Passive Income is a topic that many still struggle with today in 2019. And, I have to admit, while I understand why people aren’t too familiar with the concept, it still kind of blows my mind. Personally, I think it’s been 18 years since I first read Robert Kiyosaki’s Rich Dad, Poor Dad and his second book, Rich Dad’s Cashflow Quadrant. Since then I’ve picked up the basics of developing passive income streams and understanding how it all works. In this post, we’re going to explore the top 8 methods of developing passive income.

I Quadrant Opportunities

If you’re familiar with Robert Kiyosaki’s work, you’ll recognize his company, Rich Dad, Poor Dad. Robert himself is a fan of all passive income opportunities, however, when he originally wrote his first book, his experience was via Real Estate Investing (REI) and Traditional Investing through Stocks, Bonds, 401k’s, Mutual Funds, etc.

Real Estate Investing (REI)

REI is probably one of the most well represented options out there. However, when most people think of REI, they believe that they can’t get in the game. In fact, I remember starting to read Robert’s book Rich Dad’s Guide to Investing when I was in college and thinking “When I get a real income when I’m out of college, this will be how I make my fortune!”

While I still haven’t gone that route, it’s definitely something I see myself eventually getting into.

If this is a track you might be interested in, I’ve had several REI success stories on the show:

Chris Prefontaine (AoL 155)

Damion Lupo (AoL 125)

Kevin Bupp (AoL 124)

Whitney Nicely (AoL 123)

Traditional Investing

Outside of REI, when most people think of passive income, they think of making money through stocks, bonds, and mutual funds. 401k’s fit in this area as well.

While this isn’t necessarily a bad topic to think about, I will say that if you do the math, it takes about $1.25M to be invested in various assets to yield a comfortable $50k+ per year income.

Thing is, most people won’t ever smell that kind of lump sum amount in their career working a day job. However, there are tactics you can use to save a little bit here and there to eventually make that work out. Fortunately, you can read material by folks like Dave Ramsey to make this more of a reality than a dream.

Also, if this is an arena you’d want to play in, I’d also recommend checking out Tony Robbins’ book Money: Master the Game

B Quadrant Opportunities

In the I Quadrant, we’re mainly focused on making our money work for us to make more money. However, again, not everyone has access to that seed money to get up and running. So what’s one to do if they want to get in the passive income game?

They should totally look at the B Quadrant. The B standing for Big Business or Business Systems. These terms can be used interchangeably because you can’t have a big business without harnessing the power of business systems.

What’s great about the B Quadrant is that it’s the scaled up version of the S Quadrant. The main difference being that while in the S Quadrant you’re capped by the activity you can put in yourself, in the B Quadrant you can grow your business through fractal patterns or fractals. If you’re unfamiliar with fractals, a basic example is a tree in a forest. A tree has a trunk, limbs, branches, and twigs. They all are formed using a pattern of nodes and branches. Depending on the type of tree, however, the pattern might keep going. 

Most trees have a tap root that counterbalances the tree and keeps it in the ground. When the tree is growing, a lot of energy is put into creating that tap root.

However, Giant Sequoia trees have a network of roots that support the entire forest like a mesh. Sure, a tree can grow by itself and support itself, but Sequoias, being the largest trees in existence have evolved to support each other in this network. The trees themselves act as the nodes, while the roots act as the branches. 

So simply saying when it comes to fractals, the larger the network, the more potential for growth.

Traditional “Tried and True” Opportunities

The B Quadrant isn’t anything new. In fact, you probably already know of examples of people who are successful in this quadrant.

Insurance

As long as there’s been insurance, there’s been agencies. And insurance has been around a pretty long time.

When someone takes the leap from being an agent and starting their own insurance agency, then they’re taking a step into the world of the B Quadrant. Those agencies can continue to grow to a point where they train other agents and agencies. At this point they become a Field Marketing Organization (FMO). Their most basic role is to offer insurance products, services and possibly training to insurance agents or agencies.

An example of one here in Indiana is Gordon Marketing.

Franchising

Using the same idea as an insurance FMO, a business can eventually grow to the point where they franchise the model of their business.

Like insurance, the idea of franchising goes way back to the Middle Ages. However, the franchising that we’re aware of today didn’t really start until after World War II.

Of course, one of the most well known franchises is McDonald’s. And luckily for us, a movie was released about the man who built the franchise. The Founder is the story of Ray Kroc and his journey to create the business that we know today.

It’s easy to see that this method of creating passive income works. There’s more franchises today than ever! In fact, there’s so many suburbs of one city resemble those of another city.

Personal Franchising

When it comes to franchising, you can do it one of two ways. The first is the more familiar route we just talked about. However, one issue with this method is that it can take quite a bit of startup capital.

Most people don’t have a spare $10k+ just sitting around.

So they participate in the age old tradition of direct sales. Direct sales is defined as “The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs.” With that kind of definition, you could say that just about any kind of sales outside of a traditional store or place of business is a form of direct sales.

Many direct sales companies today allow their sales associates or Independent Business Owners to sponsor other people to do what they do. One of the oldest companies that is set up to do specifically this is Amway. In fact, the reason  Amway was created, was so that anyone could have the capability to start their own business. At the same time, they’d also have the support from those who sponsored them as well as the company itself. 

If you’d want to know more about this form of direct sales, often referred to as multi-level marketing, you can check out our friend Robert Kiyosaki has to say on the subject. Interestingly, it’s how he met his wife Kim!

