Do you salivate at the thought of passive income and long to start your own business?
Nacie Carson, founder of The Life Uncommon, a career transition and entrepreneurship community has written an insightful article examining the truth and myths of passive income. Carson draws on her own experience to highlight common delusions as well as frame some realities.
The first time I read through their information, I interpreted their material as “passive income is easy and effortless, all you have to do is set it and forget it.” When I revisited their material, I understood that their actual message is “passive income is a great revenue source that is earned from persistent, ongoing cultivation.”
The context of Carson’s article is online entrepreneurship however I think her observations are relevant to the pursuit of easy money and passive income in traditional investing.
You don’t just get rivers of golden passive income for life just by buying any old property or share, or starting a business. Wealth accumulation takes “persistent, ongoing cultivation”.
Other nuggets from Carson include:
So what’s the truth about passive income – is there such a thing, or is passive income a myth that marketers tell to line their own pockets?
From my own experience, I say there is such a thing, but it’s a nuanced thing.
…[my] passive income triumphs required a significant up-front investment of time, effort, and tinkering on my part, and in many ways I see them more as delayed payment or ongoing dividends.
[I] would tell any fledging entrepreneur that the simple truth of passive income is this: passive doesn’t mean effortless.
Carson’s comments echo comments I frequently make about the Do It Yourself approach to wealth creation. It takes a significant up-front investment of your time and energy to first acquire the expertise you need.
Then it takes additional time and effort to apply the expertise before you earn a decent return on investment for your money.
You then have to consistently apply that expertise to get a return for the up-front time and energy you invested.
The wealthiest people in the world are entrepreneurs – not passive investors in residential property (the backyard BBQ favourite.)
In my experience of working with people many want to start their own business. But their traditional education and employee experience often has not given them the toolkit to succeed.
In the video below Cameron Herold argues that we need to be teaching kids how to be entrepreneurs. Herold has been an entrepreneur since childhood and for the past 20 years has been coaching other entrepreneurs.
The presentation was recorded at TEDxEdmonton in March 2010. TED is an organisation devoted to “Ideas Worth Spreading” and includes many wonderful presentations of ideas that inspire you to learn more and take action.
In his presentation to TEDxEdmonton Herold shares some of the lessons he learned from his childhood jobs and business ventures that are important entrepreneurial skills. He also summarises some key entrepreneurial traits to teach our kids. Both will spark ideas in you that you can being to implement at home with your children of any age.
One idea that may challenge you is Herold’s attitude to paying children an allowance, or pocket money as we say in Australia. Watch below and find out his suggested alternative.
If you’re already in business you know the importance of building and managing your brand. And you’ve probably heard of Facebook and Twitter. But have you started to harness the power of these communities to interact with your customers, both current and prospective? You may be thinking that since you already have a website for your business you don’t need a Facebook page. Well in this article you’ll discover why it may be handy to have both plus get access to a free guide to setting up your Facebook business page.
If you’re pursuing business or self-employment as a money making strategy you know the importance of building and managing your brand. And you’ve probably heard of Facebook and Twitter. But have you started to harness the power of these communities to interact with your customers, both current and prospective?
Facebook presents a powerful opportunity for business. At one stage it was just for college kids. But that’s no longer the case. As this is written the social networking platform has well over 200 million active users. If Facebook were a nation it would be one of the earth’s most populous. Over 100 million log on at least once per day and these users upload over 850 million photos every month.
But, importantly for business, Facebook’s fastest growing demographic is 35 years of age and older. They’re connecting, they’re communicating, and they’re spending. It’s fertile ground for business.
Early in 2009 Facebook released a new version of Pages. Business Pages, or Fan Pages as they’re also known, harness the power of some of Facebook’s most popular applications. Previously these applications were only available on personal profiles, but today they’re being used by business to leverage connections and engage and interact with their community in new and creative ways.
First, I hope to demonstrate how Facebook Pages provide a unique opportunity for marketers to build active communities around their business. Second, I plan to reveal some of the new skills that are essential to online marketers in order to create engagement and dialogue, and to tap into trends and fashions. Finally, I hope to show that the development of a vibrant business community is within reach of anyone with the passion, will and drive to create outstanding results.
A Facebook page as a compliment to your website
You may be thinking that since you already have a website for your business you don’t need a Facebook page.
Firstly I ask how often is the content on your website updated and is it easy to do so? You can post new information, articles, photos and videos very easily to your Facebook page. And even better people can interact with them – and you can interact back. It’s great to have such a conversation with your customers.
Secondly, my thought is that if Facebook is where people hang out then I want to make it easy for them to interact with me where they are. I don’t want to force them to come to me. Sure I’d love for everyone to come back to my website, but most importantly I want them to be able to get value reading my stuff wherever they are.
Time to get started
Even, and perhaps especially if you are brand new to considering social media as part of your business brand management I recommend you read Peter’s book. It is easy to read and includes a step-by-step guide into starting your Facebook business page. It’s already helped me tune my Facebook page.
While you are on Facebook setting up your page you are welcome to connect to my Facebook page. I look forwarding to discussing personal finance with you there or in the comments below or wherever you like to hang out. 🙂
Recently I’ve written a little about my belief in profiting from your passion and that now is a great time to be able to do that. If you’re early in your journey of exploring this possibility then you may be wondering “why is now a good time?” and “how can I make money from it?” I get that questioning because that curious nature is just like me – I want to learn more and deeper.
