A Freelancer’s Guide to Creating a Revenue Stream and Passive Income

Having a steady revenue stream is an important goal for many freelancers.

Maybe you are one of those freelancers.

In fact, many freelancers start side projects with a goal of having them produce a regular flow of income. But are those side projects really passive income projects?

I hear an awful lot about side projects that generate a so-called passive freelancing income for the freelancer.

There are even websites devoted to the topic. Just how much work really goes into generating a steady revenue stream?

In this post, we’ll discuss what passive income is and examine some concerns for freelancers who want to set up income opportunities that require very little follow-up work. We’ll also examine three popular revenue stream strategies in more detail.

What Is Passive Income?

Passive income usually means money earned with little or no effort on the part of the earner.

If you live in the U.S. though, watch out. The IRS has their own, very specific, definition of passive income. You can find that definition on the IRS website.

Basically, for income to be passive it must be from one of the following:

  1. Rental activities
  2. Activities that you did not work on regularly or substantially (see this IRS definition of material participation)

I’m not an expert, but even I can see that most freelance efforts to build an income stream don’t fit this definition of passive income. In fact, it usually takes a lot of effort from the freelancer to set up a steady revenue stream.

So, in this post we won’t call such efforts passive income (because they aren’t). Instead, we’ll take about revenue stream strategies.

Strategy 1: Affiliate Marketing

If you believe some of the less reputable proponents of affiliate marketing, all you need to do to earn a regular income is to set up a website, strategically plop some affiliate links on it, sit back, and wait for the earnings to roll in.

Believe me if it were really that easy, everyone would do it. Most successful affiliates will tell you that there’s a bit more to it than that.

If you’re thinking of growing a revenue stream through affiliate marketing, here’s what you need to know:

  • Affiliate marketing is essentially selling. To earn a substantial amount through affiliate marketing, you will need to take some of the same marketing steps that you would take to sell any other product or service.
  • You must have value. People won’t come to a website simply to buy affiliate products. You need to create a website that provides value and then you can add some affiliate advertisements.
  • Not all affiliate programs are created equal. Some pay out regularly. For others, you may have to chase down the owner to get your payout. Also, an affiliate program may be shut down with little or no notification.
  • Be aware of and follow the FTC disclosure rules. This includes being transparent about any affiliate relationships in any blog posts or articles that you publish.

As you can see, affiliate marketing requires a lot of thought and it can actually be a lot of work. (That’s not to say it can’t be successful.)

Strategy 2: Creating & Selling e-Books

Another popular revenue stream strategy that many freelancers turn to in order to develop an income stream is the creation and sale of e-Books.

In theory, creating e-Books sounds like a good idea (especially if you’re a writer). You write an e-Book once and sell it over and over again.

If you’re thinking of using e-Books to develop an income stream, here’s what you need to know:

  • It’s a lot of work to write a book. A lot of internet marketing materials make writing an e-Book sound easy. Don’t be fooled. Writing an e-Book (worth selling) takes careful planning and a lot of work.
  • The competition will be fierce. There are already a lot of e-books out there. Worse yet, many of them are free. You’ll have to provide something better than what’s already there if you want to earn money.
  • Uh, that marketing thing again. If you’ve created an e-Book and you’re selling it, you need to do some marketing to draw people to your product (the e-Book).
  • Your book will eventually need updated. This depends on your topic, of course. Most e-Books will need to be updated after a few years. Either the information will become dated or you’ll have new ideas.

So, creating and selling an e-Book, while a popular choice for many freelancers, isn’t quite the easy path to an income generation stream that it might seem to be at first.

Strategy 3: Developing & Selling Web Themes

Another popular side project that freelancers (especially web designers) often pursue is the creation and selling of premium web themes. Now, obviously this can be a sound strategy. There are many companies who have leveraged this into a viable business model.

However, the creation of web themes isn’t necessarily a guaranteed way to generate income with little effort on your part.

If you’re thinking of developing and selling web themes, here’s what you need to know:

  • It takes a lot of effort to create a web theme. Of course, if you’re thinking of doing this, you probably already have the required knowledge and skill set.
  • Your themes need to stand out. There are hundreds, maybe even thousands, of premium web themes available online. Somehow, you’re going to have differentiate yours from the rest.
  • You must market your themes. To get customers, you’ll need to devise a way to get them to notice your themes. You’ll also have to convince them that your themes are their best option.
  • Allow some time for technical support. Even with the best-designed themes, you’ll find that customers will still demand support. They may be trying to get the theme to do something it wasn’t designed for, or they may not be technical enough to use it properly.

I guess the bottom line is that even “easy” methods for earning money online actually require a lot of work.

Your Turn

Obviously, some freelancers take these income generating strategies and successfully turn them into a means of generating revenue. But usually, these strategies are far from passive.

Do you have a steady stream of income from one or more projects? How much effort do you put into your projects? What advice would you add to this post?

Share your answers in the comments.