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My 2nd Annual Passive Income Report: 2 Years Later

By Pat Flynn on

Sometimes it’s hard to believe that all of this is real. I wake up and play with my son for a few hours every single morning. I go to several places with my wife during the day and am proud to be one of the only husbands there. I work from home on my own schedule, on my own projects and answer to no one. I have automated businesses setup that can literally make money while I sleep, and somehow I’ve become a leader—an authoritative figure in this make money online and blogging niche.

And most importantly, I’m happy.

Some of you are probably disgusted (which is understandable) because it seems like all of this just sort of fell right into my lap. That I’m just a random guy who got lucky when the stars aligned in my favor and success was handed to me on a plate.

Over the past year, along with a lot of deep thinking about where I am in my life and how I got to this point, I realized that luck has very little to do with it. The only lucky part about my journey was getting laid off in 2008, which opened up a whole new world opportunities for me.

As I said last year in my first annual passive income report, “…my lay off was the best thing that’s ever happened to me. For some reason, my 9 to 5 job was masking the fork in the road that has been there the whole time. It just took an eye-opening experience like a layoff to really see what was available for me and my future.”

Success was not handed to me. Opportunity was.

A Challenge to Myself

I forgot where or who I heard this from, but after I posted my report last year someone called my success a “flash in the pan”. At the time I didn’t know exactly what that meant, so I looked it up:

The expression “flash in the pan” means: “A transient occurrence with no long-term effect; A career notable for early success not followed by significant accomplishment.”

It was at this moment that I questioned myself and the future, and never have I had so much doubt fill my brain.

Was my success really just a flash in the pan? Will my online career be short-lived? Will I be able to accomplish anything else significant? Did I have my “15 minutes” and it was now time to move on? What will happen next year?

This is when I decided to challenge myself.

I wanted to prove that my success in 2009 was not a fluke, that I could find continued success and go on to do even bigger and better things.

And that’s when I decided to brainstorm.

A Third Party Perspective

At this time (January 2010) I had my primary business at GreenExamAcademy.com, which had been running for nearly a year and a half and was the source of the bulk of my online income.

Also under my name was this blog that you’re reading today, which was just a little over a year old with less than 2000 RSS subscribers on the feed count. Additionally, I had a number of eHow articles and a few iPhone apps generating an income as well, although nothing significant there.

I was on the prowl for “my next big thing” and generated a detailed list of about 15 different businesses and potential authority sites that I could start. I had “the entrepreneurial bug”—you know, that entrepreneurial energy shot that flows through your mind and body constantly when you think of new business ideas. We all get it, and I was high on it.

Naturally, I wanted to talk to someone about my ideas to get some input, someone that I trusted. So, I went to my good friend and mentor, Sterling from Internet Business Mastery.

Sterling had helped me several times throughout my internet business career, both directly in mastermind groups and indirectly from the IBM podcast, so I was eager to hear what he thought about some of my ideas. I was a little surprised to find that in his email response was attached a little audio message.

At first I thought it was a little weird, but then again podcasting is his primary medium so I thought maybe it was just easier for him—but I listened to his message over and over again and it really changed everything for me.

I’ll paraphrase what he said for you:

Pat, your business ideas are great. You always seem to come up with creative and potentially profitable ideas, however there is one thing missing from all of the ideas that you described to me, which is the one thing that has made you successful right from the start—YOU. There’s just something about YOU that people connect with and I really think you should make YOU a significant part of your business, or your brand.”

Sterling was absolutely right. One of the major reasons why GreenExamAcademy.com was so successful was because people trusted me, someone who actually went through the process of passing the LEED exam and was willing to share what he knew about it. Every email I receive from a customer or reader starts with, “Hey Pat”, or “Dear Pat”—which is just something people don’t normally do when they send emails directly to a company.

And this is when it hit me like a train.

I already had the start of something great here on The Smart Passive Income Blog, something that had me as the brand and connecting with a relatively large audience already, so that’s when I decided that 2010 was going to be focused on expanding the brand and reach of this blog.

