Passive income is one of the best things on the planet.
It’s freedom. It’s money-while-you-sleep. It’s a beautiful thing.
Unfortunately, there’s a massive misconception that passive income is created primarily through product sales or investment vehicles. (i.e. Mutual Funds, Dividend Stocks, etc.)
Whenever I hear the word ‘passive’, I immediately think of Flight Media—my business.
Sure, we have one product that generates about $600-$1,000/mo, and that’s passive, but that’s only a tiny, tiny fraction of the revenue we generate.
In this post, I’m going to help you redefine the phrase, ‘passive income.’
Why? Because a majority of you don’t have a product, don’t have time to build a product, or don’t have a desire to create a product.
You have a service-based business model and you want to be able to make money while you’re on vacation.
(I say that, because I vacation 5-6 weeks per year—only possible because of the business model our team has developed!)
By: Josh Coffy, blog.flightmedia.co
Rethinking ‘Passive Income’
A year ago, when I was listening to Pat Flynn’s amazing Smart Passive Income podcast, I thought that I needed a product to create a passive income.
So I set out, spent 75+ hours developing a course on Twitter marketing, built the sales funnels, launched it, and made a few thousand dollars. But after the first month, it began hovering at $500-$600 per month in revenue.
I began to complain to my mentor (who’s developed a $1 million product) and he stopped me.
“Josh, why are you complaining about passive income? You have 2 employees who generate income for you.”
I immediately shut up, and decided to hone in on what we’re best at: helping businesses grow through our marketing & design services. I realized that for me to create a decent passive income, I’d need to have the right people, in the right seats, working for Flight Media.
*Side-note: I also Googled ‘passive income’ to see the true meaning.
Passive income is defined as: an income received on a regular basis, with little effort required to maintain it.
In other words—income you generate consistently, with little to zero effort is passive income.
If you think about your current business services, they can be passive income, as long as you aren’t doing the work.
(While this sounds like common sense, most people don’t consider service-based business a form of ‘passive income’, simply because labor is involved. It is passive. Only if you play your cards right.)
The Passive (Automated) Process
Both product & service-based income have their cons.
Selling a product sounds like easy money, but the upfront investment in product development, beta-testing, market-research, sales funnel development, marketing & advertising, and ongoing product support are time-consuming.
Service-based income involves manual labor, meetings, proposals, customer care, customer support, and my least-favorite—invoicing & trying to get invoices paid. (I have a secret weapon for that below)
Here’s how I turned Flight Media from a 2-employee to a 7-employee company, in a 5-month span, that generates a hefty passive income.
1. Productize Your Services
CasJam summarizes a productized service quite nicely: a productized service is one that is focused on a single deliverable, packaged at a set price and scope, and delivers a compelling value proposition.
In layman’s terms: creating a package that has the same deliverables and price each time.
How to Productize Your Services
Break out a word document or good ole’ piece of paper and write down the services your business provides.
After you have them, ask yourself:
- Can it be done without me?
- Do I have written steps for completing each service?
- How much does each service cost?
- Is it a recurring service?
If the service can be completed without you, can be packaged and can be recurring, excellent. You’re on your way to passive income. If not, then consider dropping the service or putting more focus on the services thatcan.
Typically, you’ll have 2-5 services left.
For each of those services, create a package that includes specific deliverables, a specific completion timeframe, and a specific price.
Write them on your wall, tattoo them in plain view (just kidding—or am I?), and memorize them like the back of your hand. To sell each package confidently, you need to know every working deliverable, workflow, and price.
2. Systematize Them
Once you’ve created a package for each service, make sure you have a detailed document of how to complete each service from the ground, up.
These are your ‘scalable systems.’ They’ll be the guiding light for your employees during times of you being unavailable to answer miniscule questions. (Which should be all the time.)
Flight Media uses Google Drive to build all it’s systems.
Each system is first documented in a Google Drive Doc, then converted into ‘how-to’ screenshare videos, using Screenflow.
In Drive, we have an entire sector called “Flight Media University.” (See below)
Within that folder, there are various subfolders, for different departments, with screenshare videos, as well as the written process documents.
Having systems makes new hire training a very fast process–seeing as it takes virtually no training time for our managers. It also minimizes time spent answering questions.
3. Automate Your Billing (or else)
I’ve coached several dozen entrepreneurs in the last 18 months.
EVERY single on of them has explained their billing frustrations to me. Every. One.
I found that, on average, they spent 10-15 hours per month dealing with any of the following:
- Invoicing clients
- Getting slapped with Paypal’s high fees
- Re-invoicing monthly for renewed services
- Chasing clients who didn’t pay their invoices (often losing thousands of dollars from it)
- Manually withdrawing money from Paypal (or similar softwares)
- Different invoicing schedules
- Loads of stress
I’m betting you’re in the same boat. (Don’t worry. You won’t be in about 5 minutes!)
I was for about 12 months, until I began looking everywhere for a solution. I tried Mint, Paypal, Quickbooks, and about half a dozen other softwares—all consuming loads of time and getting me nowhere.
Then I found PaySimple.
I signed up to give it a test run and I haven’t looked back.
Currently, Flight Media’s billing process looks like this:
- Invoice client for initial services (through PaySimple’s invoicing system)
- Client gets pro-rated to 1st of following month
- Client gets automatically billed on 1st of each month
No chasing people to pay invoices. Just automated, recurring, glorious billing.
Here’s a peak at our dashboard:
Basically, we look forward to the 1st of each month because the revenue that comes in gets larger and larger. (And larger)
They even allow you to customize automatic email notifications that get sent to clients.
We now have automated, personalized emails that get sent for:
- Upcoming payments (3 days prior to being charged. This gives them time to cancel, if desired.)
- Expired Credit Cards
- Receipts (of course)
- Failed payments
- Overdue Invoices
- Recurring & pro-rated schedules
- and a ton more
If you’re in the rut of ANY of those items listed at the very top, I highly recommend you stop reading and get PaySimple.
I’ve recommended PaySimple so many times to clients, that I decided to call them to partner & get a discounted deal for our subscribers before announcing it in this blog post! (Yes, you mean that much to me!)
Click here get 50% off the first 3 months.
It’ll change your game. It’ll let you focus on what you love—not stressing over unpaid invoices.
*Side-note: we get a tiny commission if you sign up, but that’s not why I’d write an entire 1,500+ word blog post. I did it for you.
Passive income is relative to what you want to offer.
Whether that’s a product or a service, you can develop a massive, recurring stream of income with the right steps and the right tools in place.
Once I realized that I could productize Flight Media’s services and create an automated income from it, I mapped the 3 steps above and quintupled (yes, 5X) Flight Media’s revenue.
What are you trying to productize, scale and automate? Leave it in the comments. I’ll happily provide input!