Many of us love the idea of passive income. The idea that you can literally make money while you sleep.
This is a concept that is heavily promoted by many information marketers, who do a lot of what I call “selling the dream.” Everyone wants to make more money with less effort so many people are ready to jump on the bandwagon.
The problem is that very few people will tell you just how hard you’re going to work to create passive income. In fact, we might be better off calling it residual income, because the money will come in after you put in a whole lot of effort.
With that in mind, here are a few things to be aware of before you skip down the road of passive income.
1. Passive Income is a numbers game
Let’s take affiliate marketing as an example. The average conversation rate for affiliate marketers is 0.5% – 1%. If you’re not familiar with how to establish a conversation rate, here’s a simple formula:
{Affiliate sales / website visitors} x 100
So, if during one month your website had 5,000 visitors and you sold 10 products that would be a conversion rate of 0.2%.
{10 / 5,000} x 100 = .02
Let’s also say you are getting an affiliate commission of $2.50 and take the math a bit further. In this example you’ve had to work to bring 5,000 visitors to your site, all to make $25.
Kind of depressing isn’t it?
2. Expected Returns on Passive Income
Outside of affiliate marketing, there are a number of ways to generate revenue, many of which revolve around advertising revenue. For example, many people love the idea that they can generate income from YouTube on their videos.
What you may not realize is how low many of these returns are. The following numbers are averages on income you might expect:
- YouTube Ad Revenue: $6.33 per 1,000 views
- Podcast Ad Revenue: $20-50 per 1,000 listeners
- Podcast Sponsorship: $18 per 1,000 downloads
3. You must be a content machine
Imagine for a minute how many people are coming to your website in a month. If you are a small business, chances are your numbers are in the hundreds, rather than the thousands. In fact you may be exploring SEO projects to bring more people to your website to sell your core services.
What you may have learned is that it takes a lot of work to drive visitors to your website. You must have something to draw viewers to you and that means content. Quality content. Whether blog posts, videos, or podcasts, you must have a high quality offering to entice people – not only to come once but to keep coming back and fall into the category of a regular subscriber / listener.
But just having content is not enough. You might have the best podcast around, but if no one knows about it, you’re stuck. You’ll need to put a lot of effort into social media, or some other marketing channel to raise awareness of your content, and that too takes work.
I realize that I’m throwing a proverbial bucket of cold water on many dreams, but I do think it’s important to be aware of the level of effort it will take to make the dream of passive income a reality.
That’s not to say you should abandon all hope. What you should do is get started and work toward your goal slowly. That means building up:
- A library of content
- A large email list
- A strong following on social media
Need help to get started? Give us a shout or read up on ways to build your email list.
