Last Updated on February 3, 2024 by Matt Zavadil

Matt Memo #5 – 11 minute read

Video Version of Memo:

YouTube video

So I told him the best way to think about and attain passive business income but it didn’t land well. 

It cemented in my mind how important my message for you today is…

Now, who was I talking to and how can you best attain passive income?

I’ll go into that story in just a bit. 

First, let me share some simple numbers with you

In last week’s Memo here I took you through the basic math of creating traffic, leads, and sales in your online business. 

Today, let’s look at a different type of number:

The Failure Rate of Businesses

business rate failure chart

According to the Bureau of Labor Statistics, here’s how it breaks down:

  • Almost 21% of businesses are gone within one year. 
  • 40% of businesses fail within the first three years. 
  • At the five year mark, almost 50% of businesses have failed.
  • Within 10 years, almost 66% of businesses are out of business. 
  • At 15 years, just over 73% of businesses fail. 
  • And within 20 years, almost 80% of businesses are gone. 

Yikes!

Keep in mind that most of these stats reflect offline business like:

  • Construction
  • Utilities
  • Agriculture
  • Mining
  • Manufacturing
  • Retail trade
  • Transportation
  • Finance & insurance
  • Real estate
  • Health care

And so on…

What About Online Business Failure Rate?

I’m not surprised that the data reveals that 90% of online businesses disappear after 4 months

120 days!

Double yikes!

Nine out of 10 people starting an online business don’t even make it past half a year, let alone remain standing 12 months later. 

The #1 and #2 reasons reported for why online businesses fail resonates with me and I think it’s important for all of us to understand. 

The #1 reason, coming in at 37% of the “reason” pie is “Poor online marketing”

#2 is close behind at 35%:

“Lack of online search visibility”

It doesn’t surprise me that 72% of all reasons for online business failure fall into these categories. 

Let me go back to what I mentioned upfront about the person I was talking to about passive income. 

We brought in a new client who wanted our help in building out his high-ticket $7500 coaching program. 

As I onboarded him, he made this statement: 

“My goal is to get a system in place where I basically sit back and make money residually off the business.”

Remain mindful of the fact that he hadn’t made one sale in his business yet. 

This was said to me about two months ago, but it wasn’t the first time I’ve heard a version of this goal over the years. 

Some people want a network marketing business that they build once, and it never requires their effort again. 

The same idea exists when applied to folks looking to build an affiliate marketing business and selling products created by others. 

I explained to my client that I understood what he means by wanting passive income.

I also asked him if that’s the best mindset to start a new business with.

We were on Zoom, and he kind of looked at me inquisitively, and said,

“I’m not sure I follow you.”

A Healthy Business-Building Mindset Is One Of WORK

YouTube video

Now as a quick aside, in last week’s Memo (I’ve placed the video above for you), I plainly stated that building a business is hard. 

Most of the concepts for building a business are simple, but you need to work hard

Especially when getting a new business off the ground. 

Going in already planning your exit strategy doesn’t work. 

I’ve never seen that work. 

So I told my client this,

“Look, you’re at the beginning of your journey. This isn’t the time to be thinking about sipping a beer, doing nothing, while laying around on your own island.”

“Know what I mean?” as I laughed a bit. 

Fortunately, he nodded, and said,

“Yeah, I gotcha. I have a lot of work ahead of me.”

I said, “A lot of FUN work if you look at this right!”

I don’t know about anyone else, but I think the process of building your business…

…you know, creating content like I’m doing right now, helping people solve whatever it is your business helps people solve…

I think all that is just as much fun as seeing the money pour in. 

There’s a definite feeling of accomplishment and I think that’s a big part of the makeup of anyone looking to build a business.

If you don’t find fun and enjoyment inside the process of:

  • Writing emails
  • Talking with clients
  • Building funnels
  • Writing marketing copy
  • Making videos
  • And all the other aspects of working your business…

…then I submit that perhaps becoming a high-ticket coach, network marketer, or affiliate marketer isn’t the best path forward for you. 

