The Truth About Passive Income: What it is, what it isn't, how to make it, and the systems you need to make it work
This post contains affiliate links. If you purchase products via the links in this post, I may receive a commission. Note that I only recommend products that I truly believe in.
I realize that this is a topic that gets a bad rap - and has a lot of baggage associated with it. So I want to go into tons of detail about passive income and what that really means and how I’ve made it work for me.
I firmly believe in “passive income” - I’ve been building up passive or leveraged income businesses for years now.
But I also know that product creation is the opposite of passive, and that many people who talk about this are complete idiots (let’s be honest, shall we?).
This is not some sleazy bullshit - this is being intentional about how you set up your business and your products.
Passive income isn’t about not working or "4 hour work weeks", it’s about LEVERAGING YOUR SKILLS AND TIME FOR MAXIMUM IMPACT AND INCOME.
So today we’re going to talk about what passive income IS, what it ISN’T, which parts of your business you can automate to make it more passive, and we’re going to take a detailed look at my own passive income “system” or what we call a “funnel”.
This system essentially automates selling, pitching, marketing, sales, and fulfillment of products.
It’s all about creating and building systems that WORK FOR YOU - they do the heavy lifting - and your job is to get new people into the top of the funnel.
What is passive income?
Passive income is not tied to how many hours you work.
It’s SCALABLE because you can make more sales without more work on your end. You have an infinite depth of inventory, and more sales does not mean more work. In my experience, it’s the only way to create multi 6-figure businesses as a one-person operation. Whether you sell 5 or 500 copies of your eBook or course, you don’t need to do more work.
Passive income is all about “front loading” - it requires you to do the work up front, automate the processes, and then continue to make revenue day after day, month after month.
Passive income allows you to focus on the FUN STUFF - the big vision, creative, important stuff - because the little things are automated. (You shouldn’t be sending out digital files or passwords - that’s what automation is for!)
What ISN’T passive income?
Passive income is not a “set it and forget it” type of business - you still need to get people to your site and into the “top of your funnel” (which could be signing up for your free email course, or registering for a webinar, or downloading a video).
Passive income is NOT entirely passive!
It takes an incredible amount of work and discipline to build the products and systems that allow you to earn passive income. And the people who have that drive and motivation in the first place, generally are not the types to “rest on their laurels” once the money starts coming in.
This is just a reality check: Passive income is never entirely passive. Even when your systems are set up, you still spend time marketing yourself and your business to reach new audiences. And customer service is an ongoing project.
Benefits of Passive Income:
Like I really need to tell you this, right?
The best thing about passive income streams is the FREEDOM.
You can’t put a price on that. I love to travel, I have gone on cross country road trips, international European tours, and all the little getaways and mini-vacations in between, and being able to say “YES” to everything that comes your way is an INCREDIBLE feeling.
Knowing that even if you decide you need to chill out for a month and rest, or go see family or friends, or just do something crazy, and that your business is still running and making money the whole time, it’s just amazing.
And for me, the biggest thing is being able to work on NEW businesses and NEW exciting projects once the current product is set up and automated. I love building new businesses and new projects, and automating everything allows me to work on new stuff which holds my interest!
It also allows me to build up my income.
Meaning, if I create a product that makes $5k/month passively, I can create another product and double my income. And another to triple my income. it’s what allows me to continue to add new “digital assets" to my “portfolio” of products and keep increasing my income without tons of extra maintenance and work.
Best Products for Passive Income:
There are two main types of passive income products.
eBooks and E-Courses (digital downloads and programs).
They are also generally two DIFFERENT types of products.
E-Courses - usually have open and closed registrations, lots of sales in a short time, launches, then can go evergreen later
eBooks - available for sales every day, bring in consistent sales
There are TWO types of passive income products - the kind that are always on sale (“evergreen”) and the kind that are only for sale during launch periods or two to four times per year.
Other passive income products could be photography, art prints, digital downloads like planners, templates, or blog themes, physical products that are fulfilled via drop shipping.
I sell e-courses and digital products which are both passive income streams. I spend about an hour or two per week working on them and maintaining them after the initial set up. They are a combination of online courses, downloadable PDFs, automated drip email courses, and other resources. I love that I can spend time creating something once, then sell it again and again as many times as I want!
In this post I will be focusing on digital products such as eBooks and courses.
RELATED: The Ultimate Guide to Creating, Selling, and Marketing Your Own eBooks and Digital Products
Marketing is NOT passive
But you can still automate your marketing efforts with these systems.
One thing to remember is that although the courses, products and income is passive - marketing isn’t! So I spend most of my time on my business marketing and getting in front of more people.
