Passive Income Ideas for Small Business Owners

by / ⠀Startup Advice / May 20, 2021

Passive income offers investors a way to make money without putting in a lot of work. Creating a couple of passive-income pipelines can help small business owners ensure that their company survives difficult times.

Many people confuse passive income with get-rich-quick schemes, but almost every passive income source will require some investment up front. Your investment might be time, skilled labor, artistic endeavor, money, or some combination of these and other assets.

To get a better idea of what a passive income might look like, this article will provide a high-level overview of popular and proven categories. Start jotting down some ideas of your own, do a little brainstorming, and choose the option that makes sense for your small business. Most passive income sources require that you put in the initial hard work for weeks, months, or even years before they become a reliable source of income. Choosing well, commitment, persistence, and patience will yield the best results.

Three Common Types of Passive Income

Passive income streams generally fall into one of three categories.

    • Residual Income.
      • After paying bills and meeting financial obligations, residual income is whatever you have left. This is also sometimes called “discretionary” income.
    • Leveraged Income.
      • Create something one time and use it in multiple settings. You get paid for your initial investment on a regular basis without additional effort.
    • Active Leveraged Income.
      • This type of passive income requires consistent effort but allows you to make more money by simultaneously involving more people.

Here are seven specific categories to consider when setting out to develop a passive income stream. The intent is to help you decide on a general direction. After that, of course, you will need to dive into your own research and market analysis.

1. Creating and Maintaining Website Resources

This endeavor, of course, necessitates some level of expertise and an initial investment of finances. Additionally, web technologies and website promotion strategies are becoming increasingly complex with each passing day. It will help to remember that you have competitors and check in on them periodically. However, after a certain investment of finances, knowledge, and free time, it is possible to make an additional online profit from your small business. Passive income from an operational site can come from:

  • sale of permanent links;
  • sale of advertising space; and/or
  • participation in partner programs.

2. Passive Income on Intellectual Property

Any original creation that people find fascinating and/or useful has the potential to become a product. Your product can be a book, an idea, a technological innovation, or your ability to create unique and engaging crafts. Creating a custom video channel filled with tips and tricks serving your niche can easily become a source of passive income. Which brings us to…

3. Create a YouTube Channel

In the past few years, YouTube has become one of the most effective ways to generate passive income. After creating a branded product, you then create a YouTube channel. In that space, you share secrets, useful tips, further describe your product, and provide overviews. You have the ability to discuss the benefits of your product in more detail using video than you do in text form. Keep in mind that, unlike other types of passive income, a YouTube channel will require ongoing effort and time.

4. Financial Investment

You might decide to invest in real estate, including homes, apartments, and land. All of these can be rented out to others and, depending on your location, it’s typically not that hard to find interested parties.

Another good source of income might be to invest in a business project. You don’t need to start up a new idea from scratch, either. Instead, consider investing in a ready-made, already-operational work project. Depending on the type of business project you select, you may need to have at least a working understanding of that niche.

5. Network Marketing

The main requirements for successful network marketing are communication, optimism, and a little knowledge of psychology. Several systems of network marketing are quite doable and many have proven themselves lucrative. If you decide to engage in this area of business, keep a couple of points in mind.

  • Examine the company you are considering from all sides. Read reviews, positive and negative. Study the company website carefully. Be clear about and the requirements for investment.
  • Don’t focus primarily on selling goods, but rather on building your network. Share secrets with newbies, encourage them, learn new marketing trends together.

The old days of hosting product “parties” in your home are pretty much over. Recent technological advancements have made network marketing easier than ever. If you previously considered network marketing but decided it wasn’t your style, you owe it to yourself to take another look.

6. Affiliate Marketing as Passive Income

Affiliate marketing is a perfect way to make money passively by advertising and selling other people’s goods. You won’t need to pour a lot of effort into developing new products and services. Instead, you use your business to help others sell whatever they have to offer. This is one area where you will want to read the fine print on any agreements very carefully. When done right, affiliate marketing can be a win-win for you and your supplier, but both sides need to make sure that reality matches expectations.

7. Selling Online Courses

As an entrepreneur, you are all most certainly an expert in one or more fields. That being so, you can easily monetize your experience and expertise by creating and selling online courses. Use your website or blog to sell online courses or create a separate website specifically dedicated to the course. Make sure your courses offer your unique insights, something specific to your experiences that can separate your offering from the pack of imitators.

The Bottom Line

Narrow down your choices by using this list to find the idea or ideas that best fit your small business. After all, relying on just one passive income stream might not be the plan you find most appealing. Especially if your primary small business is seasonal, prepare for those downturns by creating at least a couple of passive income sources. You might be surprised to find how many business owners have turned their side hustles into extra income, yes, but then leveled up to make it their main gig.

About The Author

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Helen Wilson is a professional content writer. Her main spheres of specialization are Small business and Marketing. She also studies topics about psychology and health.

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