Passive income?

Discussion in 'Off-Topic' started by sezna, Jun 19, 2017.

  1. sezna

    sezna undermotivated

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    Anyone here have any success at trying to generate passive income? I'm a programmer and I feel like I have the technical ability to set up something pretty decent, it is just the business side of it that kills me.

    My main questions are: how do you get an initial customer base for a product? How do you monetize effectively?

    I guess I'm just asking for anecdotes if anyone here has tried this kind of thing.


    P.S. if you can think of a web service you'd pay for, let me know :rofl:
     
  2. tedtan

    tedtan SS.org Regular

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    The problem I see with this is that you'll have a hell of a time trying to find a customer base and that the software will need to be maintained in order to continue to be functional, and neither of those are passive activities.

    Are you more interested in starting a business or in generating passive income?
     
  3. sezna

    sezna undermotivated

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    Generating passive income. I plan on starting a business with another friend, and I'm hoping to open up some
    revenue streams to help me fund that and my general freedom. I realize there will be upkeep and maintaining, and I'm okay with that. I mean passive in the sense that I can forget about it for weeks at a time and just update it when need be.

    I have lots of free time and programming experience, so I'm not afraid of up front effort. I just want to have a better plan before starting. I myself have been learning Chinese for the past five years and there are not a lot of centralized resources for that, so I was thinking of making a utility site for that with all the features I missed from other services. A lot of up front work but then subscription money.

    I also have experience programming for MMO games, but those require a lot of work to get an initial base of users. And a lot more art experience that I don't have for the graphics (I'm pretty much just a programmer and musician).
     
  4. tedtan

    tedtan SS.org Regular

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    Chinese will probably become more important over the next 10 years or so, so I don't think that's a bad idea. And you should be able to pick up some marketing ideas for building a user base pretty easily, too.

    One question: does Rosetta Stone already offer this or is your idea beyond the Rosetta Stone offering?
     
  5. sezna

    sezna undermotivated

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    Rosetta stone is actually not very good for language learning. They have an excellent marketing division, and it can be done, but there are much better products (at least in the english -> Chinese market).

    There are flash card programs that determine when you need to review words, there are vocab lists, there are articles tailored to language level, etc. but they all are independent and are hard to keep track of. I'm just looking to centralize a bunch of tools.

    Hoping my idea doesn't get stolen here, lol. But yeah, I think I can get an initial audience of at least 10-20 from other forums I'm on, but I don't know much about business practices in general.
     
  6. tedtan

    tedtan SS.org Regular

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    You are right about Rosetta Stone's marketing department, and that (plus the fact that they are the choice of the US State Department and US military) is why I asked. If you are not doing something different from what they do, you're essentially selling a commodity and won't be able to compete with them without a very large marketing budget (which you probably don't have as a start up).

    But if you are doing something different, you won't need as much marketing money to compete. You'll still need to let potential customers know you exist and educate them as to why your offering is better, but it won't cost nearly as much as going head to head with competitor already established in the marketplace without some type of competitive advantage would.
     
  7. TedEH

    TedEH Cromulent

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    I've always been of the opinion that ideas aren't really the valuable part. The implementation, marketing, etc. are what's important. Stealing the idea isn't so much the worry, as it is someone stealing the idea and then doing a better job with it. :lol:
     
  8. CapnForsaggio

    CapnForsaggio Cap'n (general)

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    You need a unique aspect to your system, that you can market as "improved."

    What about VR implementation? An app for the phone that uses Google VR libraries for sound and visual immersion....
     
  9. Drew

    Drew Forum MVP

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    I think the only sort of "passive" income I can think of is interest and dividend income from an investment account. Any other site-project type income is going to be a lot more work than you think it will be if you're trying to generate any sizable income. :lol:


    (and yeah, I get the irony that I'm telling you that if you want to generate income without working, you first have to work hard to generate a whole fuck of a lot of income the conventional way, but hey, nothing in life is free :lol:)
     
  10. bpprox22

    bpprox22 String Breaker

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    It sounds to me like you have 2 paths that you are looking at:

    1) Build a product (and maintain it), then sell it (whatever way you decide).
    2) Find customers who have a problem that current solutions can't solve effectively, build them custom software, and maintain it.

    I've worked in companies that build custom software for customers and let me tell you it is a grueling (never-ending) process -- even when done correctly. There is no "forget about it for weeks at a time and just update it when need be." Especially for a 1 man team, depending on the scope of the project, your ETA on "finishing" the project may be too long for the customer to wait and/or too long for your sanity to stay in tact. If you go down this path you'll need a pretty decent portfolio of your work as well as a handle on the legal side of things (contracts, NDAs, etc.) -- even for customers with a need for simple applications.

