25 great passive income ideas for boosting your finances

Britain has become a nation of side hustlers. In fact, research has shown that a fifth of adults are working to make extra money on top of their primary source of income, with one in six people earning more than £1,000 a month from these side ventures. What’s more, many of these ventures generate a passive income.

It goes without saying that a parallel revenue stream can make a crucial difference in rocky economic times. And, if you’re reluctant to delve into small business ideas that require a lot of ongoing attention, coming up with a way to generate a passive income can be an appealing prospect.

Passive income ideas are paths to secondary revenue which don’t require your continuous involvement. Unlike a regular job or business, where you’re effectively exchanging your time for money, passive income streams will come in even when you’re off doing something else.

This means you can secure extra money even while you’re at your primary job, or spending quality time with friends and family. But this isn’t money for nothing: even sources of income which qualify as “passive” will require some input and work on your part.

You’ll have to put in the upfront effort to create and promote your business idea. You’ll also have to make time to maintain it, depending on the nature of the work.

So, if your interest has been piqued and you’re wondering how to make passive income a part of your life, read on for some inspiring ideas and more details on getting started.

25 passive income ideas to have on your radar

One thing that our passive income ideas have in common is that they’re all business ideas you can do from home. That similarity aside, they do cover a diverse range of categories, and some will naturally strike more of a chord with you than others.

Read through them all, or jump straight to the categories which appeal the most:

• Online sales

• Investing

• Social media

• Rental services

• Creative services

1. Online sales

Research shows that ecommerce businesses in the UK will be generating more than £221 billion in combined revenue by 2025. By selling goods and services online, you can not only tap into this ever-growing market, but also set up passive income streams to supplement your primary job. 

The trick is to choose an ecommerce model that requires as little ongoing input from you as possible. Here are some possibilities to consider.

Get into dropshipping

Dropshipping should be on your radar if you’re considering how to create a passive income through ecommerce. The concept is straightforward: you create an online store listing the products you want to sell, and any orders that come through will be handled by the suppliers of the products.

This means you won’t have to risk any of your own money by buying and storing stock ahead of time, and you won’t have to worry about posting the items to your customers. In other words, your ecommerce store will practically run itself.

You will have to put in some initial effort to create a successful store. It’s important to pinpoint items that are in high demand, and it’s worth doing plenty of research on social media and through tools like Google Trends.

You’ll also have to market your products carefully, perhaps utilising platforms like Instagram, TikTok and Twitter. Establishing partnerships with reliable suppliers is another must, whether that’s by reaching out to companies directly or drawing on established dropshipping networks like SaleHoo.

Once you’ve laid this groundwork, your business will hopefully be all set to generate a profit with minimal hassle.

Sell print-on-demand fashion

The dropshipping model can be adapted to allow you to create and sell your own, bespoke fashion line without the need for daily, hands-on work.

Online companies like Printify and Printful provide a wide range of blank clothes, from skirts and dresses to t-shirts and tank tops. All you have to do is select which items you’d like to sell, then upload the designs you’d like to have printed or embroidered onto these garments.

Not an artist yourself? You can licence images from sites like Shutterstock, or hire a graphic designer from platforms like Fiverr. After you’ve listed your line on your online store, the print-on-demand companies will create, pack and dispatch the products whenever the orders come in.

While this ranks among the best ideas for passive income in the ecommerce sector, success will rest on putting the word out. 

It’s well worth taking professional-grade photos of your clothes to show off on sites like Instagram and Pinterest. Bold, irreverent designs providing a real alternative to what people typically see in high street shops can also help you stand out.

Create your own line of homeware items

The bespoke dropshipping model can also be adapted to let you generate a passive income by selling homeware products. Once again, sites like Printify and Printful make the process straightforward, providing a wide portfolio of plain products you can customise with your own designs.

These include:

• Mugs and glassware

• Coasters

• Canvases

• Blankets and pillows

• Candles

• Towels

• Pet products

You can create or commission unique designs, upload them through the print-on-demand site, then list them on your online store. Orders will be managed and dispatched by the site, so you won’t have to be involved in the selling process itself.

Marketing your online store is a must, so keep up with social media hashtags relevant to your product line and maintain an active presence on the top platforms.

Sell your own beauty products

Sites such as Hera Beauty and Selfnamed make it possible to customise your own range of beauty products with very little hassle.

There are lots of products to choose from, including shampoos and shower gels, moisturisers, face masks, and even beard balms. You can pick out what you’d like to offer, design your own labels, and have your customised line of cruelty-free cosmetics sent to your door. 

This isn’t quite the same as dropshipping, as you’ll need to buy and store the items, and dispatch them to customers yourself. But once you’ve put in the initial effort of sourcing the items and setting up an online store, you can generally let the business tick over on its own – as long as you set aside a bit of time to market items and engage with customers on social media.

