Passive Income Streams 101

passive income streamsCreating multiple passive income streams is everyone’s dream. In order to make this happen, you have to understand exactly what the passive income business model looks like, which I’m going to share with you today. This is the business model that allows me to work just two hours a week, yet pull in a full time, CEO-sized income.

Before we get into it, I just wanted to mention that this isn’t the only business model out there. Obviously, there are a million things you can do online and offline to generate a decent income, but this is the business model that I choose to use because:

  • It’s relatively cheap and easy to setup
  • It’s low risk (what have you got to lose?)…
  • After it’s setup properly, it runs on auto-pilot, which means you don’t have to be present in order to complete a transaction
  • You can implement this business model “on the side” for an extra income in addition to your 9 to 5…
  • You can make money at any time of the day, from anywhere in the world…
  • It’s easy to implement tests and business strategies to try and improve results…
  • Once it gets going, you can try and duplicate your results in other markets and create multiple passive income streams
  • If all goes well, you’ll have the freedom and time to do what ever it is you want.

Hmm…cheap, easy, low-risk and high-reward? Sounds like a winning business plan to me.

In the video below, I outline exactly how my passive income business model works. Also, for you beginners out there who may not have information products to sell just yet, I’ve included a Bonus Adsense Tip, which I used to quadruple my Adsense earnings, back before I was really focusing on information product creation.

If you cannot view the video, please watch Passive Income Streams 101 on YouTube here.

I hope you’ve enjoyed the presentation. Please leave a comment for me below. I’d really appreciate it! Thanks!


P.S. If you liked this video, you can subscribe to The Smart Passive Income Blog on YouTube for more videos just like it! Check out my “4-minute blog”, a blog that I created in less than 4 minutes from scratch, including it’s first blog post with an embedded picture. Now you don’t have any excuse to not get started earning money online!

  • Marty Green

    Awesome post Pat! For me the best part is watching the video presentation as you actually draw it. It has more impact for me and makes it easier and clearer to understand.

    Great post!


    • Pat

      Thanks Marty, I appreciate it. I saw an internet marketer do the same thing, and I was so fascinated by how much more I paid attention to the guy’s material, that I had to go out and get a pen and tablet for myself.

      • Erica Douglass

        Aw, man. Now I want a tablet. Just because your stick figures are so darn cool! πŸ˜‰


    • Laurence Michael @ Residual Income Online

      This video is as relevant today as it was a few years ago. I just showed it to a small marketing class I teach and they loved the presentation as well as the content. Well Done!

  • Ron Turner

    Hey Pat, thanks for this great information! It’s great hear this in layman’s terms, and the video graphics makes it easier to follow!


    • Pat

      Thanks Ron!

  • Howie

    Great post, as always, Pat! Still following your blog here! (Got it in my bookmarks!) πŸ˜‰ :)

  • Shaun

    Hey Pat,

    Thanks for the video. It was good to have the model laid out again. I’m still considering the advice you gave me. You’re right. It’s ulitmately my decision. I just have to do the research to make a choice. Also, thanks for the tip. I set up adsense on my site, but haven’t made a dime. I kind of did things backwards. Catch you later.

  • Will Atkinson

    Hi Pat,
    Excellent video, the graphics really made the info pop for me. I also like the idea of contacting advertisers directly. Now all I have to do is focus and get some meaningful traffic:)

  • chris

    do a tutorial on setting up ejunkie!!

  • Blake Erickson

    Hey Pat,
    Great Video! It was a really great summary of what this whole website is about.
    I wanted to thank you for all your articles that have taught me many things that I’m doing my best to put into practice. My website is up, I’m adding new content, I’m working on my ebook, and I’m finally starting to get traffic!
    I can’t wait to share my success story with you when I finally make enough money to replace my full-time job.
    Thanks Pat, your saving my life.

    • Pat

      Hey Blake,

      I’m glad to see traffic starting to finally come in. Keep on posting and keep motivated, and you’ll see more and more people come in eventually. Well done!

  • Khoa

    Great video mate. Very smart technique regarding the adsense, I never thought of that! I’ve got a few high traffic sites that’s got AdSense but I never considered your strategy.