You’ll at the least be hard-pressed to experience the joy of passive income 😔

Passive Income Requires Upfront Effort

And that leads me to this passive income topic. 

So…passive income…

Making money while you eat, sleep, or play with children or grandkids. 

Sounds great, huh?

The “passive income” phrase, though, is thrown around on the Internet like a viral meme.

It’s talked about constantly…

Everyone loves talking about the excitement of the idea without emphasizing the discipline required to unlock its true potential.

It’s usually used in a “sleazy” kind of way to get people to buy products, courses, and coaching programs that typically overpromise and under-deliver. 

Is earning passive income possible?

Of course it is!

But does it take a ton of work to create it?

You bet it does!

And there-in lies a bit of deception. 

While passive online income exists, it doesn’t work exactly how many might think it does. 

The Start To Creating Passive Online Income

I know you probably don’t want to hear that it takes an incredible amount of work to create passive income…

…but my pledge to you is to keep it real when it comes to your business-building efforts. 

In last week’s Memo, I gave you the 7 steps for creating a successful business. 

If you missed that lesson, I encourage you to go back to it after digesting today’s Memo.

Today, let’s focus on the first three of those 7 steps, and how doing them incorrectly will hinder your ability to earn passive online income. 

Those three elements are:

1) Identify the problem you’ll solve for others

2) Figure out who needs that problem solved 

3) Research the pain points, goals, and needs that go through the minds of the people who need that problem solved 

The first mistake might be a failure to uncover the problem you’ll solve for your customers. 

Remember the statistics I gave you about 90% of online businesses failing within only 120 days?

Most people fail so early because they never become passionate about helping others actually solve a problem. 

Another way to say it is,

“They don’t become passionate about taking a person from Point A (which is usually a painful place to be) to Point B (where a true transformation occurs or a real problem gets solved)."

Let’s look at two examples so I can illustrate how this can look:

First, let’s say you’re a network marketer in a health and wellness company like Arbonne. 

If you’re passionate about helping others, you might focus on the skin care aspect of your company’s product line. 

You start learning Internet marketing methods like creating a lead magnet…

…a fancy name for a “resource” you give away to entice people to join your email list…

…and come up with these ideas for possible lead magnets:

  1. A skincare quiz
  2. An “at-home facial” video tutorial
  3. A printable cheat sheet
  4. Access to a private Facebook group to share and receive tips & advice 
  5. An expert interview with a skincare expert or dermatologist

You decide to offer the quiz and call it something like:

“Take Our Skin Care Quiz & Unlock Your Best Complexion Yet!”

You create a landing page where people can opt-in to your list. 

It might look something like this:

Example of an optin landing page

Then, you create a thank you landing page with a video explaining who you are…

…and offering your new leads to book a call to discuss their skin care and/or nutrition needs. 

Next, you create an email sequence that delivers the quiz results and follows up every few days for those people who didn’t take action immediately. 

Notice how there’s work and forethought involved with getting your online funnel into place…

In my second example, let’s say you’re an affiliate marketer helping people with personal finance. 

Your main passion is solving the problem of helping others pay off debt.  

  • You went through the pain of being in tens of thousands of dollars in debt
  • You figured out how to solve the problem
  • Now you create content to help others do the same

Think of my two examples and compare these two people with a third person who sees a flashy Facebook or Instagram ad about copying and pasting their way to passive income riches. 

The sales pitch gets them whipped up into a frenzy about how they can use a free AI tool to do all the work and magically start earning $50,000 per month in 45 days. 

I talked in my last Memo about how harmful this is to accept and believe, so I won’t beat that bush here. 

But really think about it. 

Is that person going to still be around in 120 days when they find out they were sold a lie, and that they need to work hard?

They didn’t select their business direction based on anything meaningful. 

If you don’t have a real passion inside to solve a problem for others…

…it’s likely you’ll quit the process within 3 or 4 months, looking for the next thing that promises to quickly give you passive income. 

