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Does Your Business Or Blog Create Passive Income?

When you’re looking for ways to earn more and work less, starting a business and the idea of passive income are two things that naturally come up. Can they be combined to reach your goals faster?

We know that it takes a long time to build up a regular investment portfolio. I recently calculated that if you want your investments to pay for a certain amount of expenses (say $3000/month) and you invest that much every month, it can still take 10-15 years before you reach your goal. And that’s far more than most people manage to invest.

Next you turn to starting a business. Here’s a way you can earn more, anywhere from earning a few extra dollars outside your regular job to creating a much larger income with less work and the freedom to do other things when you want. I prefer high-value services and specialized products while others turn to blogging which can get good results too. I’ve seen how running a business can allow you make a return of 25% – 300% on the money and the value of the time you put into something within a year.

Since a business can be such an effective way to make money, you naturally start to wonder. Do you really need an investment portfolio? Or can your business pay for everything while you gradually stop working completely? I’ve learned that this isn’t possible.

While everything might seem simple and smooth at first, the world of business is constantly changing. What people want, how they look for it, and where they get it can be completely different today compared to 5 years ago. And the competition is never-ending.

If you look at large corporations they are the best example of how to build a stable business. They have optimized and interconnected functions for everything they need from coming up with products to finding customers to making sales. As a shareholder in one of these corporations everything is done for you. This is very different from small private businesses that might vanish if you don’t keep contributing something every week.

And yet these corporations can barely manage to keep doing what made money a decade ago. They only survive thanks to visionary leaders who can transform them into a different company in a short time. Their management is in a desperate race to top themselves before someone else does, and the people choosing the managers are essentially gambling on who will get it right in time. Many of the corporations we know now will be gone in 30 years.

If the most successful businesses can’t last long, the chances that you can retire early on the income from a business with 10% of their sophistication are very small. True passive income is government bonds in the right countries. Going down from there, you can claim that things like blogs or niche sites are passive income but there’s a good chance that if you don’t keep putting in work their revenue will decline to $1/month.

My plans are based on this concept now. I see my businesses as the opposite of regular investments – I can get high returns but only for a short time before I need to do something new. At some point they might be able to create an income that’s several times as much as our expenses without requiring a lot of daily work.

But I will take a large portion of that and invest it in a conventional portfolio. When that portfolio grows large enough to cover our expenses I will have a lot more choice in what I work on. Until that time I will need to keep coming up with new ways to earn more regardless of how well things went in the last month or the last year.

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  1. January 8, 2012 at 3:50 pm

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