There is money to be made in very small niches. The big shift has been in access to the Internet. Previously to make a good profit you needed high production volume and a best-selling product. Now, through our PCs it’s easier to create things and the Internet gives us all access to global distribution. There is almost any market, for any product, somewhere. Let your customers find you on the net.
When you decide to establish a business it is first essential that you choose to operate within the appropriate business structure. Should you choose a company, discretionary trust (family trust), unit trust or a combination?
The answer will have a significant impact on the tax you pay and the protection of your assets.
For an overview of the two major structures watch this brief video by lawyer Brett Davies.
Also read the full article on LawCentral in issue 262 of their regular Bulletin (dated 4th May 2009). You will need to pay a small fee to become a platinum subscriber to read the full article. But that’s a small price to pay compared to the tax you could save from what you learn.
Over half the people I speak to professionally list “self-employment” as one of their life goals. If you too dream of going out on your own or starting a business then I strongly recommend that you read “The E-myth Revisited” by Michal E. Gerber before you quit your job. Preferably you need to read The E-myth before you succumb to what Gerber calls ‘the Entrepreneurial Seizure’. Read my full review of this essential book.
Over half the people I speak to professionally list “self-employment” as one of their life goals. This can take many forms including:
Tradespeople wanting to go out on their own
Professionals wanting to start their own consulting business
Those wanting to start a business to pursue their passions (e.g. to open a restaurant)
And those who believe that owning their own business is the only way to get rich.
If you too dream of going out on your own or starting a business then I strongly recommend that you read “The E-myth Revisited” by Michal E. Gerber before you quit your job.
Or if you know someone who has the self-employment goal then please do them a huge friendly favour and forward this article to them now.
Preferably you need to read The E-myth before you succumb to what Gerber calls ‘the Entrepreneurial Seizure’. That’s the point where something inside your head resoundingly declares “I could do this for myself’, and from that point on your world is not the same.
The ‘E-myth’ is the myth of the entrepreneur. Gerber describes it best:
At the heart of the e-myth is ‘the fatal assumption’ that if you understand the technical work of a business, you understand a business that does that technical work. And the reason it is fatal is that it just isn’t true.
But the technician who starts a business fails to see this.
The real tragedy is that when the technician falls prey to the Fatal Assumption, the business that was supposed to free him form the limitations of working for somebody else actually enslaves him.
Self-employment enslaves many rather than frees them.
Now it’s not my intention to turn you off going into business. I do agree that many of the wealthiest people achieved their wealth by concentrating their risk and investing in their own business.
I want you to embark on that part of your journey with your eyes as wide open as possible to the realities of being in business. That is what Gerber does in “The E-myth”.
Inside The E-myth Revisited
The E-myth Revisited is written with a blend of traditional non-fiction text and parable. Gerber illustrates his points through the story of his client Sarah and her business “All About Pies.” This is a master stroke in getting the message across as Sarah experiences and expresses many of the emotions and questions that you do as you read the text.
If you’ve come across The E-myth after starting your business then you will likely relate to Sarah’s predicament. No matter how raw it feels stick with it as I promise you that the books also brings hope.
Part One of the book is essential reading for the aspiring self-employed person as you get an overview of the phases of business and some of the essential roles. One important distinction to grasp is the difference between:
And to realise that everyone who goes into business is actually the three roles in one. But the trap is that you start by operating too much in the technician role and neglect the important functions of the other two roles. Yet without completing the function of all three roles the technician becomes stressed and enslaved as mentioned earlier.
After reading part one pause for reflection and take a good hard look at your situation and motives.
Are you truly willing to do what it will take to be successful?
Your Primary Aim
You may have heard of self-employed people that their business is their life. The truth is that a successful business is not your life, though it can play a significantly important role in your life.
You need to decide what role that will be by considering what Gerber refers to as your primary aim. To me this chapter of the book is gold. In one sense you really should start here. But without having read the earlier sections you may be too dismissive and flippant in your answers.
To discover your primary aim Gerber suggests you ask yourself these questions:
What do I value most?
What kind of life do I want?
What do I want my life to look like, to feel like?
Who do I wish to be?
Those who have worked closely with me may not be surprised that I consider this chapter to be gold as it mirrors my approach to financial planning. The whole purpose of a business and of creating wealth is to facilitate the life that you want. So first you must start by defining what is most important to you.
If having reflected on your primary aim you decide your business aspirations are for the right reasons then read further into the book to learn what a successful business needs to look like.
Your Turn-key Operation – The Franchise Prototype
One of the big ideas in “The E-myth” is that every business can aim to be turn-key and operate in a methodical, repeatable way like the successful franchises such as McDonalds. Whilst many entrepreneurs may not ever plan to franchise they can still operate their business as if it were the prototype for a franchise.
The pay-off for creating a turn-key operation includes:
Creating a real exit strategy. A well-run business that will continue to operate smoothly and profitably after sale is very attractive to buyers.
More time for you in the other roles in your life. Plus your time in the business will be more enjoyable.
Enjoying being in business and then easily selling it for a bucket load of cash seems to be the aim of most aspiring entrepreneurs. So resist the temptation to dismiss this section just because you can’t imagine yourself as a McDonalds.
The essential business eye opener
Self-employment and a business can be extremely rewarding both personally and financially. Sadly for most it is not. Businesses can burn through your hard earned assets and strain your relationships to breaking point. You can end up in a place you never wanted to be and don’t know how to get out of. (Ask Sarah.)
Even if owning your own business is just a speck on the horizon I strongly recommend you promptly buy and read “The E-myth Revisited” by Michal E. Gerber.