    Great job mate!

  • Jonas

    Great video! Knew most of it already, but it’s a good reminder and well put together.

    What benefits or negatives do you see from having an income stream from a rather static site (ie. GreenExamAcademy) where you have a product that your selling, vs. having a blog where you are constantly providing value in the blog posts and also having products on the side?

    Hope my question was clear even though I even kind of confused myself there :p

    Have a great week :)


    • Pat

      Hi Jonas,

      Well, for a static site, you could possibly leave it be for a week or two and everything will still be going strong, such as the case with my website. That opens up a lot of time for other projects, or just working on testing and optimizing conversions, instead of having to worry about constantly updating material. However, the downside of that is, the search engines love “activity”, so a static site will rank lower in SEO if it’s stagnant for a while. I do my best to put a new post every couple of weeks just to give the search engine robots something new to look at.

      For a blog, it’s obviously much easier to connect with your readers, and because you are updating on a schedule, you develop long lasting relationships with your readers at the same time. Of course, it does take more work, and you can’t “leave it be” for a long time. Constant updating is key. However, you can write posts ahead of time and schedule the date and time they will be published, which helps if you want to take a long vacation, for example.

      I hope that helps. Cheers!

  • Ben

    Hey I liked the presentation but I’m curious if you spend any time updating those ebooks, revamping the websites, etc.? Do you have a specific lifecycle for your information products?

    • Pat

      Hey Ben, I’ve done one update to the books that I ended up selling. That’s another thing that’s nice about selling an electronic product, it’s really easy to send out an updated version to all of your customers.

      The lifecycle depends on your market. For me, the exam get’s updated every two years, so it has a two year lifecycle. I know of some eBooks and other information products that were made 5-6 years ago and are still going strong today.

  • Michael-John Wolfe

    Great video Pat! Can you tell us what payment processor you use? (I don’t think PayPal will deliver your product via email, correct?)


    Michael-John Wolfe

    • Pat

      You’re right – paypal won’t deliver information products for you, but, you can integrate paypal with other programs to automatically deliver the products for you. I use, but there are numerous other options out there.

  • Brian

    Very cool video Pat; I’m rooting for you on your new “Passive Income Streams” keyword goal. You nail that one down and then you should go after the other variants.

    Just leave the “residual income stream” keyword for me though. :)

  • Dustin | Engaged Marriage

    Pat, you’re rocking that pen! Your Adsense tip was intriguing, but one issue I have is that there aren’t a lot of people clicking the ads on my site as they’re mostly cheesy “save your marriage” junk while my site is aimed at making good/normal marriages awesome. Plus, I don’t know which specific ads they’ve clicked when they do so, so I wouldn’t know which advertiser to contact.

    I look forward to creating my own products (ebook initially) and getting away from the pay per click pennies.

  • Simon

    Thanks Pat,

    Your presentation was really smooth, succinct….a nice bite size amount of information to consume. It reminded me a bit of the common craft style videos which are awesome. You have obviously taken the time to plan how and what you delivered.

    This passive income model is quite simple in concept which why it is so inspiring as anyone could apply it. The hard part I think is creating a model for getting the customers and creating the right e-book. A few posts about the mechanics of choosing a niche and getting customers would be awesome :).

    Thanks for continuing the share Pat!

    • Pat

      Simon, I’ve put those things in my checklist of things to cover. There’s so much information out there, it’s hard to give it all to you without making it feel overwhelming. I think a post about getting traffic would be something very useful. I’ll work on that soon. Thanks!

  • Jack

    Hi Pat! I’ve been following you for months now and watching this blog grow. I’m really excited to see the videos and I can see a clear new direction you’re taking overall, which is inspiring to me. You’ve got some great ideas! I don’t know how you consistently come up with topics that are interesting, but I’m glad you do. Love to see a video about that secret sauce :)

    Now for a little critique. I’ve been involved with the process you outlined in the video and I’ve really been trying to emulate this whole passive income strategy. Unfortunately, I just haven’t been able to get the traffic I really need to get people buying. I think you should stress that it’s an ongoing process to make sure the web site component gets eyeballs. Because the way I see it, you can’t just jump into a niche and hope that people will find your product. It takes a good deal of effort to be seen in a sea of Internet marketers.

