Passive Income is a Lie, but Scalable Income is Real

Greetings,

There has been a surge of people online trying to sell their systems to generate passive income. Remember an important truth: the only true source of passive income comes from income generated by investments. I’m talking rent from real estate, dividends from stocks, and interest from bonds. So, if someone is selling you a system for passive income, they are the ones really benefiting from passive income--through book sales, courses, etc. For you, ask yourself if those methods are really passive, do they really tell you step-by-step how to achieve it, and have they done it themselves (versus just selling you books, videos and courses). To generate true passive income, you need to first build excess primary income to generate the wealth to invest in passive income.

 When people dream of passive income, they are thinking about what most people call retirement planning. As MJ Demarco describes in The Millionaire Fastlane, for the average person working a 9–5 job, it will likely take until they reach retirement age before they have enough money to resemble financial freedom. You just can't scale and build wealth fast enough by working hard, saving 10% into your 401k or IRA to invest in a volatile stock market, only to get single digit returns at best. At today's zero interest rates, how much nest egg do you need to support your lifestyle? Way into the millions likely. You can't get freedom early enough with this method to fully benefit from your years of effort.

 Now that I have thrown a wet blanket on you, let’s talk about the good news. Don’t obsess over passive income! The focus on passive income has reached an unhealthy point in my opinion. It would help if you didn’t pin all of your hopes on the pipe dream that you could have enough passive income to quit your job in a few short years. Maybe if you want to restrict your lifestyle to the minimum possible level for the rest of your days, but what kind of a life is that? I would rather work extremely hard for a few years, then reap the benefits of my efforts through systems and processes--but never be fully passive.

 What most people think of as passive income and see from their wealthier friends is actually “scalable income,” which is another way of saying business income. With scalable income, there is no limit on how much you can earn, but you aren’t guaranteed a dime. The primary takeaway is that scalable income has great magnitude, but it’s not truly passive. You can take actionable steps to create scalable or business income that will speed up your timeline to achieve financial freedom while you are young enough to enjoy it.

 Financial freedom is not a get-rich-quick scheme; it’s a deliberate process. Business ownership is the best solution to achieve unrestricted earnings as its path is based on your efforts, so it is more controllable. It won’t be easy, and you need to assess whether or not you have what it takes--there will be obstacles. Franchising often can act as a transition plan to full independence as it provides you with a proven concept, training, support infrastructure, and an executive team dedicated to helping you succeed. This leverages your time and many franchise models allow you to keep your corporate job, as you can run the business through their systems and technology platforms.

 Franchising may or may not be for you, but it might make sense now to figure that out. If you have the interest and you’ll invest some time and thought, I guarantee we’ll have real, worthwhile conversations as you consider if business ownership and creating scalable income is for you.

 David Busker

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David Busker is the founder and president of FranchiseVision and a senior franchise consultant with FranChoice, the premier national network of franchise consultants. David helps candidates exploring franchise ownership to set their criteria, matches them with the perfect franchise, then guides them through the entire process. Learn more about David at FranchiseVision.