Do you want to keep working for the rest of your life? Probably not! Last week on the blog, we looked at the benefits of working ‘on’, rather than ‘in’ your business, and how this can help you to develop and grow.
This week’s post ties into that, as we’re going to explore the importance of passive income, and how generating money in this way will provide you with personal and financial freedom, so you can work less, and earn more!
Active vs Passive
Active income is an income you’ve earned through participation, like wages, a salary, tips, or profits from a business that you actively maintain. Active income requires effort to generate, which means that it is limited by the time you have available. Without your input, active income stops coming in.
Passive income is regular income that requires very little effort on your behalf to maintain. Because passive income requires very little input on your behalf, and continues to generate income over time there is virtually no limit to the amount of passive income you can generate.
Most people tend to focus on improving their active income before building their passive income – but when you look at things more closely, it’s easy to see why you should be focusing on building up passive income streams as a priority!
The definition of a successful business
Owning a business can be a great passive income stream – but you’ll need to make some big changes to make it happen! As we discussed in last week’s post – when you start a business, you’ll probably spend most of your time working ‘in’ your business.
However, for your business to reach its full potential, as time goes on, you’ll need to take a step back, and spend more time working ‘on’ your business – making big strategic decisions, whilst delegating the day to day running of your business to others.
The ‘end game’ of building and developing a successful business is creating a profitable business that works well without you – getting someone to manage your business for you, whilst you benefit from the profits.
The result is a business that generates you income without you having to do anything at all – the true definition of a passive income.
Multiple passive income streams
Whilst building a successful business that can operate without you is a great way of generating passive income, its only one aspect. A good passive income should come from multiple different streams, so that you’re protected if one stream becomes compromised.
Examples of passive income include:
- Rent from investment properties
- Dividends from shares
- Investments in government bonds
- Residual income – from resales of intellectual property (books, photos, videos, network marketing commission)
- Leveraged income – franchising your business, selling products or IP through an affiliate, sub contracting work
By investing your money in building multiple passive income streams, you’ll be making your money work harder for you, so in the long run, you won’t have to work as hard!
For further information on building a passive income, or transforming your business, book your free, no obligation coaching session with Coach Pam today by calling 07540 888016 or emailing firstname.lastname@example.org.
Next week, we’ll be exploring the importance of offering your customers a guarantee, and how this can really benefit your business.