    I have also worked in a company (still do) that took the path where you build a product and sell it. You still need to improve and fix the software but it's much more manageable IMO. For a 1 man dev team, this is the path I would go down. Especially for passive income, there are no timelines (other than your own) and after the initial work, you can more or less "forget about it for weeks at a time and just update it when need be."

    Obviously I am over-simplifying things -- there are plenty of pros and cons that can be discussed but I just quickly wanted to give my :2c:
     
  11. Drew

    Drew Forum MVP

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    Really, high level, there should be no such thing as "passive income," in the sense you mean it.

    I mean, reverse engineer the problem. gross domestic product, the aggregate of all of the payments for goods and services, is commonly broken down into a number of component parts differing on what you're trying to analyze, but a dichotomy that is both popular (because it's useful) and particularly appropriate here is breaking it down into income paid for the use of capital and income paid for the use of labor. Personalizing the problem too, you make income from one of two primary ways, providing labor to someone, or providing capital to someone. So, high level, if you want income you have a choice between investing (providing capital for someone to use in return to for income) or working (providing labor for someone in return for income).

    So, basically, if you want something that you can find a customer base and then monetize that base, you need to use that technical ability to produce a product useful enough to a large group of people that they're willing to pay for it, and then sell the shit out of it to them. And, I'd argue there's nothing passive at all about this.

    Your best bet, though, for minimal effort and maximum return, is to create the app equivalent of a fidget spinner, and hope like hell it goes viral. Just don't' hold your breath. :lol: suggesting you could "fund your general freedom" with something that requires little to no active work on your part, that DOESN'T violate the laws of economics, pretty much means return on capital, and as the joke goes, in order to make a small fortune in the markets, first start with a large one. :lol:
     
  12. narad

    narad SS.org Regular

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    Rosetta Stone's pretty bad for everything. Duolingo has a lot of momentum and if I was looking for passive income ideas, it probably wouldn't be in this space. If so, writing an app would be better than just consolidating some things and coding up the glue.
     
  13. sezna

    sezna undermotivated

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    My boss is out all next week which means I will be sitting at a desk doing nothing. I'll sketch out my ideas then and see if it forms a coherent platform.

    Still no anecdotes about income? What about music? Does anyone here actually make any money off of releases?
     
  14. Drew

    Drew Forum MVP

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    I broke even on my last album and had enough left over to grab a RG550 reissue at a great price, not accounting for the time I spent recording and mixing it, or the cost of the gear I purchased while working on it. I spent a LOT of time working on it, though, and even if I costed my time out at minimum wage, I'd be deeply in the hole on the project.

    On my youtube channel (mostly pickup comparisons, lots of singlecoils), I have about 800 subscribers, average about 300 views a day, and while it varies a little probably get a $100 adsense payment every other year. This is the closest to "passive" income I make, but actually recording and editing a video with any decent level of production quality also takes a lot of work. If I estimated the hours I've put into the channel and divided the money I've made by that, I made pennies on the hour, probably similar to my hourly earnings writing and recording an album, maybe a little less. This is before accounting for the cost of the pickups that I'm demonstrating (though, to be fair, the thought process is "let's buy these to see how they sound" and not "what can I make a video of?"). That's why I consider both of these hobbies, and not a source of "income." They take a lot of work, and if I were to look at it on a cost/benefit basis, I'd be way better off selling my guitars and buying a library of books on credit research and corporate finance to "invest" in my day job.

    If you're serious about making money off music, look at guys like Ola Englund and Angel Vivaldi - really nice guys, insanely talented musicians, and both of them work their asses off to support themselves playing music. Angel seems to be doing better these days but I've talked with him over a couple beers and guitars about his first couple tours, and they're not a life I'd ever want.

    You seem to be looking for some easy "get rich quick" scheme, and I'm telling you nothing like that exists - you need to produce something that has enough value for others that they're willing to pay for it rather than doing it themselves, and if it was something easy to do, they WOULD just do it themselves. :lol:
     
  15. tedtan

    tedtan SS.org Regular

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    I make money investing in stocks, bonds, commodities, real estate, local businesses, etc. but that goes back to what Drew said: in order to truly generate passive income, you need to have capital to invest up front. That way your money is working for you rather than you working for your money. The problem is that you have to generate that initial capital somehow, and for most of us that means working and saving to have enough left over to invest.

    For what it's worth, I've looked into generating passive income via other sources and there is generally too much chance involved for my taste. Maybe you write a book that sells millions of copies, but its a long shot. Maybe you create a program, app or website that that goes viral, but its a long shot. And if it fails, its a lot of time and money spent that would have been better invested in a solid local business or rental property (assuming you're in an area where rentals are doing well).

    But that's my opinion, don't let it discourage you from fleshing out your ideas. Maybe you're on to something (though I still think you're in for more work if you pursue it than you think you are).
     
