a following. If you listen to any podcast, if you read any blog, you'll see ads and you'll see affiliate products for sale on both podcasts and on those blogs. By you having a following of people who are linked to listen, you have to say, by you creating meaningful content to your ideal audience, other people will pay to be in front of those eyeballs. Why is that? Because everything starts when something is sold, including advertising. So other companies pay to get new customers and you are the portal through which they discover those brands. So you can have passive income even if you don't have a product, as long as you control the people and the distribution. And that comes in the form of having a responsive audience. Passive income source number three Compounding investments. Many entrepreneurs, many investors only look at investments in terms of what their immediate ROI is going to be. So many people who, if you have $100,000 or $1 million sitting around, you look at, all right, how do I get to, how do I get a 10% return on this money? So I'm getting $10,000 a year coming in. That's a totally fine question to ask, but we're missing the entire compounding effect of that money because your overall passive income is going to be much, much higher five years from now, 10 years from now, if we're investing in compounding investments. So yes, you could go out and you could buy an annuity and have 10 or $12,000 a year coming in passively from your $100,000. But ultimately I think that's a mistake because you miss out on the growth of that investment and that income stream. So, for example, we might look at something like dividend paying stock. Dividend paying stock may only generate 4 or 6% of a return on your investment year one, but in year two, as that dividend buys more stock, as a company raises their dividend, our 6% now goes to 7%. And because now we have more income coming from that dividend, it's going to compound and buy a little bit more stock and that dividend is going to up a little bit more. And so our 7% becomes 8 and a quarter and then 9 and a half and then 11. And over the course of 10 or 20 years, our passive income goes up exponentially rather than at a fixed rate. Now I think it's important to have your lifestyle set and taken care of in the form of some sort of mostly passive income. But that needs to come from your business. When your business is generating the income to allow you to live the lifestyle that you want, the rest of your investment dollars should be going into compounding the sources of income like dividend paying stock, like real estate. These places that go up in value over time. And if you have more money or you are more sophisticated buying other businesses, because you turn those businesses into asset producing machines that create more products, that have more customers. And you can use that to buy more businesses and combine the businesses to complement each other's assets or even do roll ups and consolidations, which is a story for another day. But real estate, dividend paying stock and buying other businesses can be compounding sources of passive income. And that needs to be the foundation of your passive income portfolio. Passive income source number four, fixed rates of return as long as you still have access to to the principal. So our last source of passive income is going to be the most predictable source of passive income. But the important piece that many people miss is they give up the money in order to get the fixed rate of return. And there are ways to keep access to the money while getting a predictable roi. Here's what I mean. One of the most popular places that people will put money when they retire is, is into an annuity. An annuity is a place where you can take a lump sum of money, invest it, you give up that principle, but you're getting a guaranteed fixed rate of return until you die. I don't think that's a wise use of your money because we are basically giving up access to the dollars that we've spent our whole lives or several years trying to earn in exchange for a fixed rate of return. But we can do that in other ways as well. So for example, one of my favorite places to invest for a more fixed rate of return is real estate syndications or real estate funds. This is when someone in my network is going out and buying an apartment building or they have a series of mobile home parks, or they have a large portfolio of single family homes. And I am investing into their fund, really into their business. They're using that money to go buy more assets. And I have a fixed rate of return on what I'm getting every month, every quarter or every year. Another form of a fixed rate of return is in municipal bonds. Municipal bonds are government issued. And the reason why this might be a better thing to consider than something like an annuity is because you get that principal back when a bond matures or you sell the bond, you get the money that you've invested back and it's very, very tax efficient. So if you're getting an 8% ROI on your municipal bonds, that's in a lot of cases tax free or tax efficient money. And when the bond matures or you sell it, you have access to your money again. It is rarely, if ever a good idea to just throw your principal, throw your money away in exchange for passive income. Because there are ways to keep the money and generate passive income on top of it. If you think of the money that you have as being rentable and one day you're going to get that asset back, that's a much healthier way to approach your overall wealth. Rather than just working until the day when you can retire and hoping that you're going to get passive income for the rest of your life, keep it in your control and we can create a portfolio of passive income that has much higher income, much lower downside and keeps you in the driver's seat. One final thing to wrap up. I know a lot of people are looking for like the thing, what is the place in order to have passive income or to generate money so that I never have to work again. And we just covered what is a, a multi year journey here over these four steps and we didn't even talk about things like one of my favorite loopholes for passive income and deleting taxes is buying websites which is a form of buying other businesses. And if you like this stuff, we go into each one of these areas into more depth here on the channel. So make sure you are subscribed. We also have a podcast that goes deep into each one of these areas. It's called the 1% and you can listen to that on Spotify or on itunes or or if you are looking for insiders access to people who can do this for you as well as some strategies that are not available to 99% of the world. We have a monthly program called the 1% monthly which you can find around this video. Thanks for watching and we'll talk to you soon.