Since the products themselves have “infinite” inventory, my job is to get as many people as possible into my free courses, into my funnel, and to the sales pages.
With my passive income systems, if I want to GROW my business, then I need to put in some time. But if I want to take a break and go on vacation for 4 months and not work at all, then everything just runs on autopilot and stays steady, and my income stays the same.
I’m obsessed with implementing next-level marketing strategies, and since my products and income are passive this is where I like to spend my time.
I have done so many marketing experiments, but the ones that work the best in my experience (and lots of testing) are:
Often times people with huge audiences do not have their own products, and they make a living by promoting other people’s products to their audience.
Affiliates and joint venture partners are awesome. It’s the best way to expand your marketing and sales without more work. However, wrangling joint venture launches and affiliates can be a challenge.
Anytime you are working with other people and depending on them you need to be extra on top of things and it can be more work than you anticipate.
Using affiliates is more about leverage than it is truly passive. But it can mean that you get in front of hundreds of thousands of new people, without spending the time building that audience yourself. I’m all about scaling up quickly - as opposed to spending a year growing your own traffic, just tap into other people’s audiences with strategic partnerships.
This is a truly passive part of my marketing and sales strategy.
A free email course based on a specific topic can help you establish trust and sell your products passively while people move through your “funnel” (learn how to set yours up here).
The free email course mentions my paid course at strategic points throughout the course, sprinkling some promotional copy in with the extremely valuable information in the email course.
The last email is a pitch for the paid course, where people can learn more in depth about the topics discussed the free course. This sells my products every single day as people go through the free email course and are introduced to my products, my personality, and my expertise every day for 8 days and then pitched on a one-to-one scale.
If you don’t have a free email course with a cohesive, connected arc, you can set up an autoresponder sequence of your best past articles, any limited time promotions you have for new subscribers, and other info.
People are most excited about you when they have just signed up for your email list, so you want to be “communicating” with them right away.
Webinars convert much higher than any other marketing strategy. You can reach up to 10%+ conversion rates depending on your pitch, your product and your audience.
That means that if 100 people show up and you deliver the webinar with the right strategy, up to 10 people could buy at the pitch. This blows every other metric and strategy, even email marketing which I swear by, out of the water. The combination of urgency, engagement, high-value content and the live energy makes for a powerful sales strategy.
And once you have a few recorded webinars, they can actually be set up to passively market and promote your products too.
Let’s say you do a live webinar where you pitch your signature product at the end. You have the recording, a valuable piece of educational content that already has a pre-recorded pitch included!
You can set up a simple “funnel” that allows people to opt-in for the webinar replay, then they watch the content, they learn a ton and become familiar with you and your expertise, and are then pitched your product after they watch the trainings.
This is like a compressed email course funnel.
It is a similarly passive approach: people opt-in with their email for the free video, replay or training, they are automatically delivered the video/replay access, and then they are given an opportunity to purchase your paid product.
How to Set Up The Tech Stuff
When someone buys your product, you don't want to have to manually fulfill their order.
Choosing Your E-Commerce / Product Selling Solution
You need to be very clear about what you need from a selling platform and think beyond selling 10-20 e-Books.
Make sure to check for:
Monthly fees vs. % of sales - monthly fees are far less expensive
Affiliate program included with multiple options and tiers
Automatic digital downloads - so you don’t have to individually email the products to each buyer
You need to be using systems that automate EVERY part of the selling and fulfillment of your products.
I’ll show you how I do it:
There are many ways to create a passive income selling system, such as someone buys the product from, gets a unique password to a membership site, and then can access the material.
If it’s a digital download like an eBook or other digital file, then you just set up your store and button, and attach a file delivery action to deliver the PDF download. That’s the most simple form of passive income. Someone simply buys the file, and immediately gains access to the PDF or other file (yes you can also deliver videos, .zip files, and more).
The Simple Passive Email Course
Here’s one of my favorite super simple passive income systems, specifically for email drip courses. You can set this system up with ConvertKit (or MailChimp, but we use ConvertKit.)
If you’re just getting started, I recommend using this system for your first online course. It is simple and inexpensive to set up. And it’s automated through and through!
STEP 1: Update! We switched to ConvertKit. So now we integrate our checkout cart and ConvertKit for email courses and it's SO MUCH EASIER than using MailChimp!
STEP 2: Build out your course content as a "Sequence" in ConvertKit. When people are subscribed to the Sequence's tag it will trigger the email course.
