Building passive income
Video: Building passive incomeYou've probably heard the phrase, make money in your sleep. Doesn't it sound wonderful? The idea behind it is that you can have an income even when you're not actively working. As a freelancer there are a few ways you can develop such so-called passive income. All require an initial investment of time followed by slow earnings. However, those earnings can go on for years ultimately adding up to more than you would have made by selling those initial hours to a client. The first type of income is one I know and love well. Royalties.
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In this course, author and seasoned freelancer Tom Geller shows you how to prepare for a transition to freelancing. Begin by taking a look at your career goals, the systems that will support you, and proper ways to plan for success. Find out how to marshal your resources, refine your portfolio for presentation to clients, and estimate your costs to avoid any surprises on the financial front. Plus, discover how to create invoices, manage your books and taxes, expand your client base with marketing, and grow your business.
A bonus chapter covers common questions freelancers have when entering the field.
- What is freelancing?
- Defining your career goals
- Funding your startup
- Getting licenses, permits, and insurance
- Setting prices
- Finding work through agencies
- Getting referrals
- Working with time and project management tools
- Increasing your rates
Building passive income
You've probably heard the phrase, make money in your sleep. Doesn't it sound wonderful? The idea behind it is that you can have an income even when you're not actively working. As a freelancer there are a few ways you can develop such so-called passive income. All require an initial investment of time followed by slow earnings. However, those earnings can go on for years ultimately adding up to more than you would have made by selling those initial hours to a client. The first type of income is one I know and love well. Royalties.
These are most common among book authors although actors and some other kinds of creative artists also have forms of royalty income. Here is how they work. The author agrees to write a book in exchange for royalties rather than a set payment of say, $10,000. Let's say the author earns $2.00 per book sold. The publisher usually provides an advance payment against those royalties, let's' say it's $4,000. Then the book starts selling. The author earns nothing for the first 2 ,000 copy sold, because those royalties are paying off that $4,000 advance payment.
But from then on the author makes $2.00 for every book sold. If 8,000 more copies fly off the shelves, the author walks away with a total of $20,000: twice as much as the set payment would have been. But if no more copy sell, the author walks away with a mere $4,000. So it's a gamble. But with that risk comes the potential for much bigger earnings. Another kind of passive income comes from affiliate and resale programs.
In these, you're essentially becoming a salesperson for other companies in exchange for payments known as commissions. The offline version is well-known and includes sales of such things as insurance and cosmetics. Now the online version is similar except that the sales take place on your website rather than in your home or office. For an online affiliate program, you first sign up with a merchant then put their specially coded links and ads on your website. If a visitor clicks on one of those links and fulfills an action that's valuable to the merchant, you get paid.
The desired action isn't always a sale. Sometimes you get paid when your visitor simply fills out a form or merely clicks a link. There are many ways to find affiliate programs. Some sites run their own such as Amazon.com. Do a search for the word affiliate on a specific site to find out whether they have such a program. Smaller sites often run their affiliate programs through a third party. The biggest of these is Commission Junction at CJ.com. There are also a directories and reviews of such programs, for example, at AffiliatePrograms.com.
You'll quickly see that program quality varies widely. As with any other place where promises of easy money abound, the affiliate world attracts some pretty unsavory characters making empty promises and harming your reputation. So do your research. And beware of the temptation to stretch yourself too thin with affiliate programs. It's better to join one program that you can promote well than to join a thousand that just sit there and do nothing. When done right, affiliate programs complement and multiply your other online efforts, but that only happens when they're relevant to other areas of business.
My own recommendation is to build your other business first and then seek out passive income. I make a decent living from royalties and affiliate earnings, but that would never have happened if I hadn't first made a name for myself earning money the old fashioned way. Handled right though, passive income can supplement and even surpass the money you make by selling hourly services.
Find answers to the most frequently asked questions about Freelancing Fundamentals .
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- Q: This course was updated on 3/20/2013. What changed?
- A: We added a bonus chapter that covers common questions freelancers have when entering the field, such as "How do I use Craigslist or other job boards to grow my freelance business?" and "How do I find clients?"
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