I discovered that through the various strategies that I’ve implemented and have talked about here on this blog before, such as utilizing YouTube and Podcasts, varying my post type, expanding onto Facebook, being wildly detailed and honest about internet strategies that work (with proof), continuing to be transparent with my income reports, building long term relationships with other bloggers in this niche and just simply providing unique and valuable content with the intention of helping people first, I’ve been able to take SPI to heights beyond my wildest expectations (both in terms of growth and community), really change the lives of several people who have since began their online career path, and earn tens of thousands of dollars each month at the same time—all without launching my own product.

I’m proud of everything I’ve achieved with SPI in 2010, and if you’ve read my 2011 goal post, you’d know that I have a lot more planned for this year too.

Here are quick stats for the previous year:
SPI Growth 2010

  • Total Visits: 515,163
  • Total Pageviews: 1,266,266
  • Number of Subscribers: +13,564
  • Email Subscribers: +8,574
  • Average Time on Site: 4 minutes and 23 seconds

Top Traffic Sources:

  • Direct: 169,936
  • Google Organic: 130,213
  • Facebook: 19,364
  • Twitter: 13,785
  • YouTube: 5,730
  • StumbleUpon: 5,109
  • Entrepreneurs-Journey.com: 4,651

Top Referring Keywords:

  • smart passive income: 24,348
  • passive income: 18,983
  • pat flynn: 7,880
  • smartpassiveincome: 7,362
  • passive income ideas: 2,997
  • passive income blog: 2,936
  • passive income streams: 1,791
  • iphone app development cost: 1,293

The Scary Thing About It All

I’m at a point now which is very similar to the point I was at before I launched my first products on GreenExamAcademy.com, although on a totally different level. I have a large following and am seen as an expert with a lot of influence in this industry—I realize that, however I also realize how dangerous this “power” can be, and I do not take this responsibility lightly.

I know how easy it would be for me to simply write review posts for products I’ve never used, or include a recommendation to a high-end product that I know nothing about. I’ve seen many bloggers go down this path before and it has always put a bad taste in my mouth. I now understand why this seems to happen because as a blog grows so does the opportunity to earn more money like this (trust me, I get emails every day for potential products to promote), but it is my belief that there is much more opportunity and money for me in the long run if I continue to follow the 5 rules that I’ve created for myself to keep me in check and on the right path:

  1. Do not promote a product that I’ve never used, are unfamiliar with, or one that has not helped me succeed in one way or another.
  2. Always think about helping the reader first.
  3. Never use money as the primary motivation for any actions that I take.
  4. Always remember that I would not be successful if it wasn’t for my readers.
  5. I am not better than anybody else.

By following these guidelines I’ve been able to help so many people while at the same time getting a lot back in return.

Sadly, what I’ve learned is that this is what helps me stand out from the crowd, why I’ve been able to emerge as an authority in this niche. I say sadly because it just doesn’t seem right that being honest, transparent and helpful is an anomaly. Hopefully this will change in the future, and I’d be happy to lead the way.

And There’s More…

Although the SPI blog brand was my primary business focus of 2010, it wasn’t the only thing I focused on.

My Son

Pat and KeoniMy son was born at the end of 2009, so as a result much of 2010 was dedicated to him and learning about how to become a dad.

It’s hard to describe the feeling of being a father. It’s a lot of different emotions all bundled up into one experience: joy, love, wonder, frustration, tiredness, and awesome, just to name a few.

As much as he has changed my life, he has changed how I run my online businesses as well.

Primarily, he’s my motivation for everything that I do. When things get tough or I lose my energy, I see him and I’ll immediately get back into the right mindset.

Secondly, when you have a child, and especially if you’re at home helping to take care of him or her, you’ll learn that it’s the child who determines the parents’ schedule—not the other way around (at least between the ages of 0 and 12 months). Consequently, my work schedule has been erratic, to say the least. I may get only blocks of a half hour of time to work (if that) at random times during the day. I pray for long and frequent naps, but that hardly ever happens.

It was tough at first, but I’ve been really good, especially at the tail end of 2010, at being extremely productive during what little time I do have. I’ve taught myself to stop procrastinating, get rid of all distractions and become more efficient.

Lastly, my son has made the idea of passive income even more important to me. I am currently making a living off of passive income and am happy to spend a lot of my free time with my family, but at the same time I’m using a lot of that free time working hard on new projects so that I can have even more time with them in the future.

