As an entrepreneur, generating passive income in addition to your normal source of income is a fantastic way to get your ideal client to start taking notice of you. Generally, any source of passive income is usually something you put a lot of effort into up front but then works for you on the back end. For example, the La.Rue Creative Studio will be launching its first (of many to come) website template very soon. This is something we had to build out and create instructions for, which required dozens of hours of work upfront. However, once the template is launched and available in shops like Etsy, Creative Market, and our personal shop, it’s now working passively for us to generate new income. A mentor once mentioned to me that there really isn’t such a thing as completely passive income. And she was right.

While the bulk of the work is done, I still need to do things to sell it, like promote it through social media. So what do we need to generate passive income with the majority of work upfront, minimal backend work, with the highest rate of return, or ROI? First things first, we need to decide what kind of products will have a good investment rate with more passivity than others. Meaning what can you create a higher price point that will perform well? Second, you need to consider how much backend work will be required to actually sell it. Courses are a great source of passive income, but you can’t sell them unless you promote them. Which leads to the final consideration, how much work will you need to put in to show the value of the product you’re selling?

Considerations for Generating Passive Income

One | What are you selling?

There are so many ways to generate passive income as an entrepreneur. Obviously, you’re going to want to create something already within your niche. You don’t want to be a life coach who starts to sell jewelry “on the side.” Aside from obvious reasons, it’s actually very important to stay within your niche when creating a passive form of income. If you’re working to create a well-established brand, you’re working within something called the “like, know, trust” factor. When people first start following you, be it through socials, email lists, etc., that follow comes from them liking you. After a while, they start getting to know you through the content you’re posting. As they follow allow, they’re getting to know you, your brand, and why you have something of value to share.

Finally, after a few months of being invested in the content you’re creating, they trust what you have to say within your respected Niche. Selling something outside of that niche will only create confusion for everyone within your like, know, trust bubble. They’ll question what they’re actually following you for, and you’ll lose the potential to make any sales. Whatever you’re selling, it needs to be something that makes sense for your brand. Once you have product ideas within your niche, you must decide what has the best rate of return to the ratio of work. How many hours will you put into creating something, and how many will you have to sell in order to start making a good amount of passive income off of it?

Two | What is the ratio of work to income?

Once you have a few ideas to work off of, you can start to clarify and decide what will work. Two things need to happen when you’re creating products for passive income. One, they need to stay on brand to your niche and add value to your consumers. And two, you want them to require a minimal amount of both frontend and backend work. You don’t want to create a course that takes you 80+ hours that you only sell twice. At a value of $120 per sale, you’re making only $3 an hour. You must consider the hours of work it takes to create, and how much time you’ll spend weekly/ monthly promoting. Taking into consideration how much of a following you already have, it might be a lot of work promoting or a little bit of work.

As I’ve been creating my design template, I’ve been keeping track of the hours I’ve put in. Before creating the template, I calculated my design rate, the expected selling price, to the number of hours it took for me to build the template. Once the template is built, the hours of work will be significantly less to promote it, but also well worth it. Because I’m selling at a higher price point, the ROI on my time investment can, at the very least, be evened out pretty quickly.

Three | How much Active work will it take to sell?

How much are you going to promote the product after it’s made, and where? Are you going to do one round of social media promotion, or is this something you’ll promote once a month? And beyond that, where are you going to promote? Is this something you’ll have in an email promotion? Maybe you’ll sell on Instagram or promote posts on Pinterest? You want the product to do most of the work for you, but to sell, you have to promote it.

There is so much to consider when you’re building out a passive income stream. It’s a great way to promote your business and make some income on the side of your main source. In this genre of entrepreneurship: wellness, coaching, spirituality, and business growth, the best form of passive income are courses. But look into your niche and find out what your consumers need and find a way to create something that gives it to them.