Again, your checkout cart will automatically add people who purchase your product into this list when you set it up during the Store and product set up. You can set up a welcome email to be delivered immediately once they are subscribed to the list, and then lessons can be delivered every day or once a week.
(There's a full tech tutorial in Your First 1K. Get in on this >>>)
STEP 3: Create a new product in your checkout cart
STEP 4: Add a delivery file PDF that is a simple “Welcome Packet” explaining how the course is delivered, any passwords or special information, contact info, and product details. Answer as many potential questions as you can in this document. The main thing to include is a reminder for people to check their Spam or Promotions tabs in Gmail, as the course emails can end up in there.
STEP 5: Deploy your "Buy Now" buttons and add them to your sales page (I prefer to use the text URLs and add them to my own Squarespace buttons or my own custom button images).
Now the flow looks like this:
Leads land on your sales page > purchase your product through a checkout page > Convertkit delivers the purchase message, the Welcome Packet PDF file, and automatically puts them on the private “Course List” > this triggers the automation workflow to begin > customer receives the email course automatically on the days that you set up in the workflow.
This is a great way to set up a simple email course.
Including Instruction Sheets
In Step 4 I mentioned adding a welcome packet. This is extremely important.
You need to create a file that answers any and all potential questions that your new customers might have. When will they receive the first lesson? How long will it be until the get a password? How do they access the course? Where can they reach you? What should they do if they have a question or are missing a lesson?
This will ultimately make your passive income system even more passive. You don’t want to be answering a bunch of emails, especially if they are all about the same thing! So you can continually update and refine your Welcome Packet PDF as you get more common questions. It’s like a pre-course FAQ and instruction booklet.
You need to send a thank you email or welcome packet with further instructions to students.
There might be a week or two between the person registering and the course starting, so it’s helpful to include:
a list of start dates
when the lessons are delivered
how to access the course community
how to join the live chats or coaching calls
and trouble-shooting instructions.
Sending this information automatically reduces the need to keep answering the same questions and provides a sense of comfort for the student.
Sometimes, you may even want to include a video tutorial about joining the course, or finding the group forum. Just like creating products up front and selling them creates passive income, creating these robust FAQ’s and resources for your new students or customers will mean less work for you in customer service hours.
This makes the entire system more passive for you. Some people don’t read the instructions, but an easy-to-follow welcome package will reduce the email queries you receive.
The Big Picture:
From Casual Visitor to Raving Customer
Okay, there’s a lot going on now! See, I told you passive income wasn’t for the lazy :)
So now you’ve got a course or product that’s all set up to be delivered passively. Awesome!
You’ve got landing pages, and a few lead magnets, all delivered automatically via LeadPages and ConvertKit.
How does all this stuff, you know, fit together?!
I made a visual map so you can see!
Basically, people enter your “funnel” - meaning your free content, your email course, your autoresponder.
They are exposed to you multiple times in an automated sequence - they see you on video, get to know you from your emails. They become familiar with you and your expertise.
Over time, they are pitched your paid product via emails or on webinars. They go to the sales page.
If they purchase, they are taken into the paid course automation, or delivered the paid product right away via your delivery system.
Your job becomes getting people to sign up, get into the “top” of your funnel, and start engaging with you and your content.
Traffic > Signs up for your free lead agent > learns a lot and gets to know you > learns about your paid product > begins to trust you > visits sales page > purchases product > receives product or added to automation course > receives lessons.
As your business grows, so will your funnels and passive income systems. You might introduce more complex systems, more customization, and more products.
These days I ONLY do things that can create passive or leveraged income.
Everything I do leverages my time and energy in a way for massive impact with minimal maintenance.
I don’t offer services or coaching, because it just doesn’t make sense to do anything hourly. And it doesn’t make sense to make things you can only sell once.
I’m all about putting in the work up front, and getting paid for years down the line. So every day I am either creating or promoting things, not “maintaining” things. Maintenance is boring and a waste of your creative energy.
Passive Income has also changed the way I think about scaling up. It’s a lot easier to imagine the possibilities of increasing your income and impact when your products have infinite depth of inventory, and you know that when more people buy, it doesn’t actually create more work for you.
Want to learn how to create your own product from scratch and launch a small digital product? Hell yes you do! Get all the tech tutorials, step by step instructions, guides and resources in my course Your First 1K.
Ready to get famous, create raving fans, build your audience and make more money? Webinar Rockstar™ is the only Step-by-Step Masterclass that shows you how to create, promote, and profit from your own webinars.
This post contains affiliate links. If you purchase products via the links in this post, I may receive a commission. Note that I only recommend products that I truly believe in.