Aaron Hoos

In my recent blog post, I wrote that there are only 3 ways to grow your business.

The first way an entrepreneur can grow their business is through replicating their sales funnel. In today’s blog post, I want to talk about the second way that an entrepreneur can grow their business: By creating passive income.

“Passive income” is a phrase entrepreneurs use to describe something created once and then sold over and over (unlike a service or a manufactured-each-time product). An ebook is an example of a really popular form of passive income: You write it once and then resell it over and over again.

WHAT PASSIVE INCOME OPPORTUNITIES ARE AVAILABLE?

There are plenty of passive income opportunities available but they can generally be divided into two models:

• Access-to-information: This is where you create a piece of content and then sell access to it. For example, you might sell downloadable ebooks, reports, or templates; access to listen to audio files or view video files; access to knowledge centers; whatever. Your customer pays you in order to get access to information in whatever form that is convenient for you to create and for them to access it. You’ve seen these sites: There’s usually a “Buy Now” button for someone to purchase an ebook.




• Advertisements with content: This is where you create content and post ads on the content. As people click to your site and view the content, they also click on the ads and the ad revenue earns you money. In this model, you write and post the content and people view it for free and revenue is generated through ads. You’ve seen these sites, too. They’re the ones with Google ads or banners scattered throughout the content.

Of course, I’ve only described a really simplified example of each. You can mix and match and add layers to make it more effective. For example, one common way of selling digital content is with a two-step approach: Ask for your leads to become prospects by signing up for a free ezine. Then, build a relationship with these prospects and offer them your ebook.

You might want to also check out a related blog post entitled 5 levels of content monetization for a different way to look at passive (and active) content sales.

WHICH PASSIVE INCOME OPPORTUNITY IS RIGHT FOR YOU?

That depends on you and your subject matter. Here’s what I often recommend to my clients:

Posting free content with advertising is just fine but you only get paid when you send people OFF of your website to an advertiser’s site. And chances are, those advertisements are for a product or service that could be considered “competition” if you are also selling similar products or services to the same target market.

So, if you have a sales funnel that includes other products or services, don’t erode your sales in exchange for advertising dollars. Selling access to digital content is just probably better. However, if you don’t have any products or services but want to earn some income, creating content and posting ads can be a way to earn income from an industry.

Having said that, there are lots of sites out there with ads on their sites and they do just fine building traffic and earning advertising revenue. But most of my clients are real estate and financial clients and they want to build a long-term relationship with a customer, so the goal is (usually) to keep website visitors rather than send them to advertisers’ sites. The advertising model sends customers away while the access-to-information model keeps customers on your site and builds your brand’s value.

HOW DO I GET STARTED WITH PASSIVE CONTENT?

Start by figuring out if there are any services or products that you can turn passive. Pay particular attention to existing products or services that you tend to repeat. That’s a good start. This blogpost entitled Are your products and sales funnel taking up too much of your time? will help you to identify opportunities that can become passive.

• If you are creating content for the access-to-information model, check out my blog post How to sell an ebook on the web. (Note: I mention an ebook in the title but you can use this information for just about any information that you sell, no matter what the format).
• If you are creating content for the advertising model (free content on a site, plus ads) check out my blog post How to start a new business for $10: A step-by-step guide.

PASSIVE CONTENT TIPS

Be sure to create compelling, unique content that addresses a problem or issue in the industry you’re working in (I call this The Pickaxe Factor). By doing that, you’ll be more likely to attract potential readers. If they’re reading your content on your pay-for-access-to-information site, they’ll be more likely to pay to read. Or, if they’re reading your content on your freely-available advertisement-model site, they’ll be more likely to click the advertising.

If you’re creating passive content that you’ll sell through the access-to-information model, pricing your content effectively will prove to be a challenge (because it’s a challenge for a lot of entrepreneurs). Check out How much should I charge? A magic formula to easily find the best price for your product for some pricing ideas.

And remember: This might be called “passive income” but it doesn’t mean you should stop marketing. Passive income requires very active marketing, especially in the beginning. Have a plan to market like crazy so you can build traffic to your content (no matter which model you choose).

Newspapers are struggling to survive in an age where free and rapid information-sharing threatens the value newspapers once had. Many people (myself included) wonder why we should pay for local news delivered the day after it happens when we can get far more current (and varied) views as it happens.

This self-identity crisis is even more apparent because newspapers charge money for a subscription to have the news delivered to your house the next day… but they post it for free online for everyone to see as it gets written. In other words, the newspaper industry is an industry where people pay to get inferior service compared to those who don’t pay!

Recently, the New York Times introduced (more accurately: re-introduced) a paygate where internet users can view up to 20 articles per month for free but will have to pay after that. Read the Nieman Journalism Lab article about it here: The Newsonomics of The New York Times’ pay fence » Nieman Journalism Lab » Pushing to the Future of Journalism. In particular, pay attention to the seven tests that the writer outlines, which will determine the success of this paygate attempt and will guide the way for the NYT to survive (and even thrive) in the future.

You might want to also read a blog post I wrote last year about my thoughts on how newspapers can survive in today’s marketplace.

As entrepreneurs start up their businesses, they quickly learn one of the most challenging aspects of business ownership: How to price a product or service so that it is attractive to customers but still profitable for the business.

Pricing is like a tug-of-war: All customers want to pay as little as possible for a product or service; all businesses want to charge as much as possible for a product or service. Somewhere in the middle is the right answer — a price that is attractive and fair to the customer and a price that is profitable and fair to the business.

Here is a collection of some of my best advice on pricing.

HOW TO PRICE A PRODUCT OR SERVICE
Understand how prices and pricing works: One of the first things you’ll need to do is understand how pricing products and services actually works. It’s not a matter of randomly assigning a dollar value! There is an actual science to the creation of a product’s or service’s price. There are two key elements that go into any price, and there are three kinds of price-based businesses. Read more about it in my blog post Prices and pricing strategies: How to price your offerings more effectively. (Don’t miss the pricing tactics at the bottom of that post).

How to monetize digital content: If your business is selling digital content, it is critical to understand how content monetization works. The web has enabled new business models to be developed so that people can earn money in various ways, but not all of these business models require pricing services or products. There are 5 ways to monetize your content and only 2 of them require pricing. Read more about the 5 levels of online content monetization.

Competing with low-price providers: One problem in many industries is the problem of low-price providers who enter quickly and undercut your prices. It’s a problem for everyone because most of these low-price/low-cost providers will only compete for a short time before they run out of money and have to fold. But along the way, they may potentially do a lot of damage to your business. If you find yourself competing with low-priced providers, check out my blog post: Pricing your sales funnel: How to avoid competing with low-cost providers.

A competitive analysis tool to find the best price for your product or service: What entrepreneurs need most is a way that they can use to find the best price for a product a service. By doing some simple competitive research, business owners can find the best price for their products or services in comparison to their competitors’ offerings. I’ve developed a tool for entrepreneurs to find the best price for their offering. Read about it at How to easily discover the best price for your product or service.

A customer-based, needs-analysis tool to find the best price for all of the products or services in your sales funnel: I’ve also reated another tool to help you know how to price your products and services while you are developing your products, based on what your customers are wanting to buy. By mapping out your products and services against customer needs, you’ll easily see how to price your products and services in the context of your sales funnel — pricing “entry” products for brand new Customers and then pricing follow-up products or existing Customers. In my blog post, you’ll read how product development, pricing, and sales funnels all work together to create a very profitable business! Read more about it at Product development, pricing, and sales funnel strategy made easy.