How to Generate Passive Income From Your Website

SmallBizChat on TwitterEvery week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Pat Flynn @PatFlynn. Pat started doing business online in 2008 after he was laid off from a dream job in the architecture industry, which he loved. Crushed, he decided to work on his own and created a website at http://www.greenexamacademy.com which teaches people in the building and design industry how to pass the LEED exam. That website turned into a six-figure, passive income business within a year and now he shares information about developing passive income at http://www.smartpassiveincome.com where he reveals his income and where every cent comes from. His motto is lead by example, no hype and complete transparency.

SmallBizLady: What are the benefits of earning a passive income online?

Pat Flynn: Earning a passive income online is great because you can continuously generate an income for the work that you’ve already done. You don’t have to be present in order for a transaction to take place and you’re not trading your time for dollars, you’re instead investing your time upfront to get returns on it later. It doesn’t happen overnight and it’s definitely not easy, but it can give you the time and freedom you need to do other things that you love.

SmallBizLady: What are some specific ways in which a person can earn passive income from his or her website?

Pat Flynn: There are several different ways to generate a passive income online.

You could display advertisements on your site and get paid per click (i.e. Google Adsense), or maybe you set up a contract directly with companies for a monthly fee (and there are tools out there, such as crankyads.com, to automate that process for you).

You could create products such as eBooks, mp3 files or videos that people can purchase through your website, which automatically get delivered to the customer after purchase. Again, there are tools out there to automate this process for you. My personal favorite is E-Junkie.com if you want to sell directly from your website. Or, you could choose to sell these things on an existing marketplace such as Amazon.com or iTunes.

You could create a membership site or online course and have customers pay to gain access to course material. You could also create software that solves a particular problem and charge to use it.

SmallBizLady: What is the best or most attractive business model for generating a passive income online, and why?

Pat Flynn: Advertising is typically the most popular because it’s the easiest to implement. If you have a website, you can sign up for something like Google Adsense and within minutes start to populate relevant ads on your website and begin to get paid when your visitors click on those ads. I remember when I first added Adsense to my LEED exam site back in 2008, it took about 15 minutes to add and within an hour I had earned a couple of dollars. That’s not much money, but it was an incredible feeling.

If I could choose any business model for a passive income, it would be a membership website with a recurring payment. The reason is because, for example, let’s say in the first month you have 10 members paying 10 dollars per month, for a total of $100. The next month you get another 10 members, which gives you a TOTAL number of 20 members (again, each paying $10/month), and then you’re at $200 of income per month. The next month, you add even more members, and the income just keeps getting bigger and bigger.

SmallBizLady: How long does it take to start generating a passive income from your website?

Pat Flynn: If you already have a significant following, then it’s going to happen much faster than if you were just starting from scratch. The most important element is your audience – not just the size of it, but how much they trust you. The better your relationship with them, the easier it is to see results from creating products or recommending products as an affiliate.

You could place ads on your website from day 1, but to be honest you’re not going to see significant results until possibly months, or even years later.

The most important thing to remember is that it doesn’t happen overnight and there is no such thing as get rich quick, no matter how many people out there seem to claim that’s the case.

A personal example: when I wrote and published a study guide for my LEED exam website, in the first month I had sold 309 copies for a total of $7906.55 (again, in that automated fashion) – but what many people forget is that my website had already been up for nearly 2 years building an audience and gaining people’s trust first.

SmallBizLady: What are the most common mistakes people make when it comes to earning an income from their website?

Pat Flynn: The most common mistake people make is expecting results to happen fast, and when they don’t, they give up.

Like I keep saying (and I keep saying this on purpose), this kind of stuff takes a lot of work upfront and results will never happen overnight. That’s the hardest part about it: you can work on something for months before ever seeing a return, which is hard for it’s all about trial and error, and learning from your failures along the way. Everyone will fail (I’ve failed several times!), but it’s those who get up and keep moving forward who will eventually reach their goal.

Specific mistakes, based on the business model include:

For advertising: A lot of websites put too much of it, sometimes to a point where your visitors start to become annoyed or even stop coming back. You want the ads to actually be helpful to your audience and compliment your website, and not take away from the experience of your and the information that you share on your site.

For affiliate marketing: The big mistake here is when people recommend products to their audience they’ve never used before. Everything you promote, even if it’s another person or company’s product, directly reflects on you and your brand, and I wouldn’t risk promoting something to my audience that I’m not familiar with. If it ends up being a bad experience for them, it’s ultimately my fault and I’m likely to lose a following that way.