“It’s all about working hard now so you can sit back and reap the benefits later.”

iPhone Apps

Many of you know I also co-own an iPhone app company. We churned out more than 20 iPhone applications that are now live in iTunes in 2010 alone (as opposed to the 4 we did in 2009). We also got smarter about how we ran our marketing campaigns and although we haven’t created apps as successful as iFart, Angry Birds, Doodle Jump or Fruit Ninja, we’re seeing more and more passive income come into our business as a result.

To give you an idea of our growth, in 2009 we grossed a total of $9,346.00. In the single month of December 2010, we grossed $6,902.28.

If you’re interested in iPhone apps, you can read more about the business in the articles I published in 2010 below:

Niche Sites

In August and September of 2010, much of the focus of the SPI blog was on another passive income project I was experimenting with—niche sites.

You can read all about the progress on the Niche Site Duel Hub, but in 72 days I was able to build a niche site from scratch, get to the #1 spot in Google and earn a few hundred dollars from it. I’ve since started a few more that are currently making money on the first page of Google as well, and Tyrone and I recently started a coaching program to teach people how to create a successful niche site and hold them accountable for it. We had over 100 people sign up and unfortunately there were only 20 spots available.

(Applicants will receive an email from me regarding their application status either today or tomorrow.)

My New Projects

I also began the development of several different projects that are related to the SPI brand that will launch sometime in early 2011. I was glad to start all of this in 2010, but it’s nearly time to see it all come to life. I’m really excited to see what happens next.

My Income for 2010

These income reports are not so much about the numbers, but more about the lessons I’ve learned along the way. However, I’m a numbers kind of guy and I know many of you are interested, so here is my income and expenses breakdown for the entire year of 2010. I discuss the results for both below the numbers.

Monthly Breakdown:

SPI Income Graph: 2010

Income Breakdown

Difference from last month
Gross Income
184,709.56
-18,509.48
-9.11
Affiliate Earnings
95,134.12
0.00
Various
95,134.12
0.00
Article Marketing
2,811.67
0.00
eHow
2,811.67
0.00
Event Sales (In Person and Webinars)
1,000.00
0.00
Passive Income for Podcasters Webinar
1,000.00
0.00
Niche Sites
31,475.61
0.00
Green Exam Academy Product Sales
30,638.74
0.00
Green Exam Academy Google Adsense
436.20
0.00
Mini-Sites Google Adsense
400.67
0.00
Software and Apps
54,288.16
0.00
iPhone Apps
54,288.16
0.00

Expenses Breakdown

Difference from last month
Total Expenses
26,552.22
1,432.22
5.7
Affiliate Payments
4,393.60
0.00
Green Exam Academy Payments to Affiliates
4,393.60
0.00
Education
735.43
0.00
Business Education
735.43
0.00
Equipment
5,630.08
0.00
Business Equipment
3,159.67
0.00
Office Supplies and Furniture
920.68
0.00
Postage and Shipping
147.95
0.00
Software
1,401.78
0.00
Events
1,685.76
0.00
Meals and Entertainment
535.42
0.00
Travel Expenses
1,150.34
0.00
Professional Services
11,606.40
0.00
Certified Public Accountant/Bookkeeping
450.00
0.00
Developer: iPhone, Hired through Elance
6,866.01
0.00
Developer: Web Virtual Assistant
812.00
0.00
Website Design Services
3,478.39
0.00
Web Services - Storage and Hosting
1,114.62
0.00
Web Hosting Fees (Includes Servint upgrade, 12 months)
1,114.62
0.00
Web Services - Subscriptions
1,386.33
0.00
Merchant Processing Fees
1,386.33
0.00

Net Profit Breakdown

Difference from last month
Total Net Profit
158,157.34
-19,941.70
-11.2

Please note that these figures are best estimates and do not reflect my actual income for the year because income from the months of November and December may change as some companies do not pay until 30 to 60 days later because of the potential for refunds.

Although I didn’t gross as much as last year, I’m very happy with the results. When comparing 2009 and 2010, you’ll see in a graph below that there was a major change in the source of most of my income, namely my sales from GreenExamAcademy:

2009 & 2010 Income Breakdown(and as a reminder, affiliate earnings come from several different sources)

In 2009, that source alone earned over $150,000, but in 2010 it went down to about $30,000. The drastic change is a result of a number of reasons I’ve touched on before:

  • Changes in the LEED industry and sustainable design in general.
  • Competing products published by several different companies, including the actual company that administers the exam.
  • The fact I had to comply with a cease and desist letter for my original website domain name at intheleed.com, which cannot even be used as a redirect. This drastically hurt my traffic, although I was able to keep the site up and running and continue to earn an income from it. I climbed back to my original Google rankings a few months after obtaining my new domain name, but changes in the industry led to less traffic over time.

