For your understanding
A “passive income” is the opposite of an “active income”. Here’s a brief explanation. Passive income is characterized by income being earned over the long term and without time investment. It’s just not that simple. Above all, something has to be done about it.
Active income vs. passive income
An active income is achieved through the use of work and time. So for normal work, you get a salary. The more you work, the more you earn, so the wishful thinking. The passive income from the previous activity for quite normal work, for example, is a pension. During the period of normal work, the pension was provided for. In retirement, no work or time is usually spent on an income. Nevertheless, one receives a monthly pension – a “passive income”. This no longer requires a direct exchange of work and time. Likewise, no pension or passive income can be achieved without prior work and time expenditure.
Which characteristics must be fulfilled for a passive income?
A passive income requires a saleable product or service. The value must be covered by the product and/or service.
Below are the four most important characteristics for a passive income.
1.) The customer problem: It needs the solution for a current customer problem. For example, stress is the second biggest problem in the European Union. The blog STRESS-FREE and the groups on Facebook and LinkedIn are dedicated to this present topic. Due to psychological problems, the economic damage amounts to billions of Euros p.a.. Due to the current situation, there is enormous potential in the market. Because at the forefront there are only physical complaints that affect the movement and support apparatus.
2.) Novelty and uniqueness: For example, the products and services should be unique because then the offer is not comparable and one creates unnecessary competition from the neck. The novelty of products and services is an important aspect for a passive income. So consumers become aware of it, and the market is still completely unsaturated. If products and services for customers are available comparatively almost everywhere, the attractiveness for suppliers decreases. Because the competition is far too great for suppliers. Tupperware, for example, is already available in Billa and Merkur in food retailing.
3.) Be there from the beginning: Offers a unique opportunity to gain a head start in the market. Before others realize that this opportunity even exists. Thus the local market can be led. In addition, the company is benefiting from the subsequent expansion of business. More about this in the next section.
4.) Scalability: The business model should be scalable for a passive income. This means that any number of members and any number of consumers can be extended. As well as the income without further investment must be arbitrarily increasable.
Opportunities for a passive income
These are very diverse and require extensive knowledge and expertise. What passive income suits me and where on is to be respected at all?
First of all, a passive income is by no means a fast income, because building a business requires work and time. However, anyone can build a sustainable passive income and business. The way of earning must also fit the personal lifestyle and personality. For many, the dream of a passive income very often ends unsuccessfully after their own social contacts have been “harvested”. Rarely do your own social contacts clearly correspond to the target group. The target group must match the product or service exactly.
There is no doubt that there are very successful people who have been able to build up a passive income and who started a long time ago. However, it is a big mistake to adopt their way of working 1:1 into today’s world. Their success is based on their way of working in the past at that time in the respective culture. That is why this is virtually out of date in this day and time. Above all, there are cultural differences. In addition, digitization poses new challenges to today’s business models. In summary, there is only one constant in the market and that is called change. Changing market conditions require a constant adaptation of existing concepts in a temporal context. Without prior employment of work and time, no passive income can be achieved. Below a few possibilities are taken up and briefly explained.
- Direct Sales vs. Single-Level-Marketing (SLM) vs. Multi-Level-Marketing (MLM) vs. Network-Marketing vs. Structural Sales. These are the most popular options for career changers. Everyone wants to build a passive income. What do the terms mean? Direct sales initially mean that the products are sold independently of the stationary trade. The personal contact between seller and consumer is characteristic. Single-Level-Marketing (SLM) means that members earn their income solely by selling to individual consumers. Multi-level marketing (MLM) refers to the form of organization. It offers every entrepreneur the chance to generate an income that corresponds to his personal performance. Additional members are recruited in order to earn money from their sales. Further terms based on MLM are Network Marketing and Structural Sales. Network marketing describes the sales structure via a network. Structure Sales describes the sale of enterprise services using a sales structure. A demarcation to the forbidden pyramid game can be found on the website of the Austrian Federal Economic Chamber (WKO).
- “Concrete-gold” is the name for real estate in the style of gold. Since the ownership of real estate represents supposed security in times of crisis. Real estate requires the necessary administrative work. These can be transferred to special companies. Income after deduction of costs can be seen as passive income.
- Books and e Books: Anyone who writes a book first has to invest a lot of effort, work and time. If the book is published and the fixed costs are covered, this can be described as a passive income.
- Music: For this, the composer or the music band has to invest a lot of skill, work and time. The goal is to become well known. If songs are published by third parties, royalties are due which are to be regarded as a passive income for the composer or the music band.
- Apps: The market is growing and growing. In 2018, approximately 194 billion programs were downloaded worldwide. This is an increase of 36 percent compared to 2016. Although support costs still need to be paid, this is a passive income. Free apps are often financed by advertising.
- Interest: Investment is a classic method. Unfortunately, the current low-interest rates do not offer the best conditions for this at the moment. However, peer-to-peer loans offer opportunities to grant loans from private individuals to private individuals. Crowdlending platforms on the Internet are best suited for this purpose. The best 8 crowdlending providers in the test can be found here.