For product creation: The most common mistake here is trying to make things 100% perfect before going to market. If you try to make everything perfect, you’re never going to launch your product. As long as what you’re selling provides value and does what it says it’s going to do, then people will be willing to pay for that. Get to that point and perfect things later – the people who have already purchased those products, or who are a part of your course or membership will appreciate your updates and know that you’re continually working to improve things.

SmallBizLady: What is the most important thing to consider if you’re trying to make any kind of money online?

Pat Flynn: It’s not about you; it’s about those you are serving – your audience. The more you can help them, the more you’ll get back in return. Your earnings become a byproduct of how helpful you are and how much value you can provide.

Know exactly who your audience is, what they like and what they don’t like. What are their pains? What are their wants and their needs? Ask them.

The more you understand, the better you can provide value and help, and like I said, the more you’ll get back in return.

SmallBizLady: Can you share specific examples of either yourself or other people successfully generating a passive income online?

Pat Flynn: Sure! I briefly mentioned my LEED exam study guide earlier, but let me expand on that.

I wrote this guide in a month and a half, and it was 95% comprised of the same material that people could get for free on my website. I was actually very scared about this but was reassured by some of my mentors that as long as the eBook was compiled nicely, easy to read and did what it was supposed to do, that people will pay for convenience. After a successful first month of sales, I added an additional product to my product line – an audio guide. This was basically an audio edition of my eBook, read and recorded by a voice talent I hired on Elance.com. After two weeks it was ready to launch.  Through E-Junkie.com, the sales process was completely automated and I doubled my income. My record month for sales on GreenExamAcademy.com was over $30,000.00 in March of 2009, and I had spent only 2 or 3 hours the entire month on the site, mostly answering customer emails.

Later, I started to work even less after implementing a FAQ of the most common questions, which people get in their downloadable package after making a purchase.

Another example is my friend Benny Hsu from GetBusyLiving.com. He’s a regular reader of my blog and was inspired by my iPhone application business, which has been generating between $6k and $12k per month over the past 3 years.

Benny had an idea for an iPhone app, so he hired a developer and after a couple of months, sent it to Apple for approval. After a week, Photo 365 became App of the Week in the App Store and started making thousands of dollars a day!

I have a whole series of interviews on my podcast of amazing success stories from people who are running passive income businesses online – from a chef with an online kitchen, to a man who runs one of the top wedding websites in Germany.

SmallBizLady: How can one passively make money online if the business model that works best involves a human element?

Pat Flynn: Many businesses require a human touch, and whenever a human touch is involved, that is, of course, not passive.

The first thing to think about, and question, is whether or not certain tasks CAN be automated. There’s new software coming out every single day to automate many of the tasks that used to require a human touch.

For example, instead of taking a payment and then manually delivering a product, I can use a tool like E-Junkie.com to automate product delivery for me.

If you manually look up where you rank in Google each day, you can use a tool like WhooshTraffic.com’s rank tracker or SeoKeywordRanking.com to automatically send you emails each day of your current rankings.

Some things, of course, will always require a human touch, but the next thing to think about is – does that task require YOUR human touch? You could consider outsourcing some work that you feel comfortable outsourcing. Many people love this solution because it lets people focus on the work that they really want to focus on (or they’re actually good at), and some even hire teams of people to run their entire business for them.

SmallBizLady: Can anyone earn a passive income online?

Pat Flynn: It’s not a matter of skill or background or education, because anyone can learn everything they need to know to generate a passive income online. A lot of that information is freely available on the web already.  What is comes down to is the mindset, and there are common traits between those who are successfully earning an income online:

They welcome failure (they don’t try to fail, but they welcome it), they’re doers, they believe in themselves, they don’t follow – they lead, but at the same time they don’t reinvent the wheel, they just make the wheel better, and most importantly, they go big.

Those are the types of people who will find success online, and unfortunately not everyone believes in themselves.

To quote T. Harv Eker, author of Secrets of the Millionaire Mind: “Your inner world created your outer world.”

SmallBizLady: What’s the number one, best tip you have for anyone looking to generate an income online?

Pat Flynn: Experiment. Every website and audience responds differently, and the only way to know what works and what doesn’t is to try things out, and keep track of what’s going on.

Don’t just throw things up and hope, but take calculated actions and remember that you can have a business that runs virtually on autopilot, but you need to put in the work to get there first.

If you found this interview helpful, join us on Wednesdays 8-9 pm ET follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat:  http://bit.ly/S797e

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

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