As initial financial outlay is required, you should order small batches of items to start with. Another thing to keep in mind is that you’ll have to notify the Office for Product Safety and Standards (OPSS) when selling cosmetics.

Sell online courses

If you’d like to monetise your knowledge of particular fields without committing to direct, one-to-one teaching, then selling online courses could be a great route for you.

Whether you want to teach courses on watercolour painting, digital music production, animation, social media marketing, pet care or anything else, you’ll be able to curate your own lessons on specialist course platforms like Udemy and Skillshare.

The more people watch your courses, the more you’ll be paid. And, since the courses are pre-recorded, it’s possible to earn passive income streams from lessons many months and years after they were filmed, without doing any extra work whatsoever.

Both Skillshare and Udemy have support teams to help guide new teachers on how to create the most effective and commercially viable courses. 

Providing you can invest in tools such as a high-quality webcam and microphone, and providing you can communicate your expertise in a warm, engaging way, this can be a great way to supplement your income.

Sell photos

If you’re a keen photographer, you can turn your hobby into a passive income source. Popular online image libraries like Getty Images and Shutterstock pay many millions of pounds every year to freelancers who upload their photos, and you don’t need formal qualifications to become a supplier.

As long as your photos are of a high enough quality – and chances are you’ll need to invest in a digital camera – you can get accepted. You’ll then be paid royalties when your images are licensed by the image library’s clients, which can include advertising companies and large companies.

No further work will be required on your part after the photos are uploaded, which is why this is on our list of the best passive income ideas in the UK.

That said, you can always go the extra mile by boosting your reputation as a photographer on social media – whether that’s by featuring some of your work on an Instagram page, or writing about photography on LinkedIn.

2. Investing

One way to create a passive income in a way which requires the very least direct input from you, is to invest your money. One in three people in the UK are investors, and thanks to today’s user-friendly apps, the barriers to entry are lower than ever, so even complete newbies can get involved. 

Let’s consider some of the ways your money can potentially make money.

Invest in shares

You might choose to invest in shares, which means buying small stakes in companies. If the companies thrive, your shares will increase in value, and can eventually be sold to generate a passive profit. You may also receive dividend payments from the companies.

Of course, there’s always the possibility that your shares decrease in value, so investing in shares comes with an inherent risk. As with spending money on setting up a small business, you should only ever invest an amount you can afford to lose.

Another rule of thumb is that investing should preferably be a long-term endeavour, like any business. Keeping shares for a longer period will give you a better chance of riding out any dips in the market, and hopefully see your shares accrue value. The UK’s Financial Conduct Authority recommends holding onto shares for at least five years.

Apps such as Freetrade and eToro allow you to browse stock markets and buy and sell shares on your phone or computer with very little hassle. Such apps also feature in-depth guides to investing for beginners, underscoring the essential things you need to know.

Invest in funds

Rather than investing in individual companies through the purchase of shares, you can also choose to invest in funds. These are bundles of shares in many different companies, which means you’ll quickly have a more diverse portfolio.

The UK’s Financial Conduct Authority strongly recommends diverse portfolios, as they mean investors won’t be putting all their eggs in one basket. If some of your shares fall in value, others may go up, balancing things out.

There are a number of different fund types you can explore, and they can be bought and sold like regular shares on apps like Freetrade.

As with any kind of investment, remember to only spend what you can afford to lose. It’s also worth having a read of the Financial Conduct Authority’s guide to investment for beginners.

Back startups

You don’t need to be a super-wealthy investor to invest in business startups. Crowdfunding platforms like Crowdcube and Seedrs lay out a huge range of companies which are actively pitching for investors, allowing you to browse at your leisure.

These can include everything from energy drink manufacturers to drone innovators to up-and-coming finance apps. Becoming this type of investor can be more satisfying than trading on the stock market, as you can handpick startups, chat to entrepreneurs directly, and forge a personal connection with the businesses.

Both Crowdcube and Seedrs allow you to buy shares in startups for as little as £10, so you certainly don’t need to invest a lot of money to get started as a business backer.

With luck, you may see your investments turn into a passive income if the businesses in question do well.

Invest in vending machines and snack boxes

Vending machines and snack display boxes (such as those seen in shops and cafes) are so ingrained in our culture, and so much part of the unremarkable furniture of day to day life, that you might not stop to consider them as a business opportunity.

In fact, the vending world is a lucrative one. According to the industry’s trade body, the Automatic Vending Association, it boasts an annual UK turnover of around £1.5 billion.

Since vending machines and boxes don’t require your personal attendance, they’re ideally suited to anyone looking to forge an ongoing source of