I’m glad, however, that I was able to find success with other ventures such as with the SPI blog, iPhone applications and other forms of diversification.

Expenses

I’ve had a lot of requests to include expenses within my income reports. I respect this request because I could have grossed $180k, but if my expenses were $200k (for example), then I’d be $20,000 in the hole, in which case I would not be profitable at all.

What you see above is a summary of my expenses for 2010. I have these in Quickbooks, but they have not been double checked for complete accuracy, so some of the actual numbers may change slightly, but this will give you a rough idea.

Subtracting this estimate from my gross income for 2010, that would mean I profited roughly $184,709.56.

I actually profited slightly more this year compared to 2009, which has a lot more expenses for web design work, voice over talents for some of my products and merchant fees.

Overall, a wonderful year of business and I hope to do even better in 2011.

Things I Learned in 2010

My success with SPI and its affiliate earnings confirm that my overall strategy for creating a long term online business works:

Go out of your way to help people, over-deliver and provide extreme value, and you will be rewarded one way or another.

It worked for GreenExamAcademy.com, it has worked for SPI and also all of the other blogs and businesses out there that you respect and go back to for more. Not everyone will become a customer or click on an affiliate link, but there are a great number of people who will reciprocate, and sometimes go out of their way to do so.

To all of you who have gone out of your way to click on one of my affiliate links, subscribe to my blog or download my free eBook and subscribe to my newsletter—I thank you for everything.

Here’s a quote from an SPI follower, Leon Aldrich, who sent this to me in a recent email. This sort of sums up the effect of my business model:

“What sets you apart from many online, aside from your obvious transparency/giving soul/insert positive here, is regardless if a person has bought a product from you or not, you still treat them with the utmost respect. And as a carry over affect, they (like myself) become raving fans of everything Pat Flynn and Smart Passive Income (and any other platforms you are involved with). As an example, lets say you were selling GOLDEN WIDGETS. I may not buy any golden widgets, but there is the possibility several of my family/friends/coworkers could use your golden widgets. So of course I’m going to pass this along to them. The point is, while not everyone may be a buyer, they can still spread the word.”

Thank you Leon, that is much appreciated, and I’m working on my golden widgets as we speak.

:)

SEO is Not Everything

We all talk about search engine optimization like its everything that matters. If you’re doing niche sites, then I agree it’s very important to be optimized so you can get on the first page of Google, because that’s where all of the clicks are. Sure.

But when it comes to a blog or an authority site of any kind, SEO is just one small piece of the puzzle.

Earlier in the year I paid a professional for an SEO analysis of this blog, and in his report he basically said that my site was hardly SEO optimized, and that everything was pretty much a mess. I learned a lot from his report (which I’ll share with you in detail later in the year in a webinar—I recently increased the viewer limit of my webinars from 100 to 1000, so I’ll be setting that up soon), including how to improve my site and help it rank higher and become more Google friendly.

But, in addition to that, I also learned that SEO is not everything. Even though my SEO was bad, I had still built a huge following and have made a substantial profit from my blog. Looking at my analytics, I can see that search engine traffic only accounts for about 25% of my overall traffic:

SEO-Traffic-Breakdown-2010
I’m not saying you should disregard SEO altogether—no way. I’m only suggesting that you don’t worry about it so much that it gets in the way of more important traffic sources, such as referring sites and direct traffic, which all stem from the content that you write and the relationships that you build with your readers and your fellow bloggers and niche members.

And At Last…

At the end of 2010 I realized that I was not a flash in the pan. My online career is here to stay, at least for a while, and while I’m here I will continue to do things exactly the way I’ve been doing them, because it’s working for me and I can go to sleep at night knowing that I’m helping people at the same time.

We are all on level playing fields and it is those who seize opportunities and take action that will find success.

Here’s to a healthy and prosperous 2011 to each and every one of you. Happy New Year, and thank you for everything.

Cheers!

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