Like Robert, I highly recommend checking out this path if you’re stuck in the E Quadrant and want to quickly move to the B. Or even if you’re in the S Quadrant and don’t have enough to pursue the other options we’ve talked about so far.

Here’s a couple of folks I’ve had on the show who are experts in Direct Sales:

Mark Nathan (AoL 23)

Jeff Gamble (AoL 156)

Cyndi Walter (AoL 163)

George Campbell & Jim Packard (AoL 193)

Licensing

I’d be admiss if I didn’t cover the topic of licensing and what that means. Basically, it’s the sharing of Intellectual Property (IP) from one company (company A) to another (company B) in agreement that if the company B uses the company A’s IP, company A gets a commission. While it is similar to franchising, franchises differ in that they are in charge of how company B is actually ran. In licensing, while company A might have recommendations and regulations set, it’s pretty much left to company B to work out their own systems of operation.

As an owner of America Multi-Sport, I’ve had first hand experience to see how this can work out. While on the surface it might seem like a great idea since you’re skipping over some pretty hefty fees to actually make a franchise, there’s a good chance you’re going to fall behind. Since your licensees don’t have to operate to a certain standard, it leaves a lot of room for interpretation. Just with us, we’ve had a handful of licensees come and go in the last couple of years simply because they couldn’t do what we recommended to them.

However, just because it hasn’t been overly successful with us doesn’t mean it can’t be successful. The NFL got started the same way. Even though it’s had its ups and downs,  it’s celebrating 100 seasons!

Internet Powered Opportunities

Now that we’ve covered forms of opportunities that have been around 100 years or more, let’s look at a few things that have popped up in the last 20 due to the advent of the internet.

Scaled S Quadrant Work

If you’re more familiar with the podcast, you know that a number of the guests are simply people who have taken their service to the next level. They’ve found their Ikigai and have used technology to build a lifestyle that they’re proud of. Of the numerous hats I wear as an entrepreneur, one is helping people take their solopreneur business and scaling it through technology if they haven’t done so themselves. 

Of course, there’s different ways to capitalize on technology. You can become a digital nomad where the only work you do is through your laptop as you travel the world. Or you can start a brick and mortar agency that offers a service which can be executed online. Or perhaps you already have an agency and you’re up to your eyeballs in work and need help with all the work that’s coming your way.

There’s ways to do all of this. It really depends on what you want to do. Of course if you’d like help with this, shoot me an email. I’d love to help you get to the next level.

Affiliate Marketing

The internet has brought on another form of direct sales called e-Commerce or internet marketing. Today, most of us no longer go to places of business and buy something on the spot. We opt to do our shopping from the comfort of our own home.

Lots of online business owners get their start in internet marketing by pedaling other company’s products or services. Most of the reviews that you see on YouTube, have an affiliate link in their description that you can buy the product through them and they get a commission. 

In fact, Pat Flynn did pretty much this for years. However, as his platform grew, so did his need to create his own online products.

Influencer Marketing

When I first learned of Pat, I also learned of Brendon Burchard and his course called Expert’s Academy. Today I think he’s called it the Influencer Academy because more people are familiar with that term on Instagram.

The idea of Influencer Marketing is pretty straight forward. If you have an engaged audience, you have a list of potential buyers. The bigger the audience, the more potential buyers.

You make a product specifically designed for that audience, and there’s a good chance they’re going to buy from you. Why? Because of your influence on them through that engagement!

Typically speaking, those products take the form of digital products like courses and eBooks. That said, it’s not uncommon to see books, audios, and videos released by people in this arena.

Anyway, here’s the catch. It’s important that we never confuse three things. 

• Don’t confuse your platform with your income. 
• Don’t confuse your income with your career.

When people are getting started in the online entrepreneur space, many times they believe that they need to become an influencer way before they’re successful in making income. Problem is, you can’t really be an influencer unless you have some form of success in your career. They’re putting their platform ahead of their income.

To correct this, we need to learn how to separate the idea of these two. Sure your income will be multiplied as you become an influencer, but if you don’t have any income, you’re essentially multiplying by 0. 

So the next time you hear the phrase “become the next influencer” and think it’s a great idea, make sure that you already have a proven business based on the material that you want to help the masses with.

SaaS Platform

Finally, the last option I’ll mention because it’s the last category I’m personally familiar with is building a Software as a Service (SaaS) Platform. Now, doing this is just like building any other kind of business. You have to start small and in a well defined niche.

What I learned from Dane Maxwell (AoL 56) and his program called The Foundation is that if you’re creating something from scratch, you really need to do your homework up front. Find out what the people really want.

However, because it’s a product and not a service, you’re going to have to learn how to do a little bit of pre-selling the concept. Especially if you’re creating it without using your own funds. Why? Because hopefully, you’re going to hire someone to do the programming for you! 

Once you have the online tool built with the help and funding of your “champions” and early users, then you can market it and build your influencer platform like any other online business.

Action Steps

So, lots of information here! 

Hope that it provides some value and gives you a bit of clarity.

Again, if you haven’t, I really recommend getting started with reading Rich Dad, Poor Dad and the Cashflow Quadrant. Everyone should be financially literate and these are great starting manuals on passive income. 

From there, feel free to connect with me. We can do a strategy session based on where you’re at and what your needs are.