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Best business models for generating a passive income

By Edited Nov 13, 2013 1 1

The term ‘Passive Income’ refers to a form of money-making where you don’t need to trade your time for money. The ideal goal is to create an “automatic money machine”, so that if you stopped working it could still earn money without you having to be there.

Naturally, passive income is never totally automated; there is usually a minimal maintenance involved after setting up your perpetual money machine. The amount of time that it requires will depend on your business model and how efficient it is. For example, a website business typically requires a few hours each month to answer a customer’s email, checking traffic statistics, or setting up new pages for optimization tests. However, it may generate thousands of dollars every month, automatically, from products and affiliate offers displayed on the Internet, thus classifying as a true passive income vehicle.

There are several different business models for Passive Income, but if you’re just starting it may be wise to choose only one and focus on building it up. Only when you get to a point where it is generating the desired earnings and you find yourself with enough time to dedicate to another venture should you try something else and diversify.

Here are the best business models for generating passive income:

Article Writing for Revenue Sharing Sites

The fastest way to make money online right now is to write articles for revenue sharing sites such as Infobarrel.com, Associated Content, Bukisa, Helium and others. The site automatically distributes ads onto your article when it’s published, and every time someone clicks those advertisements you get a portion of that income.

This method is especially useful for novices because you can get started immediately. It’s relatively easy to comprehend and there’s very little setup involved. You can write an editorial and because it’s published on a reputable website with lots of authority in Google, your articles are prioritized and obtain traffic faster from other search engines, as opposed to starting a blog and broadcasting the same content from there. It is also a great way to learn about keyword research, SEO and content, which are among the most important things for the other types of online revenue generation.

Moreover, you see results fast. You are not going to make a living overnight, but if done right you can see little streams of cash ooze in via Adsense, which is really encouraging for trying other income streams. If you write 1 article a day for a month, you could earn between $10 and $50 a month, depending on your ability to write good content that generate clicks. Write 500 articles only once and you may earn some decent cash month after month virtually forever, without putting any extra work anymore. This is a truly passive income stream because there is almost no upkeep involved.

To get started, try Infobarrel. If you want to go through my referral link, just click on and register for a new account. I like Infobarrel because they have honest conditions for their authors (win-win), a helpful staff always improving the site and a great, established community. It is the publishing platform with the greatest potential to grow, in my opinion.

You should write articles that contain information people are looking for - terms being typed into Google, which means picking subjects that are being searched for but aren’t excessively competitive already. You may try an online tool like Google Adwords or Market Samurai to look for such keywords.

After you issue the post, the effort isn’t over, and this is where a lot of people miss the boat. You (or someone else) should do a little social bookmarking - via sites like stumbleupon, delicious, reddit, digg etc. - to make your article stand out on Google. It is also recommended to find other sites that will link back to your article, which is another way for the search engines to find your article about a specific topic and rank it higher for those terms.

Affiliate Marketing

Affiliate marketing is simply making money from a commission that you receive by selling other people’s products.

The best part about it is that often the vast majority of the work has already been done. The product has been already developed. The website is ready. The check-out and credit card systems are in place. Delivery and dealing with the customer – it’s all done by the company selling the product. All you have to do is get people to click on a special link which has a code identifying you; if the person finally buys the product, you earn a commission.

One basic example is Amazon’s affiliate program. Just sign up to become an Amazon Associate, choose any product on the site, or any page on amazon.com and generate a special link for it. Anytime someone clicks on a special link like this example and makes a purchase, you get paid. The concept is very simple, but it’s not an easy thing to actually do. Some products that people are affiliates for – like internet marketing guides which sell for $77 – have a 50% commission, which is pretty normal in this segment. The reason for that is that it’s really hard to get new people to your site first instead of the real seller. And you can’t put affiliate links directly into Google ads (you may even get banned for doing that), so it’s better to link to a landing page that then includes your affiliate link.

Some people make a killing using this Pay-Per-Click strategy, but it takes money to make money here, so you definitely have to calculate your numbers well in order to make it work. That said, if you find a product that works for you, you can eventually just pump money into the machine and get more money on the other side. The main website for affiliate marketing is Clickbank.com, and if you already have a product to sell, you can offer it to other sellers as well.


Niche Sites

These are websites that talk specifically about one particular subject matter, say, solar panels, baseball hats or cop training.

