Exploding the Myth of Passive Income

moneyI’ve been working online for many years and during that time I have come across so many people selling the idea that I can make money while I sleep through ‘passive income’. To be honest, I already do a lot of what they suggest works and I make a very decent income as a result of it. But … and it’s a big but, the phrase ‘passive income’ just doesn’t do it for me. Why? Because it’s anything but passive, and today I thought I’d weigh in to the argument and share the reasons why I know there is no such thing as passive income.

We’ve all seen the ads that make the promise that we can earn easy money online, we may have clicked on the links and signed up for someone’s free e-course; some of us may even have paid good money to learn (and earn) with the best internet marketers around. And that, my friends, is the nub of the problem. Because we bought into the idea, we now need to believe it’s possible for anyone and everyone to achieve the dream.

Now, don’t get me wrong. What I’m not saying is that you can’t make money while you sleep. As authors we all know the truth of that. For example, our books sell on Amazon whether we’re awake or not. But that’s not passive income, it’s just income.

So what exactly is passive income? Well it’s the idea that without any effort on my part whatsoever I can create a ‘set it and forget it’ routine that regularly brings in a huge wedge of cash each month. The problem is that the theory ignores the amount of work needed to:

  • get the product you are selling created in the first place, and then
  • tell the people that might want to buy it that it’s available.

As authors we also know that writing the book is the easy part. Getting it published and then marketing it, either directly to our audience or to agents and publishers, takes much more time and effort than many of us anticipated.

Another type of so-called ‘passive income’ include affiliate links. The ebooks would have you believe that all you need do is sprinkle a few choice links to other people’s products in to your blog post or email and, hey presto you’ll be a multi-millionaire in no time. Of course, ‘this only works if you have a huge audience to work with’ they say, and ‘it’s important to build an email marketing list’.

Now, I’m quite fortunate I do have an audience, a rather large one as it happens with an email list that contains some 20,000 names and email addresses who are all actively engaged with what I do. it’s highly targeted and focused around women’s health. I also happen to have written ‘the book’ on the subject (snappily titled ‘101 Handy Hints for a Happy Hysterectomy‘!). But even though I have all these benefits already, I have never managed to get anything but a paltry sum from affiliate links, so I stopped bothering.

In fact, even though I have the ‘ideal’ online business in some people’s eyes because I have the traffic and the email list, I still need to expend time and energy running that ‘business’. Every day I need to write the emails, respond to the comments, answer the queries, add content to the website and feed Facebook, Twitter, LinkedIn and Google+.

The website, which currently receives about 200k unique visits everyone month is anything but passive. Sure, people can buy products 24/7; they can leave comments, add their own stories and join in on the forums … but I still need to process the orders, approve the comments, share the stories and moderate the forums.

Generating passive income is a full-time job. Yes, you will be able to sell things to people all over the world at any time of the night or day, whether or not you’re in bed, at your desk or on holiday. But, it’s not going to happen by itself, even if the website is hugely popular, top of the Google search ranks and self-generating in terms of email marketing lists.

So please, don’t be sucked in by the promise of easy money; you can earn a good income while you sleep but not without a great deal of up-front and continuing effort on your part.

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  1. Awesome article. I’ve been reading about passive income for a few months and you said it all. I always catch myself thinking: that’s not that passive at all, it takes a lot of work to keep it going. Good luck on your business! Cheers from Brazil.

  2. You are absolutely right of course Jon, we have many words and phrases that are overused or misused and this is definitely one of them. I think another commenter pointed to pensions being ‘passive’, except that you had to do the work up front to qualify of course 🙂

  3. Like ‘entrepreneur’, I think the words ‘passive income’ are not only overused but used incorrectly. I believe that many people use the words ‘passive’ and ‘residual’ when what they really mean is recurring.
    Something has to be done up front, a book written, an asset purchased, a membership base or network built etc and then income from that can recur.

    For example, J.K. Rowling could stop working and will continue to receive significant incomes from the sale of her books, film royalties, investments etc.

    Elvis Presley earned an estimated $55 million in 2012… mind you, I guess in his case it was pretty passive 🙂

  4. agreed — it seems like once the writing is done, the hard work starts. I suppose writers can be really social, but writing is a solitary task, marketing not so much.

  5. That’s a good point about other forms of income Bill and not one I was going anywhere near with this particular post. I guess another form would a pension you might receive upon retirement. However, unless you are independently wealthy as a result of parents, you are going to have to do the work that gets you to that exalted position and you’ll also have to manage it to some extent, even if there is a manager doing the day to day grunt work. As for writing … well, mostly people don’t know about your book unless you tell them … and tell them …. and tell them …! It’s an ongoing job book marketing is. Hope you’re OK and I’m looking forward to your new book coming out soon. 🙂

  6. It has been my experience that passive income can be realized, but usually it results in aquiring an asset and having someone manage that asset. Getting the asset, like a farm, rental property, oil/gas/coal leases or partnerships usually has some barriers to entry like being a “certified investor” or just has a high entry cost. Most of the high entry cost is managed by luck, successful parents, or plain old hard work.

    Writing is very similar to farming. You write, then see how the market treats your harvest.