Site icon Brent Ozar

Epic Life Quest: Level 9 Achieved. Let’s Talk About Passive Income.

Brent

Life’s little moments of success can pass us by so easily. If we don’t track the things we’re proud of, we lose track of how far we’ve come. Steve Kamb’s Epic Quest of Awesome inspired me to build my own Epic Life Quest. I keep track of achievements, and after five significant ones, I level up.

When I became the sole fella in charge at Brent Ozar Unlimited® back in fall 2015, running the company dominated my calendar for a while. I struggled with trying to grow the consulting company, then ended up laying off half the staff. Once I stopped trying to grow consulting, I shifted priorities and tackled a few other things:

Room 6E. No pressure. Instagram

Warning: the passive income topic is rife with spam. There’s a ton of slimy companies out there that wanna sell you their secret to making money while you sleep. Because of that, I’m not going to link to anything at all in this post – I’m just going to talk about strategies, and if you want to learn more specifics about a given strategy, you can ask away in the comments.

Active Income vs Passive Income

A quick definition:

There’s a lot of gray area here. For example, if you have a rental house, and you earn rent money from it, is it truly passive? You probably have to deal with fixing the heat when it breaks, or chasing down tenants when they’re late on the rent. Another example is writing a book: you write it once, then earn royalties from it over time, but is that active or passive income?

For me, passive work means these four things aren’t fixed or related:

  1. The time when I do the work
  2. How much work I do
  3. The time when the income arrives
  4. How much income arrives

When I was learning about this stuff several years ago, I was mesmerized, and I totally understood that it was going to be the only way I was gonna get to retirement. Let’s face it, database administrators have a tough time accumulating a million bucks, let alone whatever money you need to retire. I had to figure out a way to build something that could make money while I was off doing other things.

But How Can a Geek Build Passive Income?

I’m a Microsoft SQL Server database administrator. I looked at people doing passive income businesses, and I had a hard time connecting the dots between what they were doing, and how I could make money. Eventually, I did enough research that I came across a few strategies that seemed to work.

I’m not going to include generic strategies like buying rental houses or stock. I’m specifically talking about things that us geeks can do.

Build a paid training course. It takes (a lot of) time initially, but once the material is built, people can buy and consume the material without you being involved. (Obviously, this is the one I went for.)

Build great content and get sponsors. If you can write or film stuff that brings in lots of eyeballs, you can cut deals with advertisers who want to piggyback off your popularity. You can make a living with active income as a vendor evangelist, but the catch is that when they let you go, you’re no longer making money off the content you built. If your goal is to do this with passive income, you’ve gotta figure out a way for the vendors to keep paying you long after you’ve stopped writing the content, or get other people to write the content. (This is totally doable in our industry – think about content sites with sponsors.)

Sell a retainer-based service. Clients pay you $X per month to watch over your systems, give them periodic health reports, and maybe even take action when the systems fail. In the cloud age, I see a huge opportunity here for ongoing DBA services to help keep monthly cloud costs low. This is tricky, though, because it can easily consume just as much time as active income, but the idea is to build something that you can hand off to someone else to perform.

License a process or idea. Say you build a powerful health check process, with tools and sample output. License it to other geeks who can use it with their own client base. They’re paying you while they do the work – although there’s also some ongoing improvement work you’ll need to do to make sure your process is the best. In the cloud age, this can mean building a VM template that has royalties built in – you just automatically make money when people start your VM template on AWS, Azure, or GCE.

Build a list and sell other people’s stuff. Start a popular blog, YouTube channel, or email newsletter, and then as your audience grows, use affiliate marketing to link to other creators. For example, people who start training classes want to reach as many people as they can, so they’ll give you a coupon code for your audience. When folks buy using your coupon code, they get a deal, the seller makes money, and you get a percentage. This was the entire basis of TheWirecutter.com‘s business – they made money when you clicked on Amazon links to buy products they reviewed. There’s no reason that business couldn’t work with tech industry products too, like monitoring software and cloud product reviews.

Build an app and make it popular. “But Brent,” you sneer and point, “that’s not really passive at all! Building stuff is hard!” Bad news: none of these techniques are easy. Remember, with passive income, those 4 key things I mentioned earlier aren’t related. If you can build something and make it go viral, the amount of money you make isn’t directly tied to the work you put in. More importantly, the app is making money that funds your next venture, and you can work on that next thing while you’re getting paid from the last thing. I separated out those two things – build an app and make it popular – because you gotta do both. There’s even a market for people who take a good app that never caught on, buy it from the creators, and then make it popular by selling it to their existing market. (This is how a lot of indie software makers get acquired.)

There’s many more, but I’ll stop there. When you’re looking for inspiration, don’t look in the tech market – look at completely unrelated markets like photography, gadgets, wedding planners, you name it. Pick your hobby, figure out how people are making passive income in your hobby, and then see if that technique can be used in your day job’s industry.

I Picked Training Courses, and I Worked My Tail Off.

You gotta use what you have to get what you want.

To do that, you gotta know what you have – your strengths and weaknesses – and identify exactly what you want. After a lot of self-examination, I decided that the best passive income strategy for me was to build training courses.

Free duffel bag with every subscription

It was a long, hard journey, but in April, I made it. For the last rolling 12 months, my total on-demand recorded online training – what I define as passive income – was higher than my consulting or active (live) training revenue.

Is it purely passive? Of course not – looking at my April 2017 calendar, I had four weekdays and two weekend days invested in the online training business. However, it’s a magical passive income feeling every time I check my email during a break, and there’s a handful of new-customer payment emails. Even now, as I’m writing this post, I’ve seen half a dozen come in. (I still have these going directly to my in-box during April just in case something with the new subscription process breaks. After I finish writing this, I’ll turn off that email again and just review sales daily.)

Having a passive income stream like this means that I’ve got more choices:

So that’s why I kind of look at our subscription training customers as community sponsors. They pay for my time to work on stuff like GroupBy. That’s kind of awesome.

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