How to Add Passive Income to Your Business
As a web designer, I work with a lot of small business owners on making simple updates or additions that create a big impact in their business success and growth—things like improving website design, increasing website traffic, or getting started with email marketing.
And all of these things are great to do!
But you know the single “update” that can make the biggest difference in overall business income and growth?
Incorporating passive income products!
What is passive income?
Passive income is any type of income you earn while not spending much time or energy directly working for it.
But it’s not about being lazy—it’s about being efficient. It’s a strategy to maximize your business impact with the time and resources you have.
Consider this:
As a business owner, you have a finite amount of time in your day.
With that time, you can serve a specific number of customers/clients with your services.
Your services have a somewhat specific dollar value (meaning, the maximum amount people are willing to pay to receive them).
So, your potential business income is defined by the amount of time you have available to provide your service at the highest value you can reasonably charge for it.
That may not seem so bad, but also consider this: to achieve your full income potential, you must spend 100% of your time providing your service.
As any small business owner knows, there’s a lot that goes on behind the scenes other than providing 1:1 direct services. Content creation, email marketing, social media management, strategic planning, website updates, following up with clients and leads and partners and vendors… the list goes on!
The point is, many small businesses are limited not by the number of customers interested in purchasing our services—we’re actually limited by our own availability to provide those services.
There are, alas, only so many hours in a day. ⏰
And when you trade hours for dollars, not only are you capping your income at your hourly rate, but you’re also prevented from being able to serve all potential clients who would be interested in purchasing from you.
Booooo, right?!
Fortunately, passive income products offer a way you can provide your services and make sales—without being confined by the number of hours in a day.
Before we get into how exactly this works, let’s be clear on why it’s so impactful:
How does passive income benefit your business?
Passive income is a strategy that allows you to create more impact, more income and free up more time in your business. This means you can:
reach and serve more people
make the same (or more!) $$ while working fewer hours
dramatically increase your income potential
free up time for other business activities and growth (aka, work on your business instead of simply in it)
free up time for your personal life (travel! family!)
earn income from anywhere, any time of day or night
All in all, it’s one of the biggest game changers in overall business growth and income potential.
Types of passive income to use in your business
There are a few different types of passive income you could incorporate into your business: affiliate income, digital products and membership programs.
Let’s chat through each of them and when they’d be a good fit for your business:
Affiliate income
Affiliate income is based on commissions you earn from referring people to another product or service you recommend. Many companies now offer affiliate programs—from mega retailers like Amazon, to small start-ups looking to grow a following, to LikeToKnowIt, an app that aggregates affiliate links for many different companies.
Affiliate payouts vary, but usually offer 10-30% on a one-time basis (per referral), or recurring basis (monthly, as long as your referral stays subscribed to the company’s service).
When to use affiliate income in your business
Incorporating affiliate income into your business is a great option if you meet two key conditions:
you have a reasonably large audience to refer to, whether via your website traffic or social media following
you are already recommending and referring your audience to the service or product because it offers benefit to them
In other words, affiliate income is only a viable and authentic option for your business if you have enough traffic to make meaningful income from it, and you’re maintaining integrity by only referring to products and services you would have referred to without making a dime from doing so.
Some influencers earn hundreds of thousands of dollars annually from sharing affiliate links. But the reality is, many small business owners are not generating enough traffic to make substantial income from affiliate programs.
That doesn’t mean you shouldn’t join relevant affiliate programs and get them set up for a future point down the road when you are generating more traffic—it’s just a heads up that this is not an immediate income earner for most people.
Also: It’s important to comply with FTC guidelines by properly disclosing any use of affiliate links. You’ll see this disclosure on my posts if I share an affiliate link (which, by the way, there’s one down below 😎):
This post contains affiliate links through which I may earn a commission if you choose to purchase, at no additional cost to you. As always, these are products or services I personally use & love!
Digital products
Another way to incorporate passive income into your business is to develop a digital product that you create once—and then sell many times over.
Examples of this are:
ebooks and other downloadable guides
templates that can be used by your customers (for example, graphic design templates, Squarespace website templates, etc.)
online courses
video trainings
and basically anything else you can develop and sell online!
How to create digital products for passive income
Digital products can be a great way to package your services or expertise into a format that can be more easily distributed to a wider audience.
This means that you take a topic area you typically sell via direct services (aka, your solution to your audience’s pain point), and construct a generalized DIY-version of this information, compiled as a digital product like a video training, downloadable guide, online course, etc.
Some people worry that this offering may devalue their 1:1 services, but, as a different level of service, it doesn’t tend to do that—and it actually has a positive influence on your business by allowing you to:
reach a larger audience than you could sustain with 1:1 services
provide an offering at a lower price point, making your business services more accessible to more people
free up time to provide premium 1:1 services to those clients who most want and can benefit from them
Many business owners find digital products to be a useful addition to their business model, in order to free up time, reach more customers, and increase (and diversify!) overall income.
Membership programs
Membership programs are similar to digital products (and can even include within them digital products like downloads, courses/trainings, and templates), but are a little more involved in that they provide an ongoing experience for the customers who purchase.
So, instead of selling a digital product (be it an online course or a downloadable guide) and sending the customer on their merry way to enjoy it as they wish, membership programs provide additional content for the member to experience and engage with, such as access to a resource library that’s updated on an ongoing basis, access to a member forum or private Facebook group, weekly/monthly group calls for members, or a member directory (just to name a few!).
Membership programs can be sold as a one-time fee (though, as higher-value products, they also commonly offer payment plans as well); or, they can be sold on a subscription basis—as long as a customer remains a member they’ll have access to the resources and benefits provided.
How to use membership programs as passive income
Some examples of online membership programs include:
resource library
digital archive of video trainings
online course + supplemental materials
online membership group (either an online supplement for a “real life” group, or an exclusively online program, like an interest group for people around the world)
I use and recommend MemberSpace for creating membership programs on your own website (including Squarespace websites).
Check out the archive of resources on setting up different types of membership programs to grow passive income for your business—it’s one of my favorite methods!
A step-by-step guide to creating membership programs on your Squarespace website
Grab my free Squarespace + MemberSpace Membership Program Checklist:
Incorporating passive income in your business
All in all, passive income can offer significant benefits to your online business. But how to choose which type(s) to use?
Here are a few tips and considerations:
Affiliate income is only relevant if you have a large audience that you can share links to—so, it’s only a viable option if your business already has a strong online presence, or you anticipate it will be growing one soon.
Affiliate income is dependent on the specific affiliate programs you’re part of, so you’ll need access to quality affiliate programs for products/services you could reasonably and authentically recommend to your particular audience.
Digital products are a great option if you have a specific area of expertise that can be translated into a product like a template, video or downloadable guide.
Membership programs are a wonderful way to restructure 1:1 services to make them more accessible to more people, while still maintaining ongoing interaction with your customers (if desired).