    The Adsense tip was a good one. It seems pretty obvious in retrospect but I’m glad I watched the video because it was a fantastic tip. Thanks!

    • Blake Erickson

      Hey Jack,
      I know not having traffic to your website can be depressing at times. Also, it seems like the odds are stacked against anyone starting out because Google doesn’t index your sight very often unless you are getting traffic but we think we can’t get more traffic until Google indexes our site. :(

      I recently had no traffic to my sight until I started writing eHow articles, and made some youtube videos. I think they key for anyone starting out is to post your content on sites that get a lot of traffic. Just like anyone selling a product you have to advertise in a high traffic area.

    • Pat

      Jack, thanks for your comment. You’re absolutely right – it does take time and effort in order to get seen. I stress this time and time again, so I apologize if you got the idea that you can set this up and hope to make money right away from this video.

      Actually, it should be the other way around – you should develop a website (keeping this model in the back of your mind) that should focus on gaining a following first, by providing useful and meaningful content, and then once that happens, the business model can come in and take advantage of the following that’s been established. Any new users will hopefully see social proof through comments or customer feedback and will understand that whatever it is you have to sell is worth their money.

      There’s obviously a lot of components involved, but just from your content I can tell you’re already a head of many people out there as far as understanding how things seem to work and how things should be implemented.

      Thanks again for your comment, and I hope to hear from you again soon. Cheers!

  • Studenomist

    Pat you really caught me off guard with the adsense. You really got me thinking. Do you think I should approach top advertisors and offer them a monthly text link? What if they don’t want to do this? What if I find I can make more money from Google?

    • Pat

      1. You should be able to crunch the numbers to see what you should be asking for so it’s worth it for you…and 2) If they don’t want to do it, no harm, no foul. What have you got to lose? You can keep your adsense there anyways if you’re doing text link ads within posts.

  • Ron

    Enjoyed the video Pat. I particularly thought that the diagrams were straight forward and really simple to understand. I got that you’re suggesting it’s best to set up online “shops” so to speak that are open 24-7, but what are your thoughts on just focusing on a single membership site?

    • Pat

      I don’t really think one is better than the other, I just wanted to show that it’s possible to, while one is on auto-pilot, to setup another one, for example. A membership website is wonderful, and it’s something I’ve always wanted to do. Your sales page for the membership website would kind of be like a “shop”, and your product is membership. I think focusing on one and really maximizing it’s potential is a great way to go as well. You could setup a few, and then “feed the stallions, and starve the ponies”, if you know what I mean. Thanks Ron!

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  • Oscar – freestyle mind

    That was a great video! I’m curious what software did you use on the video to draw the presentation?

    • Pat

      Thanks Oscar – I actually used Camtasia for Mac, along with Omnidazzle, which allowed me to draw on the screen. Camtasia Studios (the PC version) comes with the software to draw on the screen, but the mac version does not.

      • Oscar – freestyle mind

        Thanks, I didn’t realize it was omnidazzle, I’ll give it a try. Thanks god I’m on a mac πŸ˜€

  • John Peele

    Hello Pat, great job with the new video! Loved the interactive format and the tablet worked well for your subject matter. Audio could have been a bit louder for me, but that could have just been my setup.

    Love love love what you are doing and providing for us all here on your blog. My partner and I are a week or two out from launching our blog and first info products. The format for our blog will be to document the “journey” that we take into the world of generate multiple streams of passive income with internet marketing, network marketing and real estate. We love the process of not only learning, but also teaching others what we have, and will, learn along the way. Much like you are doing here, transparency and authenticity are our keys, so that everyone that follows us can see how totally possible it is to do this for themselves.

    I look forward to talking with you again soon!

  • Rence

    Hi Pat that was a great way to explain passive income and the video like it. Though I’m still trying to learn the biz of website, but your blogs gave me a nice start!

  • Richard

    Great presentation Pat. I am currently in the same position – laid off and decided to go “left” in that fork in the road. I created a couple of directories to maybe build some income but my problem may be I want only the best sites/blogs listed. I’m hoping in the long run it will pay off, but it really isn’t as we speak.

