Did you ever wonder what separates the best passive income streams from the rest? Is it the amount of income that it produces? While this may seem like the logical answer, it is not necessarily true. If your number one goal is to earn money with no regard for your time, then you probably are not building passive income. Chances are you are investing a ton of hours of effort if money is your number one goal.
While earning money is an important part of building solid and successful passive income streams, there is something much more important. Having the ability (or freedom) to do what you want, when you want to do it is what most passive income earners are striving for. The money or income is just the side effect that allows for this freedom.
So if the best passive income streams don’t necessarily focus on money first, what are the characteristics of a successful one? While the list can vary, there are a few key attributes that you will find in the best passive income streams which are highlighted below.
Does it Fulfill a Need?
Is there a need for your service or product you are offering? Does it fulfill a dream or make life a little easier for your customers? Does it ease the pain of someones hardship?
The best passive income streams fulfill a need and generally make life easier for a customer. Look at what other people want. The rapid success of eHow (whether you like em or not) and the “How To” craze has proven this. There is no debating that people are looking for advice and tips on how to do just about anything.
There is no sense in fighting an uphill battle when you are building a passive income stream. You don’t want to find yourself spending a ton of time and money creating a market for your product or service that doesn’t exist. Instead, you want to find a market that already exists so that you can save time and effort.
If you are looking for ideas on finding out what people want, take a look at the How To Directory on eHow or even Dummies.com for helpful ideas on what people are in need of. These are a few places where you can start brainstorming your next big idea for a passive income stream.
Automation
Can your income stream be automated? The best passive income streams are built so that the owner (YOU) is taken out of the equation. This is something that Tim Ferriss stresses throughout The 4-Hour Workweek and is critical to building passive income streams. If an income stream cannot be at least partially automated, then there is nothing passive about it.
A perfect example of building the best passive income streams using automation is setting up an online store. In fact, this is something that I will be working to setup this year. In order to create a successful online store (one of my SMART Goals), I need to be sure I can successfully automate as many tasks as possible. I will be creating my online store using Shopify, which has the tools that will allow me to eventually fully automate this income stream.
More to come on the online store later …
Diversified
Is your income stream diversified? Does your passive income source have more than one channel for generating revenue? Are you offering more than one product or service?
Just as you need to build diversified income streams, it is important to identify additional opportunities for income. For example, if you are running a niche website, then you may want to mix in Chitika Ads with AdSense. It is very important to maximize your potential earnings while protecting yourself from relying on one revenue source.
It is critical to build your passive income with many different options to generate revenue whenever possible. If the majority of your earnings are coming from AdSense, what happens if Google drastically changes their payout. Or what if you solely rely on affiliate income from Amazon and your local government suddenly imposes an affiliate tax? Your income can go away immediately if you are not properly diversified.
Final Thoughts
The best passive income streams have several things in common. First, there must be a predefined market for the product or service being offered. Second, they must be able to be partially automated thus making them more passive. Finally, a sound passive income stream should be properly diversified through a variety of revenue sources.
If you are able to incorporate the three attributes identified above, then you will be well on your way to building the best passive income streams possible.
What other attributes have I missed for identifying the best passive income streams?
Related posts:
- Top Passive Income Streams You Should Consider
- Build Passive Income Streams from eHow
- 10 Ideas for Diversifying Your Passive Income Streams
- Create Passive Income by Writing for eHow
- Creating Alternative Income Streams
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Most of my passive income streams are actually more active than I care to admit. Each one requires attention, or the payouts tend to slide more and more each month.
For instance, I have not published an article on eHow since October and my monthly payout continues to fall just a bit every month. While the $100+ checks are nice, eventually I would guess that they will settle at around $50 a month. I have found to keep my eHow income at the same amount or more I have to spend way to much time creating new articles. I have elected to build my own internet real estate instead!
John,
You’re right about everything in this article, however, I’m not sure how passive an income stream can be. Some are more passive than others, but even if you sell ebooks, they’ll eventually need to be updated.
With eHow articles, I have a feeling that earnings will probably slip unless you keep up with them. Seems like it’d easily take a few years to build up income through them. Also, the article sweeps and more importantly, the secret revenue split have me a bit concerned. Would it not be better to put up a few niche sites?
Interesting about Chikita, I’ll have to check them out. Hope your niche site is coming along nicely!
I have begun experimenting with eHow. Definitely pleased at the progress so far, but I can definitely see how it will never be an entirely passive income stream. I guess for me, “passive Income Lifestyle” really means being able to escape a 9-5 job and not work defined hours. So I will need to get my passive income streams to a high enough level where I can manage them in less than 8 hours a day, and I can work on my own terms. that is passive enough for me!
@DJ – I somewhat disagree with eHow earnings not be truly passive. I think the last couple of months have seen several other factors that have brought earnings back down. I am starting to see my older articles earn as much as they had in the past, without spending anytime on them. I guess I can see them stagnate, but not sure about them going down.
I like your thinking about working your own terms! Passive income to me is more about have the freedom to do what you want when you want. Best of luck to you!
Fine article John. I love the idea of passive income. Do something once and then pick up recurring income. Move on and and do it again and so on. With time time very small amounts can soon start to build up to substantial and real income.
Edaward
@Edward Jolly, Glad you liked it. Earning recurring income is such a great feeling and keeps me motivated to keep pushing on.
One of the best passive income streams in my opinion is writing articles because it is easy and the money builds up each year depending on the traffic but as the articles age, the income should increase. Those are one of the best ways to bring home passive income.
@Jennifer – I agree. Even though I had my ups and downs with eHow, I am still getting paid every month and haven’t written an article in well over 6 months.
Very inspiring post, thank you! I’m just about at the pizza stage of my passive income journey and although it’s wonderful to see some progress, I keep thinking “how on earth am I ever going to make a full-time income from this?!” It seems such a big leap to turn those little trickles of income into a river. You’ve helped me see that I’m on the right track and I’ve just got to keep going. Beach house here we come!