You are ultimately trying to get your website on the first page of a Google search for a specific keyword. So you could build a page and then setup a campaign to drive traffic to it, but that costs money and you could lose a lot of cash really fast. By ranking on the first page of Google, you will get traffic that is free and totally targeted, meaning that they are perfect for your site because they are really interested in that particular topic.

To make money with niche sites you may place affiliate links (those hyperlinks with a special code) for products that relate to your subject matter. It’s smart to pick a long-tail keyword because even though there are less searches for them, they are less competitive so you have a higher chance of showing up on the first page than if you went with a very competitive search term that you’d never rank for because the existing top ten sites in Google are just too strong.

For example, let’s say you want to make a site about fly fishing rods. Preferably you’d acquire the domain flyfishingrods dot com (because it matches the keyword exactly and is a “.com”). From there, you can easily setup a WordPress blog by using Bluehost to make sure your keyword (“fly fishing rods”) is in the title and the description of the site. Then write a number of articles and start the backlinking process to take the site from scratch all the way to #1 in Google – all totally free.
Only then put some affiliate links in! You could go to Amazon’s Associate Program, look for some really high quality fishing reels, write a review of them on the blog and then link to the product on amazon using your custom affiliate link. Add a book about Fly Fishing Tips from someone else’s site that has an affiliate program, and put a link to that in the sidebar of your site so people can click on. This is how you make money with both affiliate marketing and a original niche site created and managed by you.

A website like that could make $500 a month, primarily from Adsense Ads on the site and commissions from Amazon products. This is better than PPC because you can build confidence in the visitor so he or she is more likely to eventually buy that item, especially if you’re doing a review site. Many people explicitly create review blogs for specific products because they know people will type in that term plus the word “review” in Google. Get in front of those buyers with a review site, confirm their desire to purchase that product and give them an affiliate link to click on. This traffic is essentially free, and the only money required to start a niche site is to get a domain name and maybe hosting. Keep in mind that it usually takes about 90 days of hard work to get to #1 on Google but that depends on the keyword that you choose and the kinds of products or promotion you do on your site.


Not everybody agrees that blogging is a form of passive income because it takes a long time to get it to a point where you can make money, and even when you get to that point you still have to keep up with it, and it’s a lot of work. Everything else runs on semi-autopilot, so how can it be considered a form of passive income?

Whenever you write on your blog, that post becomes a potential vehicle for income. Maybe not directly, but the effect it could have on any reader could sooner or later lead to some sort of transaction. It’s an opportunity that is always going to be there. Obviously, you want to write relevant content, because that’s what ranks well in Google, but the more you write, the more chances there are for people to find you and click on your affiliate link. You only have to recommend a product once - you can be asleep and someone will go to your site, click on an ad that redirects to amazon, make a purchase and earn you a commission.

Blogs are also a great launching pad, a platform to introduce other types of passive income products. Start a blog, grow the audience, build authority and you will have the ability to successfully promote a passive income product such as an eBook. Many bloggers out there have successfully worked out this formula. Just talk about something people are interested in and eventually it gets to a point where people are willing to pay for more (consulting services, coaching programs etc.)

Finding a topic you’re passionate about matters because you’ll be writing about it week after week after week. You’ve got to love it and do a little bit of research just to make sure there’s a market for it. Then pick a good domain name, matching the title of the blog or at least trying to get important keywords in the domain name. This is not necessary but may help a lot to build your audience faster.

In order to have a successful blog, you’ve got to have great content. What you publish is what matters the most. A close second is design. If you’re serious I’d definitely go with a premium theme or even hiring someone to design a custom one for you, which proves to be a good move. Finally, make connections with other bloggers; they aren’t competitors, they are friends. Step out of the box and make those connections. Email them, comment on their other blogs and have them get to really know you. Be useful and build good relationships so you can help each other. Do things outside of your own blog and thus get in front of more people.

You can reach new audiences by shooting YouTube videos or doing podcasts. Many more people may find you through YouTube, iTunes and other unexpected places because not many bloggers are going beyond their own blogs, so if you want to stand just try other platforms.

But blogging is not easy. To be upfront as far as expectations are concerned, it’s a tough road, and things happen slowly. After the initial surge of excitement, you write and write and suddenly you start to wonder, because there’s hardly any traffic coming into your site. You spend all this time writing brilliant content, but then you lose energy and burn out, finally scraping everything.