    Being new to this stuff, I have to say I really enjoyed the way you presented yourself. I’m taking a break right now, so I think, first, I will go read some more of your blog, maybe head over to see what Erica Douglass has been up to, then get back to work building a passive income model. I’ll be back to make sure I’m doing it right LOL!!

    Thanks again Pat. Much appreciated.

  • Jared |

    Nice presentation. I like the simplicity. I have a lot of blogs running adsense and am making some decent $. I have thought about contacting advertisers directly, but was wondering if we should have some knowledge of what to ask for or expect for negotiating ad placement? (not sure if that makes sense…) I guess I’m wondering if there’s a model for what advertisers pay… like based on page views, traffic, etc. Should we have some knowledge prior to contacting them directly?

    • Pat

      Hey Jared,

      Good questions. Well, the more professional you look when you present yourself to them and make an offer, the better. Plus, the more you could probably get at the same time.

      The traffic and numbers all depend on your niches, how much the clicks are costing, how many clicks a day you get, etc. It’s a bit difficult to put a number on, but when I did it myself, I just sent an email asking them nicely, and they were willing to do a test run with me for a month to try it out. It worked out, so they’ve been working with me ever since.

      If you can figure out what questions they are probably going to ask, and have decent (perfect isn’t absolutely necessary) answers, you’ll be good.

  • joey

    hi! great tips, but i’m intrigued by how you made those scribbles that allow resizing. may i ask what software you used? thanks.

    • Pat

      Sure Joey, actually – I was using photoshop for this. Just drew with the pen tool in a layer, then transformed using a shortcut (command + t).

  • joey

    You’re kidding! photoshop!, that’s really cool. Your video reallly got me thinking about passive incomes! now why dind’t i think of that.

  • Mike

    LOVE that Adsense tip! I don’t know why I never thought of checking out the advertisers and contacting them directly. Much more income can be made from a paid link or even an affiliate link!

    Thanks Pat!

  • Carmen LeMon

    Hi Pat:

    I will first say, I just listened to your podcast over on Yaro’s site….really inspiring, it was a nice collaboration, you have inspired me today in beliving that making big money on the internet is really possible. Thank you for sharing your story.

    I listened as well to the above video and was impressed with the presentation, really cool chalk board. Continue bringing valued content, and the masses will come kneeling at your feet. (smile)

  • Mark Marshall

    I love the idea of passive income. So far I have been using Adsense, which would seem like the ideal passive income stream. But is a bit disappointing in the income amount.

    As Pat suggests, skip adsense and sell directly. Doesn’t this seem like the opposite of passive income. Calling or emailing potential advertisers and generally doing sales isn’t passive?


    • Pat


      Things just don’t happen magically without putting any work into it! If you think that way, then nothing is really passive at all, not even adsense, because you have to take the time to create your account and put the ads on your website, right?

      Calling or emailing potential advertisers might take 15-30 minutes, 1 hour tops. Make a deal for 3 months, 6 months, 1 year of advertising and you can pretty much get paid month after month, for doing nothing.

      Does that make sense?

      Cheers Mark!

  • Srinivas Rao

    I’m guessing this a fairly old post, but that adsense tip is priceless. That alone has made it worthwhile for me to spend time on your blog.

  • margie

    Hi, I’m just a total beginner strangled by economy. I found your site full of very useful information. I’ll be back often. Good tips.

  • Patricia – Condition Your Mind

    Hi Pat,
    I learned about you from Yaro in OZ – Great job on today’s video presentation. The best part for me was the “adsense tip” LOL, hope the big G doesn’t hear about it:)

    Love all your stuff – thanks for the tips about ejunkie and the internet boyz in San Diego.


  • Dave

    Hello Pat,

    The presentation is great. The info re Adsense was not expected but good advice. I will try it. Also enjoyed your interview with Yaro. It was very inspirational. Keep it com’n.


  • Ms. Freeman

    That was fun! I liked the video and the high tech equipment that went into producing it. Whatamic!

