What Is Passive Income?

“Never count on making a good sale. Have the purchase price be so attractive, that even a mediocre sale gives good results.”   –Warren Buffet

 When people see the term “passive” income, they often think of earning money with no work. However, nothing can be further from the truth. It requires work to make passive income.

However, the work you do is done once, and then you make money in the future, such as royalties from a book.


It’s different from service-based work where you must do the work each time to produce income. With passive income, you create something today that keeps earning money later.

Examples of Passive Income

Retirees are familiar with these examples of passive income:

  • Savings accounts
  • Investments (including IRA, 401k, pensions, etc.)
  • Real estate

Retirees know that the above examples enable you to spend money one time and keep earning income until you tap into the principal. These are traditional vehicles to fund retirement.

But, you can also earn passive income with a web-based business. Here are some examples:

  • Information products
  • Membership websites
  • eCourses
  • eBook sales
  • eCommerce sales
  • Affiliate commissions


The Benefits of Online Passive Income

When you are an employee, you earn money with an hourly wage. While this is a quick way to generate cash, it is limiting and certainly not feasible for employees who must stop working due to health and other reasons.

No Freedom Allowed

Angry Time Clock Controls Your Freedom


For example, insurance sales people develop passive income by earning a little commission from each person who buys the product. Then when the customer keeps paying for that product, the salesperson gains a recurring commission.

In this way, they earn a good income because as more people buy insurance, the commission continues to grow. This method requires the salesperson to do a lot of work to get sales, but eventually the reward is through “passive” income.


The Two Types of Passive Income

  • Promote Other People’s Products:

This is one of the fastest ways to get started. Use the following six simple steps:

  1. Figure out who is your ideal customer
  2. Know the audience well
  3. Find quality products and solutions
  4. Sign up as an affiliate or develop your own eCommerce website
  5. Promote the product or service
  6. Ask for the order to generate sales


  • Create Your Own Products:

The advantage of this method is you keep 100% of your profits. At first, creating the product is labor intensive. The product can then be sold through a variety of sales channels. They include:

  1. Blogs
  2. eCommerce
  3. Kindle
  4. Amazon products
  5. Affiliate promotion

Affiliate promotion is paying a commission for other people to sell your product. Two examples of websites selling products to affiliates are ClickBank and JVzoo.com.

They provide, literally, hundreds of people who want to sell your product. By paying them a commission for each sale, your income will grow, month after month and year after year.

business man

Key to Success

Know your audience. Then develop your action plan. Do you like to write? Develop a blog to attract your audience and promote products and services to your readers.


When you develop a good relationship with your readers, they will try the products you recommend. Once you have a reliable list of buyers, a viable passive income will result.

Key Resource: Affiliate Marketing, A Step-by-Step Approach to Online Marketing, by Sandeep Sharma. This is a primer on developing your online affiliate marketing business. There are seven steps to help you make money online. It is a good book if you are new to marketing online and will guide you through the sales process. Click here for the book.













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