This happens to 90% of people who start blogs… It takes a long time for it to gain any traction, receiving 10 to 20 visitors a day for a while. But your goal must be to reach 10,000 page views a day, and the only way to make it is by publishing great content, a unique design, building relationships, expanding into other mediums, and giving it time to brew.


This is one of the better, if not the best, ways to earn passive income. Ebooks are digital products that cost virtually zero to reproduce and can be sold a million times.

Before you write an eBook, mindmap it. Mindmapping is the process of putting ideas onto paper to show how things relate to each other, hierarchally. (A great tool to create mindmaps is Mindmeister, which is useful for a ton of different things, not just ebooks).

By using a mindmap, your eBook pretty much writes itself. Once you lay it out in a bubble diagram with all hierarchies set, you can simply transfer that into an outline with chapters, subchapters, sections etc. You’ll know exactly what to expand on to fill in the rest of the book.

The outline looks like a table of contents, so you can treat each individual chapter like a separate blog post or article. This way, you can finish each piece one at a time, in no particular order so you can begin with the topics you know best, and then write the rest. After you write it in Microsoft Word (or Pages for the Mac), just save it as a PDF document and you are ready to go.

To start selling your digital product (eBooks, videos, software…) there are a number of ways you can automate the buying and delivering process, but I recommend checking out http://www.e-junkie.com . For just $5 a month this website will host your file and generate a link that will take customers to a shopping cart for your ebook, automatically delivering the product to the customer after purchase. So once you set this up, you can make money 24/7 without you ever having to do anything.

Additionally, you could sell audio files as well. Just consider selling an audio version of your ebook – it takes things to a whole new level. A great sounding audiobook will go a long way, holding people’s attention for longer and making it seem like there’s so much more value in the product, which could help justify a higher price.

You can easily hire a voiceover professional at elance.com after your ebook starts selling well, and then email buyers a $10 off coupon to get the audio version – works like a charm.
With video, you could do the exact same thing, except quality makes even more of a difference and the file sizes get a little too big even for e-junkie, so a lot of people deliver video to customers by putting the content onto a password protected membership website. Only paying customers are able to access it. There is a paid Wordpress plugin that turns a blog into a membership website, so you could do just that.

Membership sites

A membership website delivers content to a person who has purchased access to it. Users pay for this access, receiving a login name and password to be granted access to all that restricted info. Usually there’s a members only community (forum), sometimes tools and other software that can only be accessed after becoming a member.

It is one of the most attractive business models out there. The reason why is due to the recurring monthly income.

Let’s say you build a membership website about autoparts. In your site you have exclusive information about where to get the best parts for the best prices, videos on how to install them etc. Basically, there’s quality information that is for members only.

Say you charge $50 a month for membership. In the first month, you do an Adwords campaign and get 10 members in there. That’s $500 a month, not bad. In Month 2, you get only 10 new members again – same as before. But now you have a total of 20 members, each paying $50 a month, which is $1,000 a month. Even though you had the same amount of sales, your income doubled.

Now in month 3 you were mentioned in a news article on a major autoparts magazine and 30 new clients sign up. That’s another $1,500. Even better, but there were already 20 people in there paying $50 a month from the first two months, so now you really have 50 members bringing in $2,500 a month!

If your membership site has a lot of value, which is worth much more than $50 a month (perhaps through exclusive deals with manufacturers that your members can have access in order to get parts for a steep discount), you could double your price to $100 a month. Now those same 50 members would bring you $5,000 a month, which is $72,000 a year. And as your membership numbers continue to grow, so does your income. This is why a membership website is so powerful – the sky is the limit.

Of course, there are some things to think about before you get crazy to start building a membership site. If you simply create content for the site, put it on there and leave it, you may have members on board for 2 or 3 months, but if there’s little activity people will cancel their membership. The average length of membership is only 3 months, since a lot of people set these money machines up but don’t add anything to keep customers paying their monthly fee.

On the other hand, sites that engage their community, hold monthly events, answer people’s questions, and add new material each month usually hold folks for years. This keeps new content coming and renewed on the site. Some membership sites hire people just to be in charge of making sure everyone’s questions are addressed, and some forum managers do a really good job of starting up dialogues to get people involved.

To set up a membership website, you can use a Wordpress called WP-Wishlist, which is very easy to use and has a good support system. You basically create pages or posts and set restrictions to them for different levels of members, so only people who are members will see them. (The trick is, of course, getting people to become members.)

