No matter your expertise, you can start a business that brings passive income. Think dropshipping, online memberships, digital courses, and other products or services. The key is to find and fill a gap in the market, and then build a system around it that doesn’t require constant oversight.
Let’s say you want to launch an online shop. First, use an ecommerce website template to set up your store in minutes. Next, import products from dropshippers to your site and automate the order fulfillment process. All you have left to do is handle the marketing side of things and ensure your website runs smoothly.
Note, though—no business is 100% passive. You still need to make a plan, maintain and optimize your processes, and address potential issues. The goal isn’t to eliminate work entirely but to build a system that requires minimal input.
Ready to give it a try? Here’s what you should know before starting an online business for passive income and how to set things in motion.
What Does It Take to Build Passive Income?
We’ve all heard stories about successful entrepreneurs who retire in their 30s or 40s, travel the world, and earn passive income without lifting a finger. However, things are not that simple in real life.
“Set it and forget it” business models are marketing hype—unless you employ an army of people to handle your operations while you sip coffee in Bali. Even the most advanced automation tools require monitoring, updates, and occasional hands-on fixes.
For example, entrepreneur Pat Flynn, the mastermind behind Smart Passive Income, makes hundreds of thousands of dollars a month from affiliate marketing, eBooks, podcasts, online courses, and more.
His income is largely passive, but it took him years to build a sustainable business. Plus, he’s actively involved in content creation, audience engagement, and marketing. Simply put, Flyn doesn’t spend his days lying on the beach and watching the money roll in.
That said, make sure you have realistic expectations. Building passive income isn’t about cutting corners—it’s about working smarter. Consider the following aspects before jumping on the bandwagon.
Creating Passive Income Takes Time
Building passive income takes months or even years, depending on your business model. It also requires significant upfront work and the sacrifices that come with it—late nights, time away from family and friends, and the mental load of making tough decisions.
Let’s assume you want to publish several eBooks to generate passive income. Be prepared to spend time on research, content writing, and marketing activities. Even if you outsource content creation and other processes, you still need to:
- Find the right people to do the job
- Guide them and oversee their work
- Manage timelines
- Develop a marketing strategy
- Build your personal brand
- Engage with your readers
And much more.
Technically speaking, you could use AI to write your books, create stunning visuals, and devise a marketing strategy. However, this doesn’t eliminate the time and effort required to promote yourself, build trust with potential customers, and adapt your messaging as trends shift.
Make Sure People Want What You’re Selling
Did you know about 90% of startups fail? According to CB Insights, 42% of new companies go out of business because there’s no market need for their products or services.
Don’t just assume people want what you’re selling. Once you have a business idea, validate it with potential customers to ensure it’s worth your time.
Say you want to sell printable meal planners. This can be an effective way to build passive income— but only if your designs fill a gap in the market or resonate with a specific audience.
With that in mind, join Facebook groups, Reddit communities, and online forums where your audience hangs out. Share your business idea to see if it’s something people want or need. Create and share a poll or survey to collect feedback and gain additional insights.
You can also check industry reports, niche websites or blogs, Google Trends, and other resources to gauge customer interest in your product or service. Browse online marketplaces like Etsy, Amazon, and eBay to determine what’s selling well in your niche.
Choose a Niche You’re Knowledgeable about
When it comes to building passive income, there are hundreds of business ideas you could pursue. The key is choosing one that plays to your strengths.
For instance, many entrepreneurs earn passive income from investments like stocks and shares. If you go this route, you can make money without actively running the business. However, you also risk losing money if you know nothing about market dynamics, risk management, economic cycles, or the external factors influencing stock performance.
The same goes for any other niche or business model. Take print-on-demand (POD) products, for example. While it’s easy to get into this niche, success comes from understanding your audience and creating designs that sell.
Consider your skills and expertise before starting a business for passive income. If you’re a personal trainer, you could sell workout plans, eBooks, or online courses or start and monetize a fitness blog. If you’re a web designer, you could offer landing page templates, social media graphics, branding packages, and related products.
Diversify Your Income Streams
As you learn the ropes, create multiple passive income streams to grow your revenue and have a safety net. Again, focus on niches you’re knowledgeable about.
Let’s suppose you run a food blog aimed at gym-goers, and your main income comes from ads. Start building additional sources of passive revenue like:
- Downloadable meal prep guides
- Recipe eBooks and cheat sheets
- Affiliate products (e.g., kitchen appliances)
- Online subscriptions (e.g., a members-only community)
- Virtual courses on nutrition basics, vegan cooking, etc.
- Brand sponsorships
- Paid newsletters
For example, you can create and promote online courses on your blog and third-party platforms like Skillshare or Udemy. With this business model, you’ll generate income every time someone enrolls in your course.
Another idea is to set up a YouTube channel and monetize it with ads. Start by repurposing your blog posts into videos and sharing them on the platform to gain traction.
Automate as Much as Possible
Per CB Insights, 8% of startups fail because their founders are burnt out. While it’s true that building passive income takes a lot of effort, you don’t have to take the hardest path. We’re not advocating shortcuts, but rather using technology to streamline your work.
Identify which processes don’t require manual input, then use the right tools to automate them. For instance, you can fully automate social media management, email marketing, customer service, and other activities, such as:
- Inventory management
- Order processing
- Sales reporting
- PPC campaigns
- Keyword analysis
- Landing page creation
- User segmentation
A business selling stock photos can automate sales, payment processing, file delivery, image editing, watermarking, and more. If you’re an app developer, consider automating user onboarding, in-app messaging, customer support, subscription billing, and other processes.
This approach can free up your time to focus on high-value activities that require a personal touch. Plus, it’s more efficient and often involves lower costs than outsourcing, making it easier to grow your business and build new income streams.
As a final word, keep an open mind and be prepared to change direction if things don’t go as planned. Some niches are oversaturated, and you’ll need more than a great business idea to break through.
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