Problems with Passive Income Which No One Will Tell You

Dec 7, 2020 09:15 PM ET
Problems with Passive Income Which No One Will Tell You

Passive income has become a very popular concept these days. People all over the world are aiming for passive income. As suggested by the name, it is a concept of earning money without working for it. It is close to concepts like automation, distributors, auto-responders, and marketing funnels. 

However, before you walk the same path, take a moment, and ask yourself, how many people do you see being successful through this approach? If it is so easy to create a passive income, then why cannot everyone earn it? 

Clearly, it involves a lot of problems that nobody talks about, but you need to know about those. Let us get started. 

Passive Income

It is not possible to stay ahead of competition passively

Let us assume that you research and come up with a wonderful market niche that was somehow unnoticed before. However, sooner or later, everyone is going to know about it, with the opportunity to make money from it. Ultimately, someone else will do a better job in this field and will serve the market better than you do. The market is full of competition, and you cannot expect your clients to favor you all the time and be loyal to you forever. The chances are high that you will see your market go down in no time. 

Passive income streams do not start out passive

Some income streams do not need you to put on much effort regularly, but you definitely need to give it your all at the beginning. For example, think about a dividend-paying stock. In this case, before you start producing passive dividend-paying income, it is crucial to research various dividend stocks cautiously. You must do it diligently and only then buy your shares. 

It is similar to other passive income streams as well. For instance, to earn rental income from a property, you have to give time and look for the right property. To attract the right tenants, the property must be in a good state. On the contrary, if advertising on a blog is your thing, you have to write content and target an initial audience before building the momentum. 

You cannot maintain a loyal tribe of customers passively

If you try to get away from your customers as fast as possible, they will soon realize that you do not care for them. It will eventually lead them somewhere else. They will easily find someone else who is truly concerned about their requirements. 

There is no guaranteed method in passive income

When it comes to passive income, there is no guarantee that you will earn, even if you are prepared with good business experience and a supposedly great plan. Usually, an ideal approach needs you to come up with a comprehensive strategy and get prepared to face competitors, economic challenges, etc. There are a lot of people who aim to make money through passive income, and most of them trust that they can earn a lot effortlessly by simply following a step-by-step approach, but it is not true. Reality slaps these people when they face the first challenge, and their approach collapses. 

Passive income sounds great because entrepreneurs get the opportunity of earning money without spending much time on it. However, the number of misconceptions about passive income is high, and people often end up overestimating its approachability and value. There are many cases where passive income requires initial capital, significant upfront effort, and modest on-going efforts. However, even these do not assure success. 

It is not possible to lead great teams passively

If you are set to build a large business, at some point, you will need to hire employees and/or freelancers. Now, to get talented people in your time and make them stay with you for a long time, you must show them that you are dedicated and invested in the business wholeheartedly. Any talented person will stay away from a leader who is not interested in being involved in the business. If that happens, you are going to end up with people who are just trying to make quick money. 

Some people, who are obsessed with passive income, are not really involved in it. They even consider hiring a leader to manage and motivate professionals. They do not realize that by doing this, they add zero value to the equation. It is not them who is thinking or executing new ideas, and they are not leading the team. 

Capital is a huge gatekeeper

Once you get into passive income, you will see that capital is a big gatekeeper for most passive income strategies. It is not difficult to start a blog or a business of stock photography; so, anyone can do it. However, if you want to go with strategies like collecting dividends from stocks, managing rental property, or loaning money to peers, they need you to have thousands of dollars in your bank account to back up the business. To get your finances together, you may need to make a strong stream of revenue, and for that, an active source might be required. 

Passive income is not really passive

This point is very important, but unfortunately, people discover it only after getting into the business. After you start working on it, you will for sure notice that a property portfolio or a website is not passive at all. All the so-called “Passive income” vehicles need regular maintenance. You have to keep updating your website and deal with your tenants, which takes a lot of effort and time. In reality, if you calculate the amount of unpaid work you will have to do and the risks you have to take, there would be no passive income when compared to the money you earn. So, your notion of passive income is a lie. 

Final thoughts

If you are still interested in diversifying your revenue streams or want more opportunities to build wealth, passive income can be one of the options for you. There is no reason to be discouraged, but just let go of the idea that you will not have to work for it, and success is guaranteed. Instead of treating it like a get-rich-quick scheme, think of it like any other business strategy that requires effort, time, and patience and has a risk of failure.


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