Guest Blog: Sandy Gum, Insurance and Private Equity Advisor
These days, starting an online business is trending. A quick Google search and you’ll find hundreds of ideas for online businesses that you could be starting to potentially make a side income or make you wealthy. Some options cost a lot to start while others cost very little. Which one should you choose?
Before you decide, I’m going to show you how the type of income you generate from your business directly affects how much work you have to put in. Then I’m going to show you how you can start a highly profitable online business without any money.
Types of Income from Online Businesses
If you’re going to look at how to build a business online, you first need to understand the definition and the concept of a business. Next, you need to ask yourself if you are looking for active income, residual income, or passive income.
Let’s start with defining the different types of businesses. The first is an active income business. With this type, you are trading your time for money. For example, operating a marketing agency requires you to be involved in the daily operations. You’re making money, but you are also putting in your time.
When you have a residual income business, you are able to earn some money with minimal involvement in the daily management of it. You’re earning income from paid subscriptions and royalties. At the beginning, you put in more work, but later, you’re mostly involved in just the management of the business.
With the third type, a passive income business, you can completely remove yourself from the daily operations and it will keep running without you. You can disappear for years and it will continue to run itself. For example, you have e-commerce that does not require you to do daily operations and customers come to your shop regardless of your presence. We’ll look at an example of this later.
Everyone wants to go from step 1 to step 10, starting from active income, and slowly building their residual income until they achieve passive income. But is there an online business that will get you to that goal? Let’s take a look at an example.
Examples of Online Businesses that Make You an Income
An online business that you may have come across that’s very popular is e-commerce. You may think it’s a type of passive income business, but I’ve discovered it’s not really passive at all if you don’t have a solid vendor to partner with.
When I was a seller on Amazon, I discovered that you need to learn many things, source products, talk to vendors, negotiate to find products, calculate the shipping cost, and put everything in management.
Amazon is an active income business. You’re involved in all the details and you’re getting orders that you’re handling physically. You’re managing each of these transactions.
However, if you’re able to hire someone to do the work for you, then you have transitioned your business to a residual income business. Now you’re just supervising your employees. You still can’t be completely hands off in case an employee makes a mistake. You’re not yet making passive income, but you’re able to free up some of your time.
Starting an Online Business Without Any Money
So what are some types of passive income businesses that you can do? Instead of building up an e-commerce business from the ground up or using platforms like Amazon, you can actually partner with a vendor directly without any upfront set up costs. This vendor will do product research, produce products, and provide the logistics, payment, and systems exclusively for you, so you focus only on building clientele.
Once you have built up a clientele that buys products from you on their own without any further marketing effort on your part, that’s when you generate passive income. Costco or Walmart doesn’t keep reminding their customers to buy their chicken or veggies. When customers need their food, they will go back to them. You want to achieve this level of hands-off customer retention.
Once you reach this level, you have achieved passive income in business. Marketing is what attracts new clients; good products is what retains your clients.
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