    I have a couple of questions. What type of writing tool did you use to scribe out your plan for us?(no need to answer I see it’s already been asked and answered up top) and What sort of price would you recommend we ask for when approaching the advertiser directly? Just a ballpark figure will do…Thanks:)

  • Bridget

    Great job! Loved the idea on multiple streams of passive income…And the visuals really helped!!! thank you!

  • Cat

    Great presentation! I have a question- how did you research your ebook topic to see if there was a market for it? What kind of indicators did you look for? I’ve done some SEO research for ehow articles, that kind of thing, but I don’t know how to judge the market for a book. I’m considering writing an ebook in my industry, and I’m trying to narrow down the ideas rattling around in my head. I’d be grateful for any advice you could give!

  • Bryan

    Great article! I’m just getting started in this and need all the help I can get!


  • Adam Brock

    Hey, good stuff. I’m completely new, just getting my feet wet, nice to see this stuff explained so well.

  • Steve

    Nice video and easy to understand.

  • Krishna

    Interesting talk. I have been noticing a trend towards free content on-line, which may cause problems for this business model. Also, for the content that you have produced, how much effort do you put into updating the material and keeping it fresh?

  • HallyZ.

    I’ve been coming here for several weeks now to read your content and to get some ideas for my own site as well (and to check out Gizmo- he’s such a cutie). I must commend you on a very educational and well put-together site! Keep up the good work!

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  • Erin

    Great post. I just read your ehow blogs as well. I am just getting started on my journey into passive income, fueled by my success with cafepress. Have you reviewed that yet? I designed a shirt about a year ago just to buy it for myself (which I never ended up doing). Surprisingly, people started buying it and I generally get a check for about $30 every month. Not bad for about an hour’s worth of work. It’s really inspired me.

  • Aiselade

    Hey Pat! Awesome stuff! I’ve just recently started reading your blog and think it’s fantastic. I’m just wondering how you go about choosing electronic products (i.e. e-books) to create? (how do you research or decide what is “HOT” that markets are after?) If there is a post that already exist – sorry! As i said, I only just started reading your blog :)

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  • Luqman Michel

    Thank you very much for all the useful information you have given me.It is almsot like a one stop provides all information I need site.

  • Kum Lugabihl

    Great blog. Do you know of any relevant post like Top Secrets For Google Adsense Alternatives Have a great day!

  • home income alliance scam

    Hi there, I found your site via Google while searching for thoughts on this subject and your post looks very interesting for me.

  • lavinia

    Hi Pat, great post! It is quite amazing how after over a year you are still getting messages to to this post! It is great! Definitely gave some food for thought! I will search you out on facebook now! Also, are you a millionarie yet? LOL! :)
    Best, Lavinia, London, UK!

  • Juha Karjalainen

    Hi Pat,

    Found this post and spent few minutes by watching the video while trying to figure out the best way for me to get some income from traffic on my website. The first presentated stuff wasnt that helpful for me BUT idea about using adsense that way is wonderful :)

    Thanks a lot! πŸ˜‰

  • Jay

    That’s exactly the kind of incomplex explanation i’ve spent so much time looking for. Pat, you got somethin a lot of people don’t have, I don’t know if I should call it integrity, sincerity, or what, but it’s great!
    You’re a good man.

  • Zachery Axelrod

    As a newbie, i’m usually looking for information that will help me and your website did, big thanks from me

  • Carl

    great information, but you could have stopped at “providing really good information”. I think that is the most important thing websites are missing.

    I really like your site.

  • Sion


    Great info. Totally newbie here and attempting to find passive income streams.


  • dinnaim

    hi pat..thanks for the a newbie..i hope you can give me a tips to generate a passive income. thanks again.

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  • Hector Luinstra

    hey!,I like yourwritting so much! share we communicate more about your weblog on MSN? Looking forward to see you.

  • bernice sanchez

    That was a great visual! Thanks for the advise.

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  • CeCe Marie

    Hi Pat,

    I just hopped onto the passive business income highway and finding your blog absolutely helpful. There’s a lot of great advice in here and I almost feel like I’m getting personally coached by you. I look forward to your future posts!!!