But the Arbonne rep and the “get out of debt” affiliate marketer chose to go in a direction where they’re building businesses based on something that deeply matters to them

When their first paid ad flops. 

When they get their first 25 leads and no one buys anything. 

When they start putting up content on their blog or YouTube channel, and no one seems to pay attention for months on end. 

  • They don’t quit. 
  • They make it past the 120-day fail point. 
  • They make it past the 6-month point. 

And, then Boom!

Stuff Starts Happening (Seeds of Success)

They made some sales at maybe month two or four or five. 

But now there’s consistency

They see a certain number of sales coming in each month. 

Although their resolve wavered at certain points of the journey…

…they have renewed hope in their business pursuits as those results multiply. 

Between the 6-month mark and the 12-month mark, they see more things work but also hit a few more roadblocks. 

But, now it’s month 13 or 14 and they’re seeing a consistent:

  • $3000 or
  • $5000 or
  • $7,500 per month coming in

Everyone’s different but my point is that they’re seeing consistent income results

They’re excited and hopeful about where they’ll be in the next 12 to 24 months. 

But is it passive income?
True passive income where they can stop all the work and retire?

No.

Building a business doesn’t work that way. 

Don’t get me wrong. 

If you’re building your business correctly, you’ll see sales coming in while you sleep or eat dinner or spend time with loved ones on a three-day weekend road trip. 

But you can’t stop. 

There’s still work to be done. 

Identify Target Market & Its Pain Points

OK, let’s get back to our Arbonne rep and affiliate marketer helping people pay off debt. 

I don’t have time here to go into a deep dive into this idea, but let’s focus on the second and third steps I gave you in my last Memo:

  • Figure out who needs that problem solved 
  • Research the pain points, goals, and needs that go through the minds of the people who need that problem solved 

The Arbonne rep and “get out of debt” affiliate marketer I detailed earlier identified the overarching problem to solve. 

But they need to now identify who to point their marketing efforts to. 

The Arbonne rep might narrow their target market down into sub-niches that include people with:

  • Acne
  • Sensitive skin
  • Anti-aging enthusiasts

The “get out of debt” affiliate marketer might target:

  • Young professionals (with student loans)
  • Parents (struggling to retire and save for their children’s college)
  • Financial minimalism enthusiasts

Next, they both need to research the pain points, goals, and needs that go through the minds of the people who need the identified problems solved.

I quickly thought through how our Arbonne rep’s target market might look at the problem. 

Mindset: 

  • Overwhelmed by all the various skincare products available
  • Skeptical about the effectiveness of skincare products overall
  • Low self-confidence due to skin issues

Activity:

  • Lack a consistent skincare routine
  • Put off self-care activities due to a busy lifestyle
  • Engage in impulse buying without a clear understanding of their specific needs

Results:

  • Frustration (Previous attempts at skincare haven’t yielded the desired results)
  • Skin sensitivity issues caused other products in the market
  • Wasted money on ineffective products 

Let’s look now at how our “get out of debt” affiliate marketer might attack this:

Mindset:

  • Overwhelmed and stressed by the burden of their debt
  • Sense of helplessness regarding the situation
  • Worried about future financial struggles and uncertainties

Activity:

  • Avoid budgeting due to discomfort in confronting the situation
  • Engage in habits that lead to more debt (such as impulse spending)
  • Procrastinate the creation of a comprehensive financial plan

Results:

  • Negative credit score
  • Limited financial freedom
  • Stress and anxiety due to the constant pressure of debt repayment

There’s more to do here. 

We haven’t even gotten into demographics or explored past the pain into what these best-fit prospects want and need to happen. 

But this exercise should help you see what’s involved with online marketing and becoming visible in search results. 

The Long-Term Numbers of Marketing Success

Let’s revisit the numbers I gave you earlier…

…that 72% of all reasons for online businesses failing within 120 days are:

  • Poor online marketing
  • Lack of online search visibility

Becoming GREAT at online marketing & gaining large visibility requires us to grow a number of skills we weren’t necessarily born with. 

