I wa talking a lot about building my passive income streams to prepare for early retirement. However, I realise that the definition of passive income isn’t really what I had in mind. The passive portion is what I still like to have but the scaleable portion is missing from the definition of passive income.
What is passive income
By definition, passive income are income streams that doesn’t require your attention 100% of the time. No passive income can be free of work. Even rental income needs some attention such as maintenance or in between tenants. However, unlike a job, it doesn’t require regular attention.
Examples of traditional passive income includes dividend payments, rental yields, interest on your saving deposits and insurance linked policies etc. They have a common problem: they are not scaleable without capital. If you have no money for early retirement, these financial instruments are not going to much help.
Scaleable income streams
A important concept about the incomes I want is that it must be scalebale. Most people, me included, have the challenge of a limited budget. If our income streams are scaleable only through capital and nothing else, it will be almost impossible for us to retire early.
Fortunately, the Web has enabled scaleable incomes to become a reality. An income stream becomes scaleable when it can bring in more revenue without having an equal amount of increase in capital. My personal scaleable income strategy is to build websites such as the one I have shown in my post on growing passive income streams. These websites earn money by bringing in traffic from search engines of which a certain percentage will either click on ad or to buy some products through my affiliate link.
They are scaleable as I don’t need tens of thousands of dollars to create income. All I need is a ten dollar domain and some time to write content. Once these sites start to generate income, I can move on to creating new sites.
On the web, every page I create has the potential to bring in traffic for a long time, regardless of whether I update that page. That, to me, is more scaleable than investing in dividends or shares where the ceiling imposed by your financial budget can be reached more quickly.
Of course, some would argue that my time is the ceiling that will cap this scaleable income source. Fortunately, there are ways to overcome this and that is through outsourcing. If a site starts to generate $50 per month, I can use half of that money to hire a part time writer to maintain the site. My time is then free up to do more sites or to write more content for existing sites.
What are the different scaleable income streams
Besides building websites, there are other ways that you can create scaleable income.
- Writing non friction ebooks and pubishing them on Kindle
- Selling services through arbitrage: sell services through one channel and outsource that service to someone cheaper. Examples include selling design services, social marketing, writing etc
- Buying and selling domains
- Buying and selling stuff on ebay
Notice that most of these income streams involve the buying and selling of stuff? The reason for that is that real wealth is created when you sell something. For pure investment such as fixed deposits, the rates are so low preciously because we are not doing any selling. Somebody else is doing the sales and we are riding on top of their efforts. If no sales are made, there is a limit on how much wealth you can create.
In summary, scaleable income differs from passive in their ability to grow without much capital. One big of this equation comes from the selling something, of which the profits can be reinvested to grow faster. The quicker the turnover, the more scaleable the income stream becomes.