f you want to get me frustrated, tell me that you want to create passive income.
It’s not because I don’t value passive income. It’s because most people who chase passive income do so the same way people look to get rich with a lottery ticket.
The people who desperately seek passive income are attempting to escape work that is draining them. The work takes up too much time, it’s unfulfilling and obviously isn’t paying enough. So they watch Youtube videos of some bro marketer standing in front of a Lamborghini touting how you too can make easy, passive income and all you need is to buy their online course. Passive income has become the holy grail of wannabe entrepreneurs who are looking for a quick shortcut out of their jobs and their money struggles. If this is you, here is a dose of ice water over your head to cool you off. Passive income is mainly a myth. I say mainly because passive income is real in a few select areas.
1- Investments
2- (Certain) Real Estate
With investments, this passive income comes from actual assets that are derived from active work. Unless it was inherited money (which most people desperate for passive income don’t possess), there is no magic pill. Yet the term passive income has become a buzz term for those looking for the short cut or quick fix to financial freedom.
Real estate is very similar. The most profitable form of passive income comes through real estate, which has a solid amount of equity to make the return on the investment viable. Again, this “passive income” requires capital as well as active work to make it happen. In this industry as well, there are many teaching the get rich quick approach to passive income while downplaying the work involved. I am by no means saying that these methods don’t work or are dishonest. My point is that it takes a ton of work to eventually begin creating real passive income.
My hope is to get the idea of the easy money, quick passive income approach out of your mind. What I do want to discuss is the often overlooked world of recurring income.
Recurring income is revenue that is expected to continue into the future. One of the most common forms of recurring income comes from memberships and subscriptions. With a membership site, the income is consistent, stable and mostly predictable. Recurring income varies greatly from one-off sales, which is the sale of a product or service one time with no guarantee of any future sales. When much (or all) of your income is based on one-off sales, the owner is constantly looking for new sales each day, forcing them to work more in the business and less on the business.
We were in this boat with our photography business. Each booking was a one-off, which led to a constant chase for the next client. Not just the chase, but with each new client was the need to re-prove ourselves and our work. There were many benefits to this- I believe working in the one-off world kept us sharp, innovative and hungry. But it also became tiresome. The stronger our business and reputation built, the easier it became. But we grew tired of continued focus on the money side of the business.
The idea of recurring income wasn’t one we discussed in the photography business often. It was only when I discovered a guy named Leo Baubauta did my eyes open. He had a membership called Zen Habits that I joined. I was stressed and jumpy, and his focus on meditation and calming the mind and body was appealing. At the time, the membership was $10 a month and each month had a separate theme. I would receive weekly email prompts and lessons. There wasn’t a community involved, but for $10, it was a bargain. When I learned that he had thousands of people enrolled, I got very curious.
Once I signed up, I would be charged each month until I decided to cancel. Aside from the fact that the product was great, I thought deeply about his business model. He created a product that was niched, specific and for the right people. The price was so reasonable that there was no expectation of more for me, nor a connection to Leo personally. I thought about our business. Even though we had created a business that gave us more freedom than most, there was the constant push for getting new clients to replace the one-off clients and the idea that we didn’t have the time freedom that Elizabeth and I desired for ourselves and our family.
After being in his membership for a while, I started to notice memberships everywhere. They weren’t new, I just hadn’t paid attention because I was so wrapped up in the world that we knew. Adobe saw this as well, with so many others. Photographers and designers might remember when Photoshop was a one-off product. You paid $499, or whatever the price was, and you owned it. They saw the advantage of recurring income as well. They switched to the membership model where a monthly payment became their new model. When you stop paying, you no longer get to use the product. It’s popping up everywhere. Panera Bread recently introduced a monthly coffee membership for less than $10 a month.
I was sold when I realized that, as a consumer, I appreciate the model. Instead of paying a much larger amount for all of the content for Zen Habits, I could pay a little bit each month and if the value is there, I am happy to continue paying. If I no longer find value, I can cancel. With that, years ago, we began reshaping how we did business. Many of the options went towards a recurring income model. In the past five years, within Total Life Freedom, we have built out recurring income options with monthly price points of $500, $150, $75, $25 and we will be introducing an enhanced newsletter option for $10 before the end of 2022.
Even though we thought we had freedom before, creating aspects of your business model around recurring income is what truly gave us the option of time, money and location freedom. Work that can be done from anywhere, that has unlimited income potential and the increase in income doesn’t require more time? Can you see why we became excited about the options?
I will be creating more content around the idea of recurring income models. When you see all of the options that are available and being used well, it might blow your mind. In the meantime, if you have any questions about ideas that you have for recurring income or ways in which you have done it, feel free to email me at vincent@totallifefreedom.com.
I look forward to hearing from you!
Have an AMAZING day!
Vincent
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