How to Earn Passive Income: The Insider’s Guide

How to Earn Passive Income: The Insider’s Guide

How to earn passive incomeWherever you go in the world of web design, you hear the words “passive income” in hushed tones, like a child describing a pot of gold at the end of the rainbow. So what’s it all about?

Essentially, passive income is cash you receive on a regular basis, without having to make continuous effort to maintain it.

It’s the opposite, then, of freelancing at an hourly rate, where you only get money for the time you spend working. With passive income, you can earn while you’re on holiday, while you’re sleeping, or while you’re kicking back in front of the TV with a bottle of Bud.

With passive income, you can earn while you’re on holiday, while you’re sleeping, or while you’re kicking back in front of the TV with a bottle of Bud.

And that’s only one part of the benefits. The cash you can earn is potentially limitless. You can work at your own pace, don’t need to juggle multiple bosses, and the projects you start to earn passive income can be a great way to diversify your skillset.

Sound goods, right?

We spoke to a number of web designers and developers to get their insight on passive income, and whether it’s as easy to pull off as it sounds.

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How to earn passive income

There are many ways you can earn passive income. Popular methods include blogging, affiliate schemes, writing books, building apps, offering online training, selling assets such as fonts, vectors and photography, or selling physical products through platforms like Etsy or via your own ecommerce site. And that’s not to mention directly harnessing your web design skills for something other than client work.

Most website building platforms offer revenue-share partner programs that offer a myriad of ways to earn passive income. For instance, with the Shopify Partner Program you can make recurring revenue by designing and selling themes or apps, or simply by referring a Shopify customer (in which case you’ll get a monthly percentage of their fees).

Most website building platforms offer revenue-share partner programs that offer a myriad of ways to earn passive income.

In short, you can put as much or as little time into earning passive income as you like: it’s up to you.

You might also like: Working On-Retainer: Why the Survival of Your Development Business Rests on Long-Term Clients.

Part-time vs. full-time

At one end of the scale, there are those who earn only a small but helpful part of their salaries with passive income tactics.

For example, Sydney-based graphic and web designer Nicholas Turner, who creates print-on-demand products, like T-shirts, that are based on his designs, and sells them on his Zazzle store.

“My time investment isn't that much,” he reveals. “I tend to be creating the designs for myself anyway, and don’t spend a lot of time on promotion either.”

It doesn’t bring in a huge amount of cash, he adds, but it’s a nice supplement to his normal income.

“Generally, Zazzle on average is enough to do a dinner or two out a month,” he explains. “And there are the odd months where it brings in more, normally off-the-back of a discount sale, run by Zazzle.”

Similarly, Northern Irish designer David Airey makes a small but significant contribution to his income with Amazon Associates, a program that allows you to create affiliate links to Amazon products on your website. When customers click through a link and buy a product, you earn a referral fee.

Airey earns far more by selling his own books, he adds, but he keeps up with the Amazon links because they’re so quick and easy to do.

Airey earns far more by selling his own books, he adds, but he keeps up with the Amazon links because they’re so quick and easy to do.

“Perhaps once every month or two, I’ll mention a good design book on one of my blogs, and insert Amazon links alongside it,” he explains. “The cash this generates is only a few percent of my income; enough to pay a couple of bills. But it only takes seconds because I’d feature the books regardless.”

At the other end of the spectrum, there’s Sacha Greif, a French web designer and developer now living in Japan, who’s dropped client work completely over the course of the last six years, in favor of focusing fully on projects that generate passive income.

“I was getting frustrated with not being able to control the whole product when freelancing for others,” he explains. “I really wanted to work on projects I could call my own."

His most successful has been his programming book, Discover Meteor.

“At this point, however, it's a little out of date, so the money I generate from sales isn’t that much, maybe $100 a month. Currently my main source of income is Sidebar, my daily newsletter of design links. I include one sponsored link on Sidebar per week, and I charge $950 per link.”

How to earn passive income: Sidebar
Sidebar provides your daily dose of design links to followers and subscribers.

It’s worth noting, though, that Greif dislikes the term ‘passive income’ and prefers to call it ‘scalable income’, believing the former implies there’s little work involved. And he does have a point.

Because while the ultimate aim is to earn money by ‘doing nothing,’ you certainly have to put the work in to get there.

You might also like: 7 Tips to Calculate Your Freelance Rate.

Passive income side projects

Working hard has certainly been the case with Is In Stock, a project California-based web designers Jeff Toll, Jake Bellacera, and Garrett Bjerkhoel have pursed in their spare time, outside of their full-time jobs.

Is In Stock provides instant text and email notifications about hard-to-find products, coming back into stock. In their first seven weeks, the team has already gone through three major product launches: the Apple Air Pods, BeatsX Earphones, and the Nintendo Switch. But while this income may eventually become “passive,” launching a product this complex has meant being very, very active.

“When we first launched, we hadn’t fully understood the challenges of scaling the system,” Bellacera says.

When we first launched, we hadn’t fully understood the challenges of scaling the system

Jake Bellacera

“For example, we shipped an update last week that increased the number of products we check from just AirPods, to about eight products in total. In addition, we went from checking under 500 stores to perusing nearly 4,000.”

