What is passive income and how can my company generate it?
Have you ever wished that money would make itself with little intervention from you? Known as passive income, this is the dream of many business owners. Typically, businesses can generate passive income through the sale of online materials and the like.
Why generate passive income?
It may be that your company has a few large, recurring, monthly sales, which are keeping you afloat. But what happens if you get fewer sales than anticipated in a certain month? Will your company be able to keep going even though there's less income? This is where passive income can come in. It can supplement your regular income and help you through the tougher months.
What are the different types of passive income?
Like any form of income, there are different ways in which your company can generate it. The following sections will highlight some of the different passive income methods which can be used by businesses.
1. Affiliate marketing
This is a trading partnership your company enters with another business in which you sign a deal to promote their products. The kinds of deals can vary greatly, though, so be careful. At one end of the scale, you could register to become the official seller of their products through your website, whereas at the other end, you could simply be posting a link to their site through social media and everything in between.
Which types of products should my business affiliate with?
Most businesses aim to sell products which are similar to their own. However, this doesn't mean selling your competitors' products. It can take a little research, but you'll find that there are businesses out there that will complement what your company is offering without being in direct competition; think of all the gyms out there selling nutritional supplements.
If you want to go down the road of affiliate marketing but are unsure about which business to partner with, then Google AdSense may be a good way to go. You've probably seen AdSense Ads but not realised it. They're the 'sponsored ads' on websites that you visit, which usually show something that you're interested in.
Each time someone clicks the advert on your website, your business will receive money from Google. All you have to do is ensure that your website is up to date and engaging to the viewer.
2. Create digital products
When talking about passive income, digital products can range from mobile apps to e-books and sponsored podcasts. However, the digital material you produce should be related to the company and your existing products. For example, if you're a coffee shop that sells baked goods, you could produce a recipe book for the baked goods you sell. No matter what your company does or what you sell, use your team's expert knowledge to create something useful that your website visitors will appreciate.
Creating a digital product that your viewers will be willing to pay for can take time, so some businesses see it as regular income rather than passive. However, hiring an external agency to create the product for you can take a lot of the stress out - just make sure the product reflects your company and what you do.
Once you've created the digital product, you'll have to think about how consumers will purchase it, how you'll market it and how consumers will be able to use it. Although this can sound like a lot of things to consider, there are platforms out there which can help, it just takes a little research to find whats right for you.
3. P2P lending
This is an option if your company currently has some spare cash but still wants a passive income stream.
P2P lending sees business owners make a lending agreement with another company or individual via a third-party intermediary. Most loans are under £30,000 and the parties involved can set their own repayment terms. Registered lenders can expect a return of roughly 12% of the amount they give to the borrowers.
Don't be fooled; this is a very high-risk strategy for getting passive income. This is because even though the majority of P2P sites are regulated and secure, the loans your company offers to peers will be unsecured. So if they fail to pay back the loan, you run the risk of default.
If you do your research and try to mitigate the risks, then P2P lending should be fine for your company. Just be aware that there are risks with it, and always do plenty of research.
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