A parable for passive income: Are you a water carrier or already building a pipeline?
In an Italian village around 1800, two water bearers were sought. This was to ensure the supply of water to the village. Both water bearers did the job well. One of them lived well and also gladly spent his earnings in the tavern. The other did not like the fact that he was doing the same work day after day for many years. So he started to build a pipeline after work was done. But he was laughed at by the people because after work he was still working on the construction of his pipeline. After a year of hard work, he had already completed half the way with the pipeline.
Because he had diverted the water, he only had to carry the water half the way.
This meant that the working day was over more quickly for him and he had time for the further construction of the pipeline. His friend the water carrier, was doing the same work since the beginning. His hard work and lifestyle have left their mark over time. He dragged the water buckets more and more laboriously day by day and as a reward himself into the tavern. Months passed and the pipeline was completed. None of the inhabitants laughed any more, quite the contrary, he was admired. What was special, however, was that he still received the same pay for the unit of measure from a water bucket, although he no longer towed water buckets. With the pipeline, he had created a passive income for himself.
Back to reality, here and now. Are you on the hamster wheel or on the career ladder?
Is there an alternative? Yes, there is!
When exercising for an ordinary job is paid for regular work and time. Worst-case scenario, you lose your job. If you don’t work for a long time, you don’t get any money. Time is sold for money and you are in the hamster wheel. Even if the company writes high profits, the majority of them go to the boss and the investors. Even if you are willing to work more, the available time is limited. Because the day has 24 hours for everyone. As soon as you are no longer able to do the work, you do not get any money and the standard of living can no longer be financed. Are you trapped in the hamster wheel or on the way up the career ladder? Everyone has to answer this question for himself. As an alternative, there is a third answer. One possible way out is to build up a passive income in time.
Passive income using the example of direct sales vs. distribution with sales assistants
Members in direct sales ensure personal customer contact and sales promotion. In direct sales, goods are delivered directly from the manufacturer to the end consumer. Since there are no wholesalers and dealers, the commission in direct sales flows directly from the provider to the member. In multi-level marketing (MLM), additional members are recruited in order to earn money from their sales. The members are the sales assistants. Sales assistants are legally independent natural or legal persons who support the sales process. For scalability, the number of members and the number of end-users must be arbitrarily expandable. That are prerequisites to generate a passive income, around the clock and all year round. The more members and consumers there are, the higher the chance of a passive income.
In the case of distribution with a sales assistant, the goods are not delivered directly to the end consumer. Hence the term indirect sales. The goods are distributed to the final consumer via wholesalers and/or dealers. All participants in the sales channel participate in the value chain. The following video illustrates the difference between the described sales channels Direct Sales and Indirect Sales.
Passive income using the example of multi-level marketing (MLM) for tradespeople
Facilities are not likely to need more customers. Can, however, derive more from their customer base. For a passive income, we, therefore, concentrate on four key features using LifeVantage as an example.
The customer problem: Psychological problems as a result of stress often manifest themselves in physical problems. With the free service STRESSFREI, people are offered a decisive added value. Because the blog STRESS-FREE and the groups on Facebook and LinkedIn dedicated to stress management and work-life balance.
Facilities have the opportunity to present themselves in the groups free of charge. In this way, seekers can be helped. Searchers can also contact institutions directly. The STRESS-FREE card can be issued free of charge in facilities such as masseurs, therapists and professionals. The one who feels addressed by it will be interested in it. As well as facilities can offer products for stress reduction.
Novelty and uniqueness: It began with the scientific breakthrough of Dr Joe McCord. A worldwide recognized co-discoverer of “Free Radical Biology” ~15 years ago. For his work, he received the medal of the Franklin Institute, which puts him on the same level as Pierre and Marie Curie and Henry Ford. The groundbreaking science happens on the basis on NRF2 activation. This is one of the most promising breakthroughs in the history of health. Since then, the products have been expanded with the help of nutrigenomics. Detailed information can be found in the download section.
Be there from the beginning: LifeVantage products have only been available on the Austrian market since September 2018. LifeVantage is headquartered near Salt Lake City, Sandy, UT 84070 / USA. LifeVantage is a publicly-traded company with annual sales of USD 200 million. The European market has not yet been served. The BIOHACKER.TEAM offers ready-developed marketing for business development. As well as individual care and professional support based on many years of international experience. More about the contact person can be found on LinkedIn or in the Contact.
Scalability: Marketing is fully scalable. New members and consumers can participate in the business model without limit (downline). Institutions can gain more from their regular customers. The revenues are used to reduce the fixed costs of facilities. Employees can be integrated into the business model and are thus tied to institutions. In summary, institutions can build a sustainable passive income.
From a tax point of view, it makes no difference whether the income is active or passive. For those who paid income tax, it is income. For start-ups and entrepreneurs, it is income. Income and revenue are subject to tax.