Many nomads get started on the path to location independence by earning money through a skill set – often by freelancing or developing a service business.
For a newcomer, I always recommend this as the easiest way to go from zero to a full time, location independent income.
That being said, we all want to know how to make passive income online. The dream of money ticking into your account while you sleep beside a beach in Thailand is an alluring one.
I’m a big advocate of being a hustler. There’s a lot of hungry competition out there and you won’t get far if you’re not willing to put the work in.
But we didn’t get into this life to sit in front of a computer all day, so it’s important to make sure your automation game is up to scratch.
This is the only way to make sure you’re earning the kind of income you want without having to trade away your time freedom. The goal here is time AND location freedom.
(I can tell you from personal experience: achieving location freedom only to end up working all day long to maintain it is not much fun.)
In my previous post I broke down the difference between passive and active income for location independence. That’s a good primer for this post, so if you haven’t read it yet, check it out.
Now I want to get into the nitty gritty of several different methods myself and other nomads use to develop fully passive, 100% hands-free, autopilot income streams.
A quick note on terms before we get into the income models here.
Passive income is passive by definition – it’s income that ticks in from an asset, regularly, even if you aren’t working on it. You may work on it to grow the asset, but the point is that even if you don’t touch it, it will keep earning you money. That’s passive.
An automated model is a business that would normally require work and effort on a daily basis to maintain, but which you’ve “set on autopilot” through the use of software, outsourcers/employees, or some combination of both.
Some of the models below can easily become full time jobs if you don’t set them up with automation in mind. They are not passive by definition. This is why I have included a rough guide to how easy each one is to get to “full automation.”
Typically, automation simply means making these models “partly passive” – eg you might spend an hour a day working instead of four hours a day, thanks to your automation system.
With that distinction out of the way, let’s dive right in.
This is a fairly classic method of making passive income online. It breaks down like this:
One of these sites takes time (or money, if you outsource it) to build, but once it’s up and running it is one of the few truly 100% passive forms of income you can earn online without building a complicated automation structure.
Note this model can also be applied to your own products (such as ebooks), which will generally be more profitable than affiliate products and much more profitable than Adsense or other advertising.
The big question is, can you create a product better than the best affiliate product you might promote instead?
If not, you may be better off saving time on product creation and simply becoming an affiliate.
(Note you can also use an affiliate product to test the market, and then create your own product if the results look good).
100% Automation Complexity Level: Simple
If you’ve read Tim Ferriss’s Four Hour Work Week, you’re familiar with dropshipping already.
You take orders for physical products, and you only purchase the inventory from the supplier after a customer has placed an order. They then ship it out for you.
In this case, it works like this:
The trickiest part of making such a business “fully automated” is on the customer service side, and developing the advertising skill and knowledge necessary to run a profitable campaign.
100% Automation Complexity Level: Medium
Another option is to sell a service, such as SEO, social media marketing, web design or video creation.
In my experience, getting this type of business to the point where it’s anything close to “fully automated” is very difficult.
You can certainly utitlize assistants and software to automate large chunks of the business, but it will never be truly passive – you will need to keep a close eye to make sure your outsourcers are doing what they’re supposed to and your automation systems are running correctly.
That being said, you can grow a model like this to a large monthly revenue relatively quickly, so it’s a good choice if you want a bigger income and a bigger work schedule, rather than a relatively small income with zero maintenance.
100% Automation Complexity Level: Hard (due to heavy reliance on human resources input)
Creating a recurring subscription product can be a highly profitable way of earning something close to a fully automated online income.
There are different forms of this – for example a SaaS (software as a service) model, or a content membership website, or a dating site.
100% Automation Complexity Level: Medium to Hard (depending on product complexity, type and number of subscribers)
Any of the above methods can be turbocharged by adding an email list and autoresponder series component to improve conversion rates.
In fact, in many markets you’ll struggle to compete profitably if you DON’T have an email list, because your competitors will convert much better, be much more profitable, and be able to pay a lot less for advertising than you do.
That is the basic premise of list building and email marketing theory.
By offering more free value to potential customers before you ask them to buy anything from you, they will be much more likely to convert in the long run.
Higher conversion rates means less time and expenditure on your marketing in order to achieve the same results.
It can also mean the difference between making money and losing money on your paid advertising campaigns.
Great conversion rates also make it easier to attract partners to promote your products on your behalf.
Email lists themselves can be automated with the use of autoresponder series.
Email marketing platforms (I use Aweber personally) allow you to set up automatic emails to go out to new subscribers to your list at times of your choosing.
For example, you could set up a free email course that will send each subscriber a new tip every day for seven days. The autoresponder series might include a link to a paid offer on the third and seventh day.
Done correctly, this will yield a better conversion rate than simply sending people directly to a sales page for your promotion without any prior relationship-building.
Below are some of the tools, apps and resources you may find useful for setting up and maintaining the above automated income models.
Leadpages – quickly and easily create landing pages from existing conversion-tested templates.
Aweber – cheap, reliable email marketing software.
Asana – team management software, useful for organising work with outsourcers (very handy for the outsourced services model).
Zoho – team management and customer relationship management software. Also has service desk and financial management features, useful for the outsourced services business model.
Salesforce – customer relationship management software for sales, marketing and support automation.
Infusionsoft – more advanced email marketing software, appropriate for bigger lists and established businesses.
Freshbooks – cloud-based billing and accounting software, ideal if you are billing clients in multiple countries around the world.
Upwork – large pool of freelancers, useful for hiring virtual assistants as well as virtually any other type of talent you may need (eg video editing, animation, web design, development, voiceovers, etc).
Fiverr – a wide range of small, one off services available from freelancers for $5 apiece.
(P.S. – This is just a handful of useful digital nomad resources. If you’d like to see another blog post with a list of 100+ apps and websites for digital nomads, let me know in the comments below!)
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