You've probably heard the term "passive income" used in the digital marketing space. But do you have a clear understanding of what it is and how it can help your business?
In this lesson we'll focus on breaking down what it means and how it can be built into your digital product business.
We also have business building resources that will help you build an amazing digital product business.
Let's Start with the Different Income Models:
Pros and Cons of Active Income
The incentive for this traditional model is to "climb the corporate ladder" working for raises and bonuses, and saving for retirement. The goal is to work, make steady progress and retire to obtain time freedom.
At the same time, active income results in trading time for money. Time is the thing you'll never get back. Progress can be slow or non existent. You have to be present to perform tasks and handle transactions consistently in order for this model to work. If you don't show up, you don't get paid.
We've had a global pandemic that massively changed the way we work. More people are working from home than ever. Wages have become stagnant, raises, bonuses, bonuses and retirement are not what they used to be. And the cost of most everything has risen to unmanageable levels.
One of the pros of active income is that it's consistent, as long as you show up. A beginning strategy for a digital product business is to work 9 to 5 for the consistency and benefits.
It helps to have options and sometimes if you like you job (even if you don't), you should stay until it's feasible to leave.
The Pros and Cons of Passive Income
People have earned passive income forever, but it wasn't as mainstream as it is today. For example, authors and entertainers have traditionally earned passively in the form of royalties from music, books and artwork. Investors earn passive income from dividends and royalties from land, oil extraction etc. Landlords earn from rental properties etc. Those used to be the primary ways to earn passively.
For the most part, traditional income models blended with these forms of passive income, have been the way Americans have earned money.
The drawback to earning passive income from a digital product or affiliate marketing business is that while you're getting things set up you may not earn consistent income. There may be periods when you may not make anything.
How Passive Income Works with a Digital Product Business
A digital product business allows you to create products for free using tools like the free version of Canva, Google Docs and Google Sheets, making them available to a wide audience of people. You can also list them on popular free platforms like Etsy for a minimal $15 charge. If you sign up with us you can get 40 free listings which helps you save on listing fees. All of this can be done in your spare time.
Today, the internet has provided additional ways to earn passively or at least semi passively for free. And having a digital product business is one of the most cost effective ways to earn from this model without a huge upfront investment.
Passive income can be earned from commissions (affiliate marketing) and product sales that happen 24 hours per day, seven days per week. The goal with passive income is to create something of value to the market once and get paid for it again and again.
The way entrepreneurs are earning passively is by teaching courses, hosting a video channel or podcast, running a blog or setting up an online store. Some entrepreneurs all of these methods to earn consistent income.
You create the product, course, video, podcast episode, etc., one time and drive traffic to it daily to earn money. The internet provides a path to reach a global audience for free. You can also use paid ads to drive traffic as well.
The way to make passive income work well is to perform market research, create digital products that are needed and wanted by your target audience.
Place your products in an online store, promote them with social media, a blog, a video channel and/or a podcast, and make it easy for your target audience to purchase them.
Sign up for business social media accounts, optimizing your platform for SEO, creating a video channel, or podcast, and learning as much as possible about how to effectively use paid ads, provides your business with the best way to reach and engage with the widest audience.
These forms of advertising use a one to many communication style (versus one on one) to get the word out to as many people as possible at one time. For example, your videos can reach thousands of people at one time, through courses, webinars, live presentations and more.
Once your products are created and placed on your platform of choice, you can use tools like Tailwind (details in the Resources section below) to auto share them on social media. You can participate in groups, provide training, webinars and use a number of other ways to get the word out about your business.
Everything in your digital product business (products, videos, podcast episodes, etc.) can be created once, and you can earn from them again and again.
And instead of getting paid once, you can get paid over and over again for things like eBooks, your original music, podcast episodes, video training, and courses.
It's important to build sales and lead generation funnels (check the Resources section below for details), and test them so that they are optimized to help you earn passive income. Once you find a process that works, it's time to duplicate it to earn from additional sources of income. This is how smart business owners are able to scale their business, earning even more from a variety of different products.
By performing market research, consistently promoting products that are in demand, and using well optimized sales and lead generation funnels, business owners can be paid a hefty sum of money for years well into the future for one product or piece of work.
Pros and Cons of Residual Income
Other examples of residual income include earnings from rental property, interest and dividend income, and income from the ongoing sale of consumer goods.
Starting a subscription or membership program can bring in residual income. This means that in addition to being paid passively for your products, you can receive repeat payments for a service you provide to your audience. Giving them someone of value on a regular basis, bring in earnings as long as the person is a member.
There are many payment and commission structures you can offer members and subscribers to your program.
How Residual Income Works with a Digital Product Business
Membership programs can be offered for your digital products that allows your audience to get a new item or an update each month for a product, bundle, free items etc. For example, you can offer a book of the month at a discount, you can charge a fee for access to podcast episodes, or access to exclusive training courses.
You can provide subscription bundles to your audience that gives them content that they can't get in other places. This is a way to ensure that you receive consistent income each month.
Here are some examples of membership and subscription opportunities for digital products.
1. Exclusive Content Membership
Offer a membership that grants subscribers access to exclusive content. This could include:
- Premium Tutorials and Courses: Advanced tutorials, step-by-step guides, or in-depth courses not available to non-members.
- Webinars and Live Q&A Sessions: Monthly or bi-weekly live webinars where members can interact with you directly, ask questions, and get insights on specific topics.
- Exclusive Downloads: Special templates, graphics, or digital tools that are only accessible to members.
2. Resource Library Subscription
Create a vast library of digital resources that members can access for a monthly or yearly fee. This library can include:
- Design Templates: Regularly updated design templates for websites, social media, printables, etc.
- Stock Photos and Graphics: A curated collection of high-quality photos and graphics for use in various projects.
- Toolkits and Checklists: Comprehensive toolkits and checklists for different aspects of running an online business, such as marketing, project management, and content creation.
3. Community Access and Support
Build a membership program centered around a supportive community and personalized assistance. Features can include:
- Private Forums or Groups: A private online community where members can network, share ideas, and seek advice.
- Monthly Office Hours: Regular office hours where members can book one-on-one time with you for personalized guidance and support.
- Accountability Groups: Small groups within the community that hold each other accountable for their goals, share progress, and provide encouragement.
These subscription programs not only provide value to your customers but also create a steady stream of residual income for you as a digital product creator.