Passive income
by Shivani Gupta,
Newcastle Herald Small Business Column,
published Monday, 25 July 2011
As it is new financial year all small business people should be looking back at how they met last year’s budget and what they can do to increase revenue and profit.
I want to return to a theme of a couple of months ago where we talked about passive income. Small businesses should be looking for ways to generate either new sources of income or passive income. By passive income I mean income that generates without you having to do continual work to generate it.
I have been looking at this issue and have done two things. Firstly I have invested in commercial property, investing in some serviced offices in the CBD. Secondly I have invested in another business.
Investing in passive income doesn’t mean you don’t have to do anything. Indeed you need to thoroughly research whether the business is sound and will deliver the returns you are looking for. You also need to, in my case, provide strategic direction for the new business, install the staff and management and periodically review performance. I am not going to be involved in the day to day running of the business however. Earning more income is not about me working longer hours in two businesses.
So while there is some effort, earning additional income or passive income does not have to be difficult. Here are three ideas to consider.
- Create new product. This could be an e-book on your area of expertise. If you can’t write a book, I reckon you could produce a list of Top 10 tips that could sell on your website. For example, if you are a plumber you could create a 10 steps guide to common plumbing problems.
- Cross selling. If you are a plumber you could recommend a gas-fitter for a referral fee. Diversification of your products and service can also be achieved through other means. I mentioned in a previous column the carpet cleaner who also started up a pest control business because they were two most common outsourced household tasks.
- Upselling is also a way to increase sales and revenue. McDonald’s is the classic example of this approach. If you sell beauty products you could say 50 ml of a certain cream will cost $50 but if you buy two or if you buy the 100ml size you will only pay $80. Have you noticed major supermarkets doing much more selling in bundles of two and four?
Not all of these ideas will suit your business. The point is to look at where you can increase revenue. Doing this without having to physically work on the income generating operation is ideal for already time-poor small business people.
Happy financial new year.