Running a business is great. Collecting passive income from a business is far greater. But how do we set ourselves up to collect passive income from our new business start-up? It takes critical-thinking, specifically in the initial planning phases.
When you are starting a business, you need to map out your goals from the very beginning. Most people who start a business are actually starting their own job. They don’t have a boss, but they also don’t have freedom from work. When they stop working, the money stops coming in.
This is the same across many small businesses. This can include coffee shops, liquor stores, and dentists’ practices. Some people love to be at work and work defines who they are. I am not one of those people. If I can build systems that allow me to not be at work, I will build them all day.
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The best part of an automated business is that it can also be sold off when you decide to leave. If you are running a dentist practice and you sell out, the only people you can sell to are other dentists. On top of that, you can only sell the structure and equipment. You cannot sell the cash flow.
When you create a cash flowing, automated business, you are selling the business to an investor who wants cash flow. They like your systems and how efficient they are. You have worked hard to remove yourself from the equation of making money.
Now, how do we create an automated business? Let’s start with the basics. When starting any business, think of your end state. Where do you want this business to take you, or where do you want to take this business? Personally, when I started my blog and YouTube channel, I knew that I didn’t want to spend more than 2 hours a day on them, combined. Sure, this will limit what I can do with the business, or maybe how much money I can make, but I am fine with this. My business is a way to diversify my income, not a way to become rich and famous.
There are lots of types of automation. First, there is automation via systems. Second, there is automation via virtual assistants, and finally there is automation via a manager. Understanding these systems is vital to the outlook of your business. I won’t do this explanation justice, so please read the book “The 4-Hour Work Week” by Timoty Ferriss.
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Once you have read this book, then comes the fun part. Critical thinking is the most important part of starting your business. Think of what you want to accomplish and then think of a way to remove yourself from the equation. You want to be as far removed from the process of making money as you can. Also remember, that your business may not be automated from the start. You may have to put significant start-up time into it. However, as you learn and grow, you will constantly be thinking of removing yourself from the equation.
Let’s take a look at some different examples of automation and removing yourself from the equation.
Blog– You start by writing all the articles. You ensure that the blog has a company title (like Military Family Investing versus Josh’s Blog) and company focus, meaning it is not only specific to you. Over time you introduce new authors. You slowly get yourself to a point where you are happy with the amount of time you spend on the blog.
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YouTube- Using your face and personality is the fastest way to earn big money on YouTube. But you cannot become a ghost on your own channel. You also cannot sell your channel for much money without your involvement. If you start a YouTube channel without using your face or voice, it may be the solution. I have seen music channels, channels that use cartoons, and channels that use puppets. If you have systems in place, you can have a virtual assistant do all the work for you.
Merchandising– Why sell your merchandise yourself when there is a website like www.redbubble.com? Here you can make your own designs and create a store for your audience to shop. But nothing is printed or created until the order is completed. It is made-to-order. No more dealing with boxes and inventory. Your profits may be less, but your work is all done upfront when you create the products virtually.
Airbnb- As you get more sophisticated on Airbnb you can set up your house or room to be completely automated for the guest. Whether that is access to the area, sending text alerts, and reporting to the cleaning crew, you can completely remove yourself from the equation (except for emergencies).
Turo– The rental car business can also be automated by controlling access to your car and tracking car movements.
Coffee Shop– To avoid the huge expenses of owning a coffee shop, you can start a coffee cart. Ensure that you have a Facebook page (or similar) and create a vocal audience. If done correctly, everywhere you travel will already have a line of people. Once everything is running smoothly, bring in a competent employee to manage it. Then you can repeat the process.
There are many other ideas that can be automated or delegated. The main thing you want to avoid is being the center of attention. Start small and perfect your business. Remove yourself completely. Then add more components and slowly remove yourself again. Keep doing this until you get the business to the size you want it. Your hard will pay off, either for you or for someone who buys your business. Again, the most important part of the process is critical thinking. Ask yourself “If I wasn’t there, how would I accomplish this?”
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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