  16. Drew

    Drew Forum MVP

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    By the way, as a fixed income analyst by day and a CFA charterholder, I'll say this - if you have a small amount of capital to deploy and you're buying individual stocks, you're not investing, you're gambling. Even if you know what you're doing and do careful investment research and don't mind wading through company financial statements, quarterly call transcripts, doing your own on-site research where possible, talking with customers, etc, and all these other things that professional analysts do, you still run the risk of getting blindsided when you own only a small number of names. Walmart is a perfect example - I actually really like their competitive positioning relative to Amazon, in that they turned what should be their biggest liability - their brick-and-mortar locations in an increasingly online world - into a fairly solid competitive advantage by using them as distribution hubs for their online business, which as we move towards same-day delivery is an advantage Amazon, who can currently only offer this in major urban areas, will struggle to match Walmart on, where something like 98% of this country lives within 15 minutes of a Walmart super center. They're an attractive buy. That didn't stop them from getting slammed when Amazon aquired Whole Foods, making them suddenly a formidable competitor in the grocery space. Walmart held up better than most, but were still off ~5% on the news. I bought on that dip, but there was a compelling case to buy them beforehand, and you'd have taken it on the chin.

    Add to that the fact that even something like a Fidelity or a Schwab now offering $4.99 trades means a "round trip" trade, buying and then selling at a gain, is going to cost you $9.98. That's kind of the hurdle you have to break just to break even, which means that $100 of a stock needs to appreciate 10% for you to make a penny net of expenses, $200 the bar is set at or above a 5% gain, $500 you're looking about 2%, $1000 1%, etc. If you're "trading" and buying and selling rapidly rather than buy-and-hold investment, trading fees are going to chew through your capital unless you have pretty significant amounts of money to commit.

    Long story short, speculating on individual stocks is a fool's game - you're basically betting that, not only are you better than all the people who get paid large sums of money to do this for a reason, you're SO good that you can do so profitably even at a cost of say 1-5% per trade. If you're trying to make money in the market, just stick to funds and ETFs with a preference for low fee products, or be honest with yourself that you're gambling just as surely as if you were sitting down at a roulette table.

    For "creative" projects, I think of it similar to tedtan - if you want to write a book or release an album, do it because it's important to you, and not because you have any expectation of making a lot of money. If you do, that's a bonus, but it's going to be a ton of work for most likely very little return.
     
    tedtan, TedEH and ferret like this.
  17. tedtan

    tedtan SS.org Regular

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    Drew's post above is spot on. Please don't read my prior post as encouraging speculative investments - you might get lucky and beat the professional investors every once in a while, but you won't beat them consistently and you won't beat them over time. Because of this, I personally tend to focus on long term investments in funds and would recommend others focus on doing the same through their 401(k) or similar and build up a solid foundation before even thinking of taking a more speculative approach to investing.
     
  18. sezna

    sezna undermotivated

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    Drew, what do you think of services like Robinhood?
     
  19. Drew

    Drew Forum MVP

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    Only passingly familiar. Did some googling since I don't really know their busiess model, and this helped:

    http://www.investopedia.com/article...d-makes-money.asp?lgl=myfinance-layout-no-ads

    Basically, if they're not charging per trade, they have to be making money some other way. It looks like they're doing two things - one, monetizing overnight cash balances to earn interest income for the firm on cash not used to buy a position (so, like, if you put $2,000 into the account and buy $1,500 in stocks, the firm can basically lend out that $500 overnight and earn interest on it. This isn't too lucrative in the current rate environment, though, so it looks like they're mostly burning venture capital funding and hoping they can find a better way to monetize the app. So, there's a very real risk they'll go bankrupt.

    That said, all the same caveats about gambling in individual stocks still hold. I trade via Merrill, and 90%+ of my account is in diversified funds. And, I do this for a living. That should speak volumes. My overall relationship is big enough with Merrill/BoA that they give me a certain number of free trades a month and don't charge an asset based fee, and that's more than enough for periodic re-balancing.
     
  20. bostjan

    bostjan MicroMetal Contributor

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    I have a few old albums, a couple of new albums, and a couple of theme songs I've done in the past, and I make pennies off of royalties for that stuff. I have three patents in my name and I make virtually nothing off of those. Once I wrote a book, and I haven't seen a penny from that in years. I also coded a few utilities wayyy wayy back, which are useless now, and I made a game that I've never even asked for money from... None of these things ever pan out, IMO, even in the medium-term.

    On the other hand, I've played around with stocks and bonds, including penny stocks, and I've made way more steady money off of those. (as Drew said, diversity is key. I've had as few as 3 or 4 stocks, though, and been lucky, in the past, although that is a big gamble) The bond market is pretty awful at the moment, but still 1000x better than investing in something that costs a ton of money to advertise and get up and going and then generates no income anymore after 2-3 months. :2c:
     

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