Bjerkhoel add that as the frequency of checks increases, so does the frequency of errors.

“We’ve had to implement an error checking system that alerts us, so we don’t have to sift through error logs.”

All of it means lots of work now, but the long term goal is to reduce this need for constant maintenance.

“The way we’re designing the product is to require as little effort from us, as possible, on a day-to-day basis,” Bellacera says. “So that we can focus on the fun things, such as adding new products, features, and interacting with our customers.”

Another source of passive income that requires a lot of initial effort is writing and selling your own book, as Australian digital designer Matthew Vernon discovered with his ebook Sketch & Semplice.

Semplice is a portfolio site builder for WordPress with a steep learning curve, so Vernon sensed there might be demand for a guide. To make sure, he first built a landing page that took pre-orders via Gumroad.

“I started sharing the page around online, mainly via Twitter, and actually received a few pre-orders,” he explains.

He then spent roughly six hours a week for three months writing the book, and marketed it via a MailChimp list on his landing page.

“When I was nearing completion, I told the list if they re-tweeted a specific tweet about the book, I’d give them free access to an early version,” he adds.

After launching the finished book, he posted it on Product Hunt – which is where things started to kick off.

“On day one, it received around 100 upvotes, and was number one in the Books section for the day. I also had a friend post it on Designer News – where it stayed on the front page for a day or two. I received about 40 orders via these two sources.”

Since then, despite Vernon doing little marketing, the book continues to sell (mainly from people landing on his website or his Twitter account, as well as the Product Hunt or Designer News sites). Vernon’s made around $1,800 in the first four months.

And his book success is not just a one-off, either; Vernon’s also generating passive income from creating Neue Goods in late 2015 – a streetwear inspired brand for designers and creatives.

And his book success is not just a one-off, either; Vernon’s also generating passive income from creating Neue Goods in late 2015 – a streetwear inspired brand for designers and creatives.

You might also like: Why You Should Bill 100% Up-Front.

The learning curve

How to earn passive income: Cafe working

If examples like the above make you want to ditch all your clients immediately and dive head-first into the world of passive income projects, French web designer and developer Sacha Greif urges caution.

“Make sure your financial situation is secure before attempting the transition," he advises. “It will probably take a couple of years before your project-based income matches what you'd earn working with client (if it ever does). And I can pretty much guarantee you'll spend at least six months without seeing any meaningful income whatsoever. In other words, don't pursue this path in the hopes of earning more! The reward is the freedom to work on what you like, but it doesn’t come without a few sacrifices.”

Indeed, even the most successful projects experience a ton of teething problems, as digital designer Vernon learned.

“With the first collection of Neue Goods, I misjudged the demand and ordered too much stock. I’d built up a following prior to the release, but I had no way to judge who would actually convert,” he explains.

Similarly Jeca Martinez has found success producing art for print-on-demand websites like Society6 and Redbubble,but only got there by trial and error.

“Initially, I made storybook-like illustrations for my products, but now I found that patterns seem more visually appealing, and adaptable to different types of products,” she explains. “In retrospect, I should have also been more consistent with uploading new work to my accounts, and better at recognizing design trends right at the beginning, so I can create work before the trend becomes too saturated.”

Even David Airey’s simple use of Amazon affiliate links involved a learning curve.

“It took me a couple of years before I realized I should be using referral codes for both the UK and US Amazon sites,” he explains. “At first, I’d only link to relevant products on the US site because that’s where most of my visitors live. But the UK is my second highest visitor location, so it made sense to give people the option of clicking through to either site.”

As it’s not just about how much you earn, but the way you get paid too, warns Sydney-based graphic designer Turner.

It’s not just about how much you earn, but the way you get paid too, warns Sydney-based graphic designer Turner.

“Starting with Zazzle came about because I’d been doing some sales through CafePress, and discovered they offered royalty payouts in cheque only,” he recalls. “My bank charged a huge penalty fee for depositing a US cheque, and then charged a fee to convert the US dollars to Australian. Zazzle was the only company at that time that was doing PayPal.”

You might also like: Why Freelancers Need to Care About Bookkeeping.

Freedom to be creative

How to earn passive income: Creative

Despite the challenges, passive income is still worth pursuing — and it’s not just about the money, says Vernon.

“Right now, I definitely make more money freelancing; it doesn’t even come close. However, the feeling of satisfaction that comes from making money doing your own projects can’t be beaten. It feels so much better to make $1,500 from something you created entirely by yourself than to invoice a client $15,000 for some freelance work.”

Want to learn more about building a profitable web design business?

From pricing projects to invoicing clients, this free guide will show you everything you need to know to drive sales, get paid, and ensure your finances are in order so your business is as profitable as it can be.

Download Grow Vol. 3

About the Author

Tom May is a freelance writer and editor specializing in design and technology. His articles are most often found in magazines including Computer Arts, ImagineFX, and Professional Photography, as well as the website Creative Bloq. Follow him on Twitter.

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