Most employment models work on the basis of exchanging your time for money. So you work a set number of hours and are paid an hourly, or a daily, or a yearly rate, at whatever salary you receive. The trouble with this model is that you only have a certain number of hours in the day for which you can charge. Which is fine if you're able to charge something like £50+ for an hour of your time, but unfortunately not many of us can get away with that (sadly). When you first set up your business working from home, you might not realise that there is an alternative way to work.
If you decide to follow the 'time for money' model in your business, you're going to run up against another problem. While you may work a 40 hour week, it's unlikely you'll be able to actually earn money for each of those forty hours. At least some of your time will be taken up with 'non-billable' activities, such as marketing, administration, research, general business housekeeping and so forth. So you may actually only be able to charge for, say, 25 hours a week rather than 40.
When you factor in all of the other expenses you incur in running your own business - accountancy fees, setting aside a proportion of your earnings for tax and so forth - you may actually find that you're working at a loss. Not good - and definitely not sustainable. Wouldn't it be better to work to a business model that frees you from the tyranny of swapping time for money?
When you work for yourself, you can use this opportunity to try and create income streams and a business model that doesn't involve charging for your time. And this can really move you to a position of financial freedom.
There's no one specific definition of passive income but I like to describe the concept as 'income that doesn't require constant work to maintain it'.
If you own a rental property, for example, the monthly rent you receive could be described as passive income (providing you're not spending days each month chasing your tenants for rent, doing house maintenance and so forth). Interest on your savings is passive income. If you write an eBook and automate the process of selling it by using a digital services provider like e-Junkie, then any money from eBooks sold would be classified as passive income.
Passive (or, as some call it, 'residual') income is a big topic. It's a great concept, because it frees you from the tyranny of only having a certain amount of hours in the day to be paid for.
One way you can begin to build a passive income revenue stream is to leverage the knowledge that you already have and package it up in a form that you can sell. So if you're a gardener, for example and you know a lot about certain types of plants, you could leverage that knowledge in several different ways:
Write a book or an eBook on specific plants and growing techniques
Create an eBook of garden design
Create a series of video tutorials on how to garden or how to grow specific types of plant
Create an e-course on different gardening techniques
Write a monthly subscription-only gardening newsletter
These are just a few ways in which you can begin to explore the concept of passive income. When you work for yourself, it's an ideal way to make the most of your time, your skills and your knowledge.
Want to know more about successfully combining both a home business and a family? Want to know how to organise your life and gain more time for yourself? How to Run a Business From Home When You Have Small Children will give you the guidelines that you need to get the lifestyle you want.
Available on Amazon Kindle http://www.amazon.co.uk/Work-Business-Small-Children-ebook/dp/B007I8PQN8/ref=sr_1_9?ie=UTF8&qid=1331216069&sr=8-9 or from the website at http://domestic-entrepreneur.com/ebooks-and-media/
Celina Lucas is the author of the Amazon Kindle books How to Be a Virtual Assistant, Article Marketing for Beginners, How to Start a Business When You've Got No Time - Or Money and others.
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