Passive income has become all the buzz over the last several years. You might have heard many people talk about adding passive income streams inside their business so that they increase their income without the added effort.
But the reason why more people aren’t doing it is because contrary to its name, passive income isn’t really all that passive.
Actually, for most people starting a passive income stream is more work upfront and takes an unspecified amount of time to reap the rewards. And this often discourages people from ever adding passive incomes inside their business.
But let me tell you why this shouldn’t stop you!
What’s Earned and Passive Income?
So, what really is passive income?
Before we go down the passive income rabbit hole, let me explain earned-income so that we can compare the two.
Most therapists and coaches are familiar with the earned income concept as it’s the primary component of most of our practice models. In addition, many of us have worked as an employee at some point in our lives meaning we’ve received earned-income.
Earned-income is when you earn a specific amount of money in exchange for working a designed amount of time. You may have heard many business gurus refer to this concept as ‘trading time for money.’
If you provide 1-to-1 services to a client, you likely provide your services at a specific rate, let’s say $150, for a designed amount of time, maybe 50 minutes. This means that your earned-income is $150 per 50 minutes of work with a client.
Passive income, on the other hand, is income that you receive that doesn’t require you to work a designated amount of time in exchange for a specific amount money. Passive income is more fluid then earned income.
Let me give you an example: I create and sell digital templates specifically for therapists and coaches. Since I’ve listed the digital templates for sale, I’ve gotten purchases at various times of the day and on several occasions, I’ve gotten sales while I slept. This is a passive income stream.
Passive income sounds amazing, right?
I totally agree and I wouldn’t give up my passive income streams for the world. But it’s important to know that it not always that easy!
Initially, it took me a lot of effort (and hours) upfront to create the digital templates, write effective product descriptions, choose the best keywords for search engine optimization, create attractive listing images, and create my Etsy & website shops – and initially I didn’t make a cent doing any of it.
But, once the digital templates were created, listed and optimized, I started to get more sales and because the bulk of the work is already completed now it feels more passive.
Let me break this down a further:
I look at earned income as instant gratification and passive income as delayed gratification.
Earned income you see the results from your work almost instantaneously or at least in very short and predictable time frame (instant gratification) but you’ll will likely receive a smaller reward and continually hit the income glass ceiling.
The Income Glass-Ceiling
What’s the income glass-ceiling?
It’s essentially when there’s a maximum amount you can earn based on the amount of hours you work.
For example, if you work as an employee at an agency for $25 per hour, 40 hours per week. The maximum you can earn a week is $1000. And once you’ve worked the 40 hours and you’ve been paid, you’ll need to work another 40 hours to receive your full pay cheque again.
On the other hand, passive income is delayed gratification because it takes time and effort upfront with little predictability of when, if, or how much you’ll get paid for your efforts. But, once built and optimized, there’s really no limit to have much you can make.
However, it’s the if and how much that often prevents most people from building passive income streams inside their businesses.
When I first started out, two common thoughts that plagued my mind were “what if it doesn’t work?” or “what if I fail?”
I had to work through it but I didn’t let the thoughts stop me (at least for long)!
When I first created and listed my first few digital templates, I didn’t get any purchases initially, so after a few days of nothing but crickets I changed up listing images, switched keywords, and swapped Etsy tags all in an attempt to increase search engine optimization to increase sales.
After I changed this information 3 times, I got my first sale. Since then, I’ve re-optimized my original listings for a total of 8 times and now I usually get several sales a week (and my shop has only been open for 3 months).
I could’ve called it quits when I didn’t see sales coming in.
But I didn’t.
Why?
Because I believe that it’s your attitude, your actions and your perseverance that are the drivers to your success – so I kept going.
And because I believe that if you continue to work at something, make the necessary shifts and reframe your mistakes into valuable lessons – I knew it was inevitable for me to get it right (sometime).
I looked at it this way, if it can take Thomas Edison 1,000 attempts to make the first light bulb – I certainly can try to change my digital template listing 8 times before calling it a ‘failure.’
The Difference Between Earned and Passive Income?
