Basically, there are 2 kinds of income: active and passive.
Active Income: Income for which services have been performed. This includes wages, tips, salaries, commissions and income from business in which there is material participation. When you work, you have income. If you stop to work, you have no income. Because you work for money.
Passive income: Income received on a regular basis, with little effort required to maintain it. It is closely related to the concept of "unearned income". When you work, you, of course, have income. However, if you stop working, you still have money. Because money works for you, system works for you.
Ok, now I will tell you how to create a system which helps you create passive income.
First, you need to know what system is? I won't tell you its definition but will explain you simply "what you built helps you earn money frequently in long term". For example, you build a hotel with 10 rooms for rent, you can get money steadily without doing anything. It is system! System is vital for success and generate passive income. It can be showed clearly via 2 kinds of business models: Network Marketing Business and Traditional Business. When Unilever enters any market, what consumes its time and money is building its system (many kinds of systems including: production system, operation system, distribution system, etc). Whenever the system is established, new categories, brands, and products will be launched. Of course, when you know how to produce detergent, you can know how to produce softener. When a grocery orders a LifeBouy soap from Unilver, Unilever can present new shampoo like Sunsilk or Clear. Do you think its success ratio is higher than of the company which hasn't sold any products into that outlet.
Why can internet help you generate passive income?
In order to build a traditional business, you need a huge amount of money. For example, You build a hotel with 10 rooms, how much is your investment? In order to open a take away cafe, how much do you need to invest? In order to become a distributor of any manufacturer like Unilever or P&G, you need to invest in warehouse, equipment, trucks, employees, etc, you need at least 1,000,000 USD. If you buy franchise, the investment for the franchise is over 1 million dollar, and then you need to invest in leasing fee for location, the equipment, tables, chairs, decoration, employees, etc.
If you don't have much money, you only have 2 feasible options: network marketing business or online business. And now we only discuss on online business.
Advantages of online business
In traditional business, it requires a lot of time and money while it faces many risks. In contrast, the online business is easier but gain the same profit (even higher profit than traditional business) The procedure of establishing an online business is more simple than establishing a traditional company. Online business doesn't require an office, employees, raw materials because the hottest products currently are information such as functional knowledge, software, technology, etc which are immediately sold via internet.
In summary, please compare between traditional business and online business.
When you run a traditional business, you need to be available anytime. In contrast, in online business you can work part-time at home, or you can work and enjoy your vacation at the same time.
Traditional business's Initial investment and operation cost are much higher than the online business's. Due to low initial and operational cost, you can feel comfortable to start a new one if the previous one fails.
For traditional start-ups, we mainly serve the local customers or consumers at first, for online business you can sell to the whole world.
For traditional businesses, you may feel uncomfortable to cash flow issues, liabilities while you need to use your real cash to get products, raw materials in advance. While you can get money immediate and before you deliver the products.
The investment in advertising is also a key consideration.
Now, how do you feel and how much do you want to try? In the next articles, I will guide you step by step how to build a sustainable online business.
Too many people view Internet business through an extremely narrow lens – either you’re pawning off your personal possessions on eBay or you’re trying to be Mark Zuckerberg with the next big Internet thing. The reality, of course, is that there are as many different ways to do business online as there are people making this lifestyle work for them. For example, as an Internet business owner, you could:
Sell your handmade arts and crafts on Ebay or Amazon
Run an informative site that generates revenue through advertisements
Provide professional services to clients around the world
Generate client leads for offline businesses
Sell other peoples’ products and earn a commission for each referral
But the “how” of Internet business isn’t important – there are enough different Internet business models out there to suit any particular combination of strengths and weaknesses. What really matters is the “why” – that is, why you should consider pursuing online business in the first place.
The following are just a few of the benefits of owning your own Internet enterprise to help encourage you to make the leap:
Reason #1 – Find the ultimate job security
Ask a handful of people what they think about the idea of pursuing Internet business, and you should hear at least one person respond with, “It’s too risky!” I have to disagree. When you learn how to do business online, you’re actually training yourself to create ultimate job security. If you learn how to sell products online, chances are you’ll be able to repeat this process – even if your original idea doesn’t pan out.
The same goes for finding freelance service clients, sending traffic to ad-based sites and successfully re-launching every other Internet business model out there. Now, contrast the ability to generate income online over and over again with a steady day job held at a single employer. Considering how many companies go under these days, putting all your eggs in that single basket ultimately sounds much riskier to me than learning how to make money online!
Reason #2 – Work on projects you’re passionate about
As someone else’s employee, you aren’t working on the projects you’re passionate about – you’re completing tasks in order to increase somebody else’s bottom line. And while this arrangement works for some people, most chronic employees don’t know what they’re missing when they trade the passion of working for yourself on projects you care about for the “security” of the daily grind.
If you aren’t personally satisfied by your current day job, you owe it to yourself to at least investigate the potential fulfillment that comes from running your own online enterprise.
Reason #3 – Access a wider network of clients and buyers
If you already operate an offline business that either sells products or takes on freelance clients (for example, as a freelance writer, web designer, programmer or accountant), transitioning your business online will give you access to a much wider pool of clients and buyers. No longer are you competing against other agencies in your area for the same small network of customers – instead, as an Internet business owner, you’re free to think as big as you want. This could mean accessing buyers a few towns away from your own or even “going global” in order to expand your business’s reach dramatically.
Reason #4 – Cut your child care expenses
With childcare costs rising steadily and often topping thousands of dollars a month for the full-time care of infants and toddlers, you may find that running an Internet business allows you to both cut your costs substantially and spend more time with your children. For most dual-income families working today, that’s a pretty big win-win!
Reason #5 – Explore your interests
One of the greatest advantages of running your own Internet business is the flexibility this arrangement provides. When you work a day job, you’re tied in to a set schedule that in no way corresponds to the amount of work you have or the hours in which you’re most productive. Unless you have a very understanding boss, you aren’t able to drop everything for a two-hour hike when the weather’s nice or start your day at noon because you aren’t a morning person.
Running an online business gives you the flexibility to set your own working arrangements based on your particular needs. It allows you to travel more (as most Internet businesses can be operated from anywhere in the world), to work when you’re most productive and to pursue the hobbies and interests you care about alongside your business pursuits.
Reason #6 – Enjoy low startup costs
If you’ve always had an entrepreneurial bent, know that business owners who choose to launch their ventures online enjoy substantially lower startup costs than those in the real world. Think about it – the “real world” business owner must pay for commercial space, physical inventory, printed stationery and more.
As an Internet business owner, your only real expenses will be a domain name and hosting account. Even if you do decide to purchase inventory outright or invest in tools that will make running your Internet business easier, your overall investment will still be much less expensive than maintaining a physical presence offline.
Reason #7 – Increase your earning potential
If you’re employed in a full-time day job, your earning power is limited by your field and your experience. If you work as a teacher, for instance, you can accrue all the experience and certifications you want – you’re still never going to hit the same million dollar salaries that investment bankers or lawyers will. But with online business, the sky’s the limit.
If you sell one product online, you can train yourself to sell fifty. If you decide to expand your service offerings significantly, you can always take on additional employees to help manage the workload. Instead of negotiating a pithy 3% raise with your boss, you’re essentially creating this increase (and much, much more) for yourself – a truly empowering experience that makes all the risk and uncertainty of Internet business worth it.