The truth about passive income: can you really earn money while you sleep?

- March 4, 2022 5 MIN READ
Cartoon depicting businessman relaxing on beach chair while money comes out of his laptop screen

A passive income is the holy grail of financial management – the idea that you can make money with little or no effort is the entrepreneurial dream. Heck, it’s everybody’s dream! But is it really as easy as those who have achieved this financial ‘easy street’ make it sound? Author, copywriting expert and digital marketing educator, Kate Toon, says no – and here’s why.

Unlike many entrepreneur types, I hadn’t heard of passive income before I actually started making so-called ‘passive income’. (Yes, I’m doing literary air quotes there.)

I hadn’t read The 4-Hour Work-Week. I hadn’t watched a YouTube video by some shiny-suited entrepreneur telling me I could dream big and make big money. I hadn’t even read the Warren Buffet quote about making money while you sleep:

If you don’t find a way to make money while you sleep, you will work until you die.”

~Warren Buffet

My decision to make passive income had nothing to do with passivity at all. I didn’t think I’d work less, I was just focused on earning more. And thank sweet baby cheeses for that.

Because, for me, my passive income has been anything but passive.

And in this article, I want to bust some myths about the reality of being stirred from slumber by a cacophony of PayPal pings, and how going passive isn’t all it’s cracked up to be.

What is passive income?

Man with feet on desk relaxing while cash money pours from tap behind him

If you Google, you’ll get a few definitions. If you ask folk on the interweb, you’ll get a few thousand more.

But most people seem to associate passive income with something that doesn’t require much time and effort. Something that makes you money while you snooze.

For the purposes of this article, I’m going to cover some of the ‘classic’ passive income sources entrepreneurial business coaches recommend.

Source 1: The template

For me, it all started with one document.

While working as a producer and copywriter at Ogilvy and AKQA, I developed a little Word document for writing website copy. With guidelines, page structures and outlines for regular pages (about, services, contact), it made pumping out a brand website much quicker. My Copy Deck was clean, nicely formatted, included notes for clients and even the SEO bits.

But when I started as a freelance copywriter, I found most of my peers had never heard of a copy deck. And so, I gave it to a few of them. The more people asked, the more I thought, “I could sell this (in my sleep)”.

Now, I could have just whacked it up as a simple download on my existing site, but oh no, I built a whole new copywriting website with a sexy little shop.

I expanded the document and had it edited and proofed. Then when I sold my first copy (for $7), I wept with joy! Or, at the very least, smiled a little. It had probably taken about 80 or so hours to get to that first $7, which made my ROI not great, but still. It felt like free money.

I’ve since sold nearly 3,000 copies of that deck; it’s used by most copywriters I come across; it’s been copied, resold and reproduced (a great sign of success). I now have 48 other templates in my shop.

But is this passive income?

No. And here’s why:

  1. There’s the site to maintain – with themes, plugins and hosting and all that tech jazz.
  2. There are customer service queries to handle.
  3. There are tech bugs and updates to manage.
  4. And of course, there’s the marketing – no one’s going to buy it if they don’t know about it.

Each template takes on average 20 hours to write, rewrite, edit, proof, design, and code into the shop. So, it takes a while to break even.

Templates are not passive income.

Australian banknotes amongst the leaves of a tree

Source 2: The course

Next, I built an eight-week SEO course. This was back in the days when every man and his frog didn’t have an e-course. I was quite the pioneer.

I sold it first – no point building something that wasn’t palatable to my audience – and then I built it.

With 20 people signed up and champing at the bit, I set to work creating, and after six exhausting weeks of 12-hour days, I released it to the world. Again, that made my hourly rate kind of low.

But from here on in, it would be passive, right?

No. And here’s why:

  1. Good courses live and die by the support you give. If I don’t get support, I’m just going to buy some $20 Udemy course.
  2. There are oodles of admin – signing up members, logging folk in. With nearly 1,300 students since launch, it’s a daily task.
  3. There are the updates – I picked a remarkably changeable topic, which is both the course’s superpower and its kryptonite. I spend around four weeks a year updating content.
  4. And of course (again), there’s the marketing – no one’s going to buy it if they don’t know about it.

So yes, while the course is amazingly profitable, it is by no means passive.

Source 3: The membership

So, next I launched the membership – well two actually, because I’m a rampant over-achiever.

With coaching, Q&A, masterclasses, resources and a well-maintained back end packed with tools, recording and training, it’s a great money maker. And obviously, the effort is largely the same whether you have seven members, or 70 or the 700 I currently have.

So really, it’s passive income, right?


The truth is that memberships are the least passive of all my products. And worse still, it’s a year-round commitment. I could hire minions to run it while I look on eating jam donuts, but that isn’t my, erm, jam.

It’s a hugely scalable income source and a great source of recurring revenue, but it’s not ‘little or no effort’.

man watering arrow-shaped plant with watering can

The other sources

My book? No – I had to write and market it. Some say you can pump out an Amazon bestseller in 24 hours, and it’s kind of believable until you actually read those books. A decent read takes decent writing time.

Sponsorship deals aren’t passive. There’s a lot of toing and froing, and I have to dance on Reels.

Affiliate links aren’t passive, as I still work to get them out there and build the trust, so people believe my recommendations are genuine.

So, is anything truly passive when it comes to business?

Often, I think it’s the things outside your business that can be more passive.

The property investments – tough to get into, a lot of faff finding a property, but after that relatively easy to let it paddle along.

The shares and investments – especially managed well by others.

And of course, there’s always non-fungible tokens (NFTs). (Eye roll).

But so far, I’m yet to discover the passive holy grail.

I’ve pretty much cracked selling products one to many, instead of one to one. I’ve created a diverse range of income sources. I’m able to scale my products relatively easily.

But I’m far off lying in a hammock, eating grapes, and working just four hours a week. And honestly, if I were, I think I’d just invent another thing to sell.

Passive income sounds great on paper, but I still hugely enjoy being active in my business. Working, connecting with customers, marketing, creating, helping and supporting.

I don’t want to sit on a lofty plinth, spouting forth knowledge burps and speaking at one or two events a year. I like the income bit, but the passive bit, not so much.

What about you? Have you cracked a truly passive source of income in your business?

This post originally appeared on Kochie’s Business Builders, read the original here.

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