Passive Income vs. Residual Income

by Lynn Terry

Often we come across terms while doing business online that we are not 100% familiar with. Sometimes even several terms that are mistakenly interchanged to the point that the true meaning of each gets lost altogether.

According to a recent survey, two such terms are "passive income" and "residual income." Both are often associated with network marketing opportunities... but today we're going to explore their true meaning, as well as other online opportunities to earn one or both types of income.

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Residual Income

Recurring payments that you receive long after the initial sale is made, usually in specific amounts and at regular intervals.


Passive Income

Income derived from business investments in which the individual is not actively involved.

Passive basically means "inactive" or "submissive," so
passive income could be viewed as money that you make that doesn't require an effort from you.

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From those definitions, it's obvious that residual income is also considered passive income. Once you make the initial sale, your residual income can be considered passive. In most cases, you do not have to "work", or make additional sales, in order to continue to reap the profits.


Examples of residual income options might include:


Network marketing, where you enroll customers or recruit   representatives that you earn a monthly commission from.

Affiliate programs for recurring payment type services or products, such as: hosting, membership sites, dating sites, etc. In these programs, you are paid a commission each time the recurring payment is billed to the customer you referred.

Selling anything that is automatically renewable, or consumables where the re-ordering is automated.



There are also other ways to earn passive income, outside of these traditional "residual income" options. Again, a great definition of passive income is:

Income derived from business investments in which the
individual is not actively involved.


Let's take a look at some examples of passive income:


SEO, or search engine optimization, where you obtain top-10 search engine rankings for specific keyword terms in order to attract highly targ.eted traffic to your products, services or information. Using this method, you set up the webpage or site, obtain the rankings, and then you are able to make sales and earn profits "passively" from that point forward. Instead of being out "making the sale," the search engines are making those sales for you -- day and night.

PPC, or pay-per-click advertising, is another form of search engine marketing. While 'SEO' is free, it can take time and work to obtain good listings in the major search engines. PPC allows you to begin advertising across the major search engines very quickly, without a large investment. You simply pay a set amount (determined by your own bidding and daily minimums) for each click-through to your site. You can set up pay-per-click advertising and begin driving targeted traffic to your web pages, again allowing the search engines and web pages to "work" for you... even while you are away.

Multi-tier affiliate programs. Simply put, these programs allow you to recruit other affiliates and earn commission on each of the sales that they make. Instead of actively making the sales yourself, signing up several good sub-affiliates would allow you to turn a very nice profit on *their* work.

Product development is another great way to create a stream of passive income. Ideally you want to create a product that can be sold through an automated system, and requires very little customer service or ongoing support. Examples may include: writing a book or ebook, creating a course, developing your own CD/DVD/video sets, creating a software program, etc.

Setting up your own affiliate program. If you offer a
product or service, you can put a sales team to work for you by offering them a commission. The beauty of this model is that you do not have to pay your sales force unless they make a sale for you -- at which time you give them a percentage of the sale made, or a set fee for the referral. With digital products, or automated systems, this sales team could easily generate the majority of your income with very little work required on your end.

Obviously all of these options require an investment of
time (and perhaps money) on your part in the beginning. The goal is to choose a business model, or even several that can work together seamlessly, and "get the ball rolling".

Once you set things up, very little maintenance is required for you to continue earning a passive income well into the future.

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Lynn Terry is the founder of Self-Starters Weekly Tips and co-owner of Turning Ideas Into Dollars private forum. She has been earning her living online since 1997, a VERY long time in Internet years! Subscribe to her free weekly ezine about Internet marketing at Self-Starters Weekly Tips.

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Reminder: The Passive Income Teleseminar is
            coming up on March 2nd at 2pm EDT.


This will your first opportunity to grab a copy of Lynn Terry's (not yet released) book titled "The Passive Income Guide for Online Business"!

More TeleSeminar Details:
http://www.womenmarketing.com/passive_seminar.htm



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