Active Income vs. Passive Income

Active income is income you earn from actively participating in the business. If you are a handyman and you perform the drywall repair our customer requests then you are earning active income. Passive income is income you earn without participating in the service required. It should be the desire of all business owners to have a significant amount of their personal income that is driven by passive income. But what are the steps to achieving that goal? First you have to have a plan of action to meet your strategic goal for your business. Once you have that in place and are well down the road to meeting it then you must document your business processes. They must include time, cost, skill sets, resources, and risk. From there you can “LEAN” those processes for a more efficient way of conducting business. After you know who you are as a business then you can start to look over your competition for strategic weaknesses. There maybe an opportunity for a merger or acquisition, or even more exciting, a hostile takeover. Many business owners that I talk to have not thought past next weeks work and therefore continue to live month to month and worry about payroll week to week. A solid business plan will help you achieve your goal of passive income. Think about your business honestly, do you have a written plan for 3-5 years out that describes the vision, mission, and direction? If not, get one!