    Thanks for the great info!
    -CeCe Marie

  • Dave

    Hi Pat,

    I’d like to learn more about passive income company-architectures and which payment processing service i should use. Nice.



  • http://offcolourcreations donna

    Thanks for the video, it help me understand the way passive income and passive income streams work.

  • Alison


    I’m a local San Diegan and I just want to say Go Chargers! No, actually I wanted to say you make us San Diegans proud! I’ve been following your blog for about two months along with about 20 other blogs and I have to say that yours is by far the BEST. You have got skills! My favorite part of this presentation was the idea of not using Adsense. Duh, winning! It makes sense to cut the middle man out and go directly to the vendor/company. I haven’t started my site yet but your blog has really helped me or rather has stopped me from deciding to go through with some of the nonsense. P.S. I can’t stand those Google Ads. When I go to a website for information and the page is split in two columns because of the Google Ads thing, the credibility of the site drops for me. I get all disorientated and have to figure out if it’s an actual site or just a site with nonsense and ads. I usually just end up leaving the site.

  • Tina


    I just wanted to comment that this presentation was extremely well done and easy to understand. Thank you for the ideas!

    Long Island, NY

  • tina Middleton

    Great info thanks for the video doing a great thing

  • Kent Chow

    WOW. This video and post were created back to 2009, but still creating value passively to us. I really like the drawing and illustration that you have about the “money flow” in affiliate marketing.

    I really love this business model, instead of blogging regularly, I am creating multiple niche mini-sites as multiple streams of income.

    Thanks for all your inspiration and tips on SPI. Awesome to see you become so popular.

  • Jesse Jukic

    Was a good video make some more for us πŸ˜€

  • Barbara

    I need motivation… wanting to get started but don’t feel up to speed with online and computer ability/knowledge.

  • kaffeinator

    Thanks for the video, Pat. (^_^) I especially liked the use of diagrams to explain the two key processes you presented; I also appreciated the way in which you organized the material into these two easy-to-follow systems. As a budding writer looking at self-employment as a ‘career’, this video was certainly helpful.

  • David Lawson

    Great job Pat you are really creative. I’m very new to computers and just recently lost my job and am looking for different forms of income. I guess my biggest question would be; where do I get products to share with potential customers? Thank you for your time and hard work, it is very appreciated.

  • Carlos Hernandez

    Hi Pat,

    Great post. I have been into passive income since I read Robert Allen’s multiple streams of income. I think you break it down in a modern way. I had a good site going and I was selling a book on credit repair. I lost the site because I forgot to renew my domain. I was up to #2 for relevant, high traffic, keywords. Someone snatched up the domain as soon as it expired. I was devestated. I left my quest behind, but I think I’m going to start again thanks to this reminder. I got your app too. Keep up the good work and remember to renew your domains. LOL!

  • Financial coaching with glenn

    great stuff and thanks for the advice

  • Fred Owusu @Network Marketing Strategy

    wow awesome post Pat. Passive income streams is the way to go.
    Thanks for the post and video. Enjoyed the video the most.

  • http://N/A Mintz

    Sir, video straight forward affirm info research for global approach. thank you!

  • Blankie

    Hi there. I just listened to your informative blog about passive income streams and I FINALLY UNDERSTAND it! I have heard countless people talking about this and NEVER understood it til now. I have a product that I think could be sold this way so I’ll have to do a bit more research (cos I don’t know how to set up a website – any info on that?) and then I could get going. Thank you Very Much for your willingness to contribute to our lives.

  • Juan@HomeCashSystem

    This was a great video for me to catch right on target with everything that I am learning. Thank you for sharing.


  • http://Noneyet Domini Walton

    Very simple & useful! I’ve just heard about passive income & am hoping to set something up so it was very useful to see it so clearly explained. Thank you!

  • Sandy

    Loved the presentation. Easy to understand. Would like to learn more about how to start my own ebook.

  • Crystal

    This seems easy enough but I know it takes hard work. I look forward to learning more from people like Pat who have followed this process and have found success.

  • Gary LaMartiniere

    I like that information is broken down and easy to understand.

  • Kurutsi Audu