If you already have an audience, it’s going to make your life so much easier, which is why you’ll see a lot of bloggers and podcasters come out with membership sites after they’ve gained authority in a particular niche.

To increase conversions, whether you’re getting traffic from Facebook ads or naturally from search engines, one thing you could do is give away a 1-month trial. This will get more people to sign up and if their first impression is good, people will pay to stay.


Software is the best “product” you can sell for passive income. What’s cool about code is that it is very scalable.

For example, you may have heard of a Wordpress theme called “Thesis”. It is essentially a framework one could install on their site that makes it very search-engine friendly. There was an interview on Mixergy.com with its creator, Chris Pearson, where he was talking about how they paid their affiliates over $400,000. Michael Dunlop, another plugin developer, sold thousands of copies of his famous piece of software called “Popup Domination”. And there’s another piece of software over at CoverActionPro.com that basically takes any picture and turn it into a 3D image, like a book, magazine, software box, CD or DVD.

Don’t know how to code? No problem, outsource it. You could also find a partner and agree to split any revenue (just make sure you have a written agreement ). If you can find a local developer to help you out with your project, that may speed things a little faster.

One thing though, if you’re thinking about software – support is essential for the business to thrive. There are so many tweaks and it’s so easy for a piece of code to break, that it’s fairly common to get many requests for help after the software is sold. Just keep that in mind. You can make decent money selling software that meets a specific need, but it can also come with a lot of upkeep.
Besides plugins, themes and desktop applications, there is now the thriving category of mobile applications.

The main difference with other kinds of software is that mobile apps are handled by a third party marketplace like the iTunes App Store, instead of being sold directly by you. Apple handles the delivery of the software, with a huge marketplace already working. But they take a cut of your paid applications (Apple takes 30% of all sales made, for instance), and you have to comply to their rules. A lot of developers get upset at Apple because their apps - which they spend time and money on building - go into an approval process and then get denied for whatever reason, which is not the end of the world but definitely a hassle.


Podcasting is very similar to blogging – you create content, build an audience and give yourself the authority to launch your own products, like eBooks, membership sites etc. It takes a lot of work, but after an episode is published, it’s up there for good, so today, tomorrow, or next year anyone could potentially listen to it and give the podcaster an opportunity to earn passive income. It simply helps you promote other passive income products – eBooks, courses, membership sites, even software.
Rarely, you see some people actually making an actual passive income from the podcast that they record. An example is Cornelius, who has a project management podcast for free on iTunes, and sells a premium podcast that only people who pay can listen to.

There is obviously a lot of equipment to buy if you’re serious about it. You can have the best content in the world, but if the sound quality is bad no one is going to stand listening. A good mic like the Heil PR 40 topfire microphone (which means sound is recorded from the top only, unlike other ones that record from the side) helps reduce any background noise and only records the sound of the voice; a pop filter fixes “p” sounds, which come with a lot of air and can really distort the sound quality.


How in the world are consulting services a form of passive income? Isn’t it a direct result of time vs. money, which goes totally against the passive income business model, right? Well, when you get to a point with your blog or business that you’re able to offer coaching or consulting for a fee, there are things you can do to get more out of your time.

First, you can teach and consult more than one person at a time. Let’s say you’re charging $100 an hour. If you hold an online class where you meet someone for an hour a week for 8 weeks, that’s $800 in total. But with 20 people in the virtual room, that’s $16,000 for the same amount of time.

Secondly, the nice thing about coaching is that you can make things work for you. Even though you’re going to call someone on Skype, it’s on your own schedule so it’s a very fulfilling way to potentially earn a lot more money than at a regular 9 to 5 job. Some consultants charge up to $350 an hour.

Finally, if you do the multiple student webinar, you could potentially use that material and information on another passive income business, for example a membership site created after the class is over using the same recorded material used in the course. Maybe you turn it into an eBook or another digital product that you could sell on your website – there’s lots of potential there. If it’s something that you truly enjoy, it doesn’t even seem like work at all.


So, with an online business you have the freedom to do whatever you want. We are in a digital age where we can, for very little money, create a thriving internet company about the things we are most passionate about. If you could turn that passion into a source of income, you would be only one click away from your financial independence.



Oct 7, 2011 12:40pm
Ebooks are a great source for a passive income. I used to sell ebooks quite a bit but as time went on the ebooks that I was seller just started to become useless so I stopped.

I plan on getting back in it but the first thing I have to do is build up a nice collection of ebooks again.
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