Listen on iTunes   Listen on Stitcher   Listen on Spotify

Episode 17 The Leverage Ladder – The Path To Passive Income.

Lots of people want passive income, you are probably one of them. Who doesn’t want money while they sleep, right?

So let’s approach this from a logical perspective. What is pure passive income?

It’s income that you get from something that you do no additional work for each time you sell a unit.

How do you make passive income in an online business?

You make it by creating online products that can be created once and sold many times over. Many people think of an ecourse or a membership site when they think of passive income.

So what is then needed for you to earn passive income?

You need to have created something you can sell and then sell it. Right?

Kind of. That is what the marketers are telling you – just make an ecourse/book/membership site and sell it. Set up some Facebook ads if you haven’t got an email list and off you go.

The truth is you need more than that.

  1. You need to know your stuff well enough so that you can create a high quality product that you know for sure your clients will be able to follow (without you if it’s passive) and get results from. (Strong Process)
  2. You need to have strong enough marketing and sales skills so that you can sell this product. It will be harder to sell than anything personalized. (Good Sales Skills)
  3. Then you need people to sell the product to and if you don’t have a community of people that know like and trust you already you are going to need to pay for traffic and the traffic will need to be warmed up (People)
  4. Remember the lower the price point is of what you are offering the smaller amount of wiggle room you will have to be able to make a sale at a profit. And generally our prices increase as we have more experience.

So if you are new to online business you:

  • Likely haven’t tested your process or even worked out your process fully with clients yet so imagine doing it without supporting them?
  • You likely don’t have the sales skills quite yet to get a good number of yeses.
  • As a newbie you likely don’t have a lot of people to sell this too already.
  • Plus you don’t have the experience to charge higher prices meaning you have very little margin to make a profit.

The means if your idea of fun and success is to spend several months creating a course or book or membership site to make $1000 in your first year and not make much profit then listen to the marketers selling you a course on making online courses then go ahead BUT if that sounds less than desirable keep listening!

Okay so by going through that list we worked out making passive income and turning a profit at the beginning of your business journey is going to be challenging. So when do you do it?

Here are the stages of the Leverage Ladder

One on one – First you want to create a baseline in your business and start earning some money, the easiest way to do this is with one on one work, if you want to hear more about this listen to episode 4. This where you move from Dreamer, someone who wants to start a business but hasn’t yet, to Starter. So in the beginning you don’t have leverage and your income isn’t leveraged, but you have to start somewhere.

Group – Once you are maxing out the number of people you have in one on one it’s time to group people. By this time you are becoming a pro, you are figuring out your process – you will have experience with where the pitfalls lie and what you have already explained over and over.

So you create a group experience – you get more people in and charge each person less than the one on one rate. You will have some leveraged elements like maybe a video for each stage of your process but you don’t have to have every single stepping stone mapped out as you are still there to support people. You are starting to leverage your time.

You can probably take 5 to 50 times the number of people in a group program than one on one.

Your sales skills are also improving as you’ve been in business a while and your community will be growing too.

Ecourse – Then you’ll reach the stage of wanting to automate, or leverage more. You’ll create more videos or worksheets and take some of the support time out of your group program and create an ecourse. You’ll charge each person less than a group program so you’ll need higher numbers to duplicate your income if you plan on phasing any other products out.

Again your community is larger (which means more people to sell it to), your sales skills will be improving (you’ve sold one on one and group already) and your process, which is how you get people results, is even more refined.

Membership – Next maybe you want to create a memberships site – again lower price point, lower profit margin and more people needed to make the income you want. BUT each time we go up a level it is more leveraged and therefore closer to true passive income where you aren’t expending extra effort for each new person coming on board.

Build in passive income gradually – then you protect your profits

I’m saying passive income is completely possible, but if you want to make enough to make it worth you building the products in the first place do it once you’ve got your process down pat, know your way around Internet Marketing and have the community to sell it to or are skilled enough to run traffic at a profit.

I’m also saying do it gradually.

One on one, then group, then ecourse etc. Each layer of the Leverage Ladder gives you new insights and experience and allows you to see how you can further serve your clients without investing more of your time.

That’s it for today on Your Business, Your Rules. We’ll be back next time to talk about when you can jump ahead on the Leverage Ladder and make passive income sooner.