I’ve briefly talked you through the process of:

1) Identify the problem you’ll solve for others

2) Figure out who needs that problem solved 

3) Research the pain points, goals, and needs that go through the minds of the people who need that problem solved

Can you see why most people fail within 120 days of starting a business they may have willy-nilly moved forward with?

I’m willing to bet that 90% or more of the network marketers, affiliate marketers, and high-ticket coaches can’t adequately articulate:

  • The problem they solve
  • Who they solve it for
  • What’s going through the minds of those prospects

And, it’s so unfortunate

Because if you just take a little time to slow down for a bit to understand these marketing principles, you can then quickly (relatively speaking) start making progress with making money. 

Don’t allow poor online marketing and a lack of online search visibility to become your downfall like it does for the 90% of online marketers failing within 120 days of starting a business. 

To avoid this problem, know that from a marketing perspective, there are two main ways to get traffic, leads, and sales. 

  • Organic
  • Paid

Unless you have $1000 or more per month to throw at paid ads to gather data…

…while expecting zero return on investment for a few months…

…then I recommend starting out organically

  • Start a blog. 
  • Start a YouTube channel.
  • Start one other social media channel.

The blog and YouTube channel will inherently teach you the basics of online search visibility. 

Both of those channels and your social channel combine to help you test your messaging and become excellent at online marketing. 

I titled this Memo:

“If I wanted QUICK passive income, I’d do this…”

If I was starting from scratch, I wouldn’t think about passive income at all. 

I’d think long-term…like two to three years from now (at least). 

I’d work my butt off to set up online systems that turn into passive income. 

I’d go in with an understanding that building a business takes time. 

It takes upfront target market research. 

It requires new skills around:

Yes, your online funnel will eventually make money passively. 

For example, your blog posts or YouTube videos will continue to bring you traffic and leads once they’re ranking well. 

The leads and sales come in when you take breaks from working. 

But if I truly want passive income, I would realize that 100% passive income doesn’t exist.You continually need to update your blog, YouTube channel, social media accounts, funnel pages, and email sequences as the market changes and new competitors come on the scene. 

It’s never 100% passive. 

Now, I know someone might say, “Hey, Matt, I know a guy who sold his business and now he doesn’t work a day in his life.”

Sure, I get that. 

But go ask that person about the tremendous amount of effort it took him to build a business someone actually wanted to buy for millions of dollars. 

I’m talking about the initial stages of your business…

…and the dangers of thinking about passive income before you’ve done anything substantial with that business. 

That’s the danger I’m warning about here. 

There is danger in the desire for shortcuts to riches. 

And looking for shortcuts to riches usually results in, unfortunately, hurting someone, meaning the very people your business is set up to help: your customers. 

Cutting corners impedes our ability to make solid long-term decisions. 

I think each of us should choose to run our businesses without seeking easy riches. 

Instead, commit to selecting your business based on a deep desire to create true transformation for your customers. 

It’s similar to the caring nature we learn Jesus has in John 11, verses 33 through 37.

My prayer today is that my ideas here help you in a meaningful way. 

And if you’d like to explore other ways I can help you, take a look at the Attraction Marketing Formula if you’re a network marketer

If you’re working on an affiliate marketing business, take a look at our 15-day challenge

And if you’re either of those, along with being a high-ticket course creator or coach, look at my DFY content services, as they will speed up your results with either my Business Audit and/or Content Roadmap.

See you in my next Memo with more exploration into the skills that will drive more leads and sales for your business. 

Helping you build it big,
Matt

P.S. Here’s how I can help you grow your business:

The Fastest Way To Use Affiliate Marketing: The Insider’s Guide

The Fastest Way To Grow a Team to 1000+: The “Secret” Leader’s Playbook

The Fastest Way To Master Social MediaThe 15-Second Method

The Fastest Way To Produce Content: I’ll Do It For You

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