Before we take a deep dive into the differences between earned and passive income, let me illustrate it with a chart:
As illustrated in the diagram above, with earned income you put in maximum effort and then you receive a specific amount of money for that effort, then once you’ve been paid. You’re back to zero and you repeat the process over and over.
So going back to our 1-to-1 session example, if you provide 1-to-1 services at $150 per 50 minutes and you’ve completed the session and your client has paid you, now you need to find another client or wait for the client to return to make another $150.
Now, I want to be clear – there is nothing wrong with this model (I use it in my own business)! But relying solely on 1-to-1 session for some, can feel like a never-ending fight for financial freedom to ultimately continue to hit the income glass ceiling.
That’s where passive income streams come to the rescue!
As illustrated in the diagram above, with passive income you put in maximum effort upfront for an extended and unspecified period of time to eventually receive money that will grow with time.
Passive Income and Effort
You might be asking, “Okay. Does that mean once the upfront work is completed, passive income is truly passive?”
My answer is no, not completely.
BUT after you’ve built your passive income stream, optimized and automatized it, the work you’ll need to put into it lessens with time so that you continue to have passive income flow.
Let me give you a few examples:
If your passive income stream is:
(1) Blogging, you’ll need to continue to regularly write and share your blogs with the world so that you can continue to engage your readers and increase your search engine optimization in order to increase your earning potential. However, your existing blogs help grow your SEO, build trust with readers and if monetized, make you money as people land on your page.
(2) Creating digital templates, you’ll still need to add new products to your shop to increase interest and periodically investigate keywords to increase search engine optimization so that people continue to find your shop. However, your existing products can still bring in passive income as customers purchase your templates.
(3) Selling digital courses, you’ll need to continue to build your audience, talk about your course, and launch it time-to-time so that people know your course is out there and build excitement. But the sweat equity you put into creating and automizing your digital course will serve you because once it’s built you’ll never have to build it from scratch again. You can sell it over and over again.
(4) Group sessions, you’ll need to continue to market your groups, host your group and be available for group members so that they can ask questions if they need support. But once you’ve created your group curriculum and materials, you save time for future groups and you have the opportunity to double or, even, triple your income but work less hours then if you provided the same support through 1-to-1 sessions.
Passive Income & 1-to-1 Sessions
Despite the fact, that it’s a myth that passive income streams are, well, passive, I truly believe they are the key ingredient to a thriving therapy or coaching practice that provides stability and financial freedom.
And the best part is that you don’t need to give up on 1-to-1 sessions in order to add passive income streams inside of your practice!
In fact, passive income streams help supplement your current 1-to-1 work. So, if you want to take a vacation or a client cancels their appointment, you won’t be worrying about where your next dollar comes from.
Isn’t that the real reason you started your own practice anyway?
It certainly was for me!
So I built in passive income streams inside of my business.
And I’m so glad that I did because last year, I had a family emergency where I had to take 3 weeks off from my practice and cancelled all of my 1-to-1 sessions.
My main source of income completely stopped for 3 weeks.
But at this point, I had already added several passive income streams inside of my business and that allowed me to focus on the thing that truly mattered in my life – my family.
I believe I couldn’t have done it without having passive income flow built into my business model.
And that’s when it hit me!
That if it can give me the autonomy, stability and financial freedom that I needed, it can certainly help other therapists & coaches.
That’s why I’m launching my first ever membership program called the Passive Income Builder for therapists & coaches who want to add passive income streams inside of their business.
Doors will open to the membership in early spring 2023 and founding members will only pay $7 (CAD) per month. And, once you sign up, there are no monthly commitments and you can cancel at anytime as the membership has a month-by-month payment structure.
In the membership you’ll learn:
- How I’ve added blogs, digital courses and digital templates as the top 3 passive income streams inside my business model,
- How to identify your passive income stream,
- How to built our your passive income strategy and marketing content,
- How to strategically market your your passive income so that you maximize passive income stream flow
- Plus, you’ll have a range of support behind you!
If you want to be notified when the Passive Income Builder membership opens and become a founding member, sign up for the waitlist below so that you’ll be the first to know when enrollment opens!
Also, scroll further to take our Passive Income Personality Test!
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