Passive income is appealing as it allows people to earn a regular source of income. A passive income lets people focus on other interests or business ventures while knowing their living costs will be covered. When done successfully, passive income allows people the luxury of having more free time and achieving financial freedom.
This doesn’t mean that earning a passive income comes easily. It is usually the result of a considerable amount of time and effort poured into a business venture. It is a reward for hard work and wise business decisions over time. Plus, it’ll help you to put more money into your savings account and get rid of any student loans or credit card debt that you might have.
If you’d like to explore the potential of earning a passive income, this article will discuss how you can get started and important things to consider beforehand. We’ll also discuss seven business ideas that have successfully generated passive income for others.
What is passive income?
Most businesses require continuous effort and allocation of resources to maintain a stable financial future. If the owner steps away from the business or withdraws its support, keeping it afloat may be a struggle. This is the fundamental difference between passive income businesses and traditional ventures.
While both businesses take the same amount of upfront time and effort to get running, there will come a turning point where a passive income business owner can step away to focus on other things. In contrast, the business continues to generate revenue.
As with any business venture, passive income businesses also carry risks. For example, the environment in which a passive income stream thrives can shift over time and make a previously profitable idea no longer viable. Even with the best passive business models and infrastructure, business owners must remain vigilant and react to these possible changes.
Before you get started
Like all businesses, passive income sources will not start generating substantial income without a proper plan in place. If you have no experience running your own business, you must consider a few simple things beforehand.
Firstly: Be realistic about what you will achieve through this venture. Passive income is not the get-rich-quick answer often touted to budding entrepreneurs. You may initially see very little return for what will likely be considerable early groundwork. This can be disheartening if you enter your business expecting to be financially free after only a short period. Try not to be too attached to outcomes and understand that it may take time to see a return.
Secondly: You can quickly become jaded with your business if it’s not something you are passionate about. Many sources of passive income are mechanical. This means there is little need for creativity and expression once the infrastructure is in place.
If making money is your sole objective, then this may be no issue, but if you want something meaningful as well as profitable, then you might want to set up a business that you are passionate about.
With these two considerations in mind, the best way to generate passive income is to start small and find a business niche you are interested in. You will be far more invested when you’re putting the work into something you care about.
Top 7 passive income ideas
If you’re not sure what kind of passive income stream to go for, consider the following business ideas that have been proven to work for people worldwide.
1. Start a dropshipping business
Dropshipping is considered to be one of the most accessible routes to starting a business, especially for those with limited experience. With dropshipping you will set up an eCommerce store to advertise and sell products from other companies.
The reason why dropshipping is so simple is that there’s no need to maintain your own stock. Instead, orders placed on your eCommerce site are sent straight to the manufacturer, who coordinates packaging and shipping.
Your main role with dropshipping is to advertise the manufacturer’s products. You’ll start seeing a passive income when you successfully build an audience that repeatedly returns to your eCommerce store.
Check out our beginner’s guide to dropshipping for more information on how you can get started.
2. Sell digital products
Selling digital products is another great way to secure a passive income without worrying about stock inventory or management. Digital products you can create and sell include high-quality ebooks, online courses, or stock photography.
The easy thing about selling digital products is that you only have to create the product once, and then you can focus all of your efforts on marketing and optimizing your online store. If you have the skillset to create any of these products, you may have a lucrative passive income business.
3. Start a print-on-demand store
A print-on-demand store is a natural hybrid of the first two options and another effective way to generate a passive income through eCommerce.
This type of online business involves creating your own graphic designs, which you can then print on clothing, mugs, and other accessories. Most print-on-demand platforms rely on dropshipping services, so when a customer orders one of your designs, it goes straight to the manufacturer, who then takes care of printing and shipping.
Print-on-demand can be an extremely lucrative passive income stream if you already have some form of an online following or loyal fanbase. You can also collaborate with other designers and websites to broaden your potential audience pool.
4. Peer-to-peer (P2P) lending
This passive income stream involves lending money to individuals in need of financial assistance and earning interest through repayments. The more you lend, the more income you will receive.
P2P lending carries a potential risk not found in other passive income streams. Although you can use reputable facilitators to check someone’s borrowing history, you still lend money to people you do not know. Individuals using P2P lending platforms may have been rejected from traditional bank loans due to bad credit scores.
To mitigate the risk, it’s a good idea to spread your wealth across several small loans until you have built an in-depth knowledge of the process and risks involved.
5. Create a job board
A lesser-known passive income idea is to create an online job board and charge businesses to post their job vacancies. Recruitment agencies and companies will always need a place to post their jobs, so why not provide them with one?
Job boards don’t require much upfront cost but need a considerable investment of effort in order to become viable. If your job board gets no traffic, then businesses will not see the benefit of posting their job opportunities. As a result, you’ll have to work numerous hours to build a large pool of potential candidates or website traffic before businesses consider working with you.
6. Buy and sell websites
Many entrepreneurs are steadily building wealth and turning a profit each month by buying and selling websites. This may require a significant initial investment, especially when purchasing a website that already generates good revenue, but the payoff will be worth it.
Many websites that are bought and sold, such as successful dropshipping and affiliate sites, already have the ideal infrastructure and connections. This means you may not have to put much effort into reorganizing the business and can reap the benefits of a passive income once you have paid off your initial investment.
Check out our ultimate guide to buying your first website or our top advice for successful affiliate marketing if you want further guidance on this passive income stream.
7. Purchase vending machines
Buying a vending machine can be a viable source of passive income. The first step to earning a passive income through vending machines is to secure a good location and buy a machine. After that, you have to take care of product delivery and occasional maintenance costs.
Then you can step back and let your vending machine earn money for you. Once the sales revenue from snack purchases matches your initial investment, any subsequent money you earn will be passive profit.
Side hustle ideas
Here are some side hustle ideas to get those creative juices flowing, which will help you come up with ideas to generate some extra money online.
- Start building a blog.
- Selling stock photos.
- Rent out your car.
- Lease out unused parking spaces.
- Earn thousands of dollars by becoming a social media influencer,
- Start a YouTube channel and earn money from the YouTube Partner Program.
- Starting a blog and selling online sponsored posts.
- Join an affiliate program and get started earning commissions.
Final thoughts
Generating a passive income to secure an optimal work-life balance remains the dream of many. Suppose you’re prepared to do the initial work, manage the initial costs, and execute your plans carefully. In that case, you may one day find yourself in possession of a lucrative passive income business.
At Flippa, we’ve been helping new and experienced entrepreneurs buy and sell their online businesses since 2009. With over 3 million users and 300,000 digital assets sold, we have the necessary tools and expertise to help you maximize what can be achieved with your business.
If you’d like some guidance on buying and selling your first business, or for any other inquiries, don’t hesitate to contact us. To keep reading our insights, check out our guide to what buyers are looking for in an online business.
