You know the type of cash you collect without being there? You could be asleep or at the gym and money would roll into your bank account. Some people say it's real, while others say it's as fake as a three-dollar bill.
Before you think about this, I have a confession to make: Back in 2008, when I was in college and living in a fraternity house, I was making $3 to $9 of passive income a day.
I thought if I could make that, there was no reason I couldn't make $100 or $1,000 a day. It could be all the beer pong money in the world.
Feeling ambitious and greedy, I partnered up with my fraternity brother, Miles. We had hopes of building an empire, but one year later, it all came crashing down.
So, how did I do it and why did we fail?
I started out with an online course, which educated me on how to build a simple website using WordPress. I then proceeded to add Google AdSense blocks on my site. These are text link advertisements you see on the Internet.
Unbeknownst to most, Google has a publisher program, which splits income with you if someone clicks on the ad you placed. Payouts depend on the market and the searched keyword.
A click in car insurance (in the US) may pay you $30 to $50, while costing an advertiser who placed it using Google AdWords about the same. Google pays the broker and collects the middle.
Other markets can be crap and pay $0.10 a click. So, it's best to do research with the keyword tool and find some low hanging fruit.
You might be thinking, “Who clicks on ads? I don’t click on ads!” That’s true. However, you do click on things that interest you, and sometimes, it’s an ad.
Going back to that online course I took...
The best part of the course was using search engine optimization tactics to climb the organic listings of Google. Translation: The higher the ranking of your site on search, the more people visit.
The more visits, the higher chance someone values your content and finds use from clicking your ads.
It was an amazing time for Miles and me. We had tasted blood and the thought of going to a nine-to-five was slow-lane thinking. It just wasn't part of the lazy, fun lifestyle we wanted.
Then, it happened to Miles. One day, Miles woke up and a site he spent a week building was shot down in rankings. He was pissed and I was pissed.
He thought, "No biggie," and decided to test AdWords (the advertiser side of Google AdSense). He started pushing affiliate offers and realized they were more profitable, so he stuck to AdWords. He averaged at $100-plus a day for a month in passive revenue.
Unfortunately, for him, it was a high that resembled gambling. When competitors (others advertisers) started running similar ads, it cut into his profits. He started feeling low and wanted to give up.
Then, it happened to me. As I was researching new markets and buying domains (website names), I noticed low payouts from AdSense.
I, too, was getting shot down in rankings. So, I started studying SEO more and learned about Google tweaking the way it listed websites. They called it an “algorithm update” with funky names, like "panda," but to us, it was a big F-U.
But, it was just business. They were clearing house. The sites Miles and I built weren't the greatest -- high ranked, simple, one-five pages with hardly any content. They were built solely to maximize our wallets instead of the experience for a website visitor.
A few months later, there was another update, and most of the revenue coming in became lower for both of us.
One night, we cursed and exhausted our frustration at a party. It was official; we started losing momentum and pivoted into other projects. I recall how much it sucked to lose but miss the crazy, fun experience of growth.
Here's what I learned along the way, so you don't make the same mistakes when starting a passive income business:
1. Passive income is possible, but hard work.
It's not easy to create and stay on top. Most overnight successes we see in the news are hardly that.
If you create it, you still need to check in.
2. You can create a five-hour workweek, but it's not sustainable.
Quite simply, the type of personality you create will want to work longer.
It's the work ethic you've instilled in yourself — someone who works so hard to build something still has the same habits and built-up energy. It has to go somewhere.
3. Assets are kind of like passive income.
If you can stomach them, check real estate, paper stocks, gold/metal/oil/art are great for cash flow and ownership.
4. Marketing is passive income's twin brother.
If we continued with search engine optimization (SEO) and got higher rankings, we'd increase traffic and profits.
Without marketing, that shiny website or app you spent a year building is dead in the water and laughable.
5. Look for a real problem to solve.
Teach the what and sell the how. Our sites weren't great with content (since we focused on money first), so we suffered when Google ranked better sites higher than ours.
Plus, Miles and I were trying to live a lazy lifestyle before the empire was built. We were foolish.
6. Forget about doing all the work yourself.
Learn enough to manage and then hire. You don't do your own dentistry work, do you?
7. Failure is just part of the game.
It's the process, but make it through, and you'll be the MVP.
8. Common sense.
Learn to trust data rather than gut feelings. But, still, test new ideas and quickly cut what doesn't work.
9. People won't believe it's possible, even if they see the cash.
It goes against everything their parents taught them about being in the fields and working hard as a lawyer or doctor.
They don't realize you would be working just as hard, but in front of a laptop. It's the tech age. Adapt before a robot does your job.
10. Take the business advice from friends and family with a grain of salt.
Never trust their advice unless they have empathy for your market. Listen only if they understand the pains, suffering, hopes and dreams of your ideal customer.
11. Don't build the so-called empire on sand.
Have options. We learned Google was our real boss in this venture. It owns search, AdWords and AdSense (all amazing products). We should have sought other marketing channels, like Bing, forums and leveraged other blogger's email lists.
Today, Facebook, Twitter, Instagram and Pinterest are viable options.
So, what's your business idea? What are you looking to start? If you already have something set up, how will you grow it?
Leave a comment below.