- Scott H Young - https://www.scotthyoung.com/blog -

Why I’m Not Trying to Build Passive Income

I’ve written a few articles mentioning my desire to be able to earn a full-time income from this website. From that, people have written to me claiming that I want to build a completely passive income stream and get rich without doing any work.

That hasn’t been my strategy at all, with this business. Sure, I expect my income stream to be somewhat passive, because that’s the nature of running a business. But I’m not planning on stopping working anytime soon. Nor do I expect that this website will eventually have the capacity to provide decades worth of income without any effort on my part.

The Easiest Way to Earn Money

The easiest way to earn money is by working. Truly passive investments like bonds or stocks can earn money without any new effort. But this is slow, and unless you already have a lot of money, it isn’t a good way to make money.

No, the best way to make money for someone who doesn’t already have a lot of money is by working. That shouldn’t be a big surprise, but every online investment guru makes it seem like starting a passive revenue business is the easiest way to spend your workdays at the beach with piña coladas.

Running a Business Requires Effort

Everyone I know that runs a successful business works at it full-time. Some of them work at it even more than full-time. That includes blogs and online microbusinesses.

I’m not saying there aren’t advantages to working on a business. I get to choose my own projects. I have complete creative control and freedom to choose the terms from which I work. I have the ability to work just as easily from any location in the world. I also get the satisfaction of creating something from scratch.

But not having to work isn’t one of those advantages. If you build a business, even one with a healthy passive revenue stream, you need to keep working at it.

The Income Curve

Running a small online business simply has a different payoff curve than other forms of work.

If you work at a job or do freelancing work, that has a sharp payoff curve. You get paid immediately after the work is finished and then you stop being paid. If you work partially on royalties or long projects, your payoff curve may be several months in order to earn your income for work paid.

The difference with running a business is that the curve is longer. I don’t earn all of my money immediately, but over a longer period of time. I’ll write a book that will have a small spike after it is released, with a long tail of revenue that will continue for years.

The income curve doesn’t mean you can just sit back and watch the money roll in. It just means the income is spread out over a longer time period. In five years, I’ll still need to work to sustain my income, and I will in ten.

The Myth of Outsourcing

Some people have asked me whether I’ll eventually outsource the work for this blog. Hire a product manager to manage the products. Hire writers to fill the blog with content. Hire an editor to review the content and publish it.

I may hire someone if the website demands it. However, I’ve seen from other people who have taken this approach, that growing their business increases their work instead of decreasing it. As you hire more people, you need to generate a higher income to support their wages. With more work you need to do more work coordinating the efforts of the people you have hired.

For some people, this approach may be great. They get to build something even bigger and reach even more people. But, I think if your goal is to grow your business to the point where it doesn’t require any work, you’re deluding yourself.

Building a Lifestyle Business

My goal isn’t to stop working. I will probably retire later in life, at which point I’ll live off my savings and investments. But, I don’t expect to create a fully autonomous engine that can support me perpetually.

Instead, I’m trying to build a business that can serve as the platform for a career. A business, that with continual pruning and improvements, can sustain a full-time income. A business that continually advances my knowledge, so even if it tanks, I’ll have the skills to easily return to my former income level.

Realistic Entrepreneurial Goals

If your goal is to work enough that you never have to work again, I don’t think starting a business is the best path to that. I know some people that have been able to do it, but for every person I know that can live entirely off passive income, I know twenty other people that require work to sustain it.

If, however, your goal is to build a business that will support your lifestyle, go for it. A business is a different kind of career which can allow you personal and creative freedoms not available through a job.

My goal is to be able to support myself full-time through writing. Not to quit working and retire at thirty, but to build a career that is a little different than most. I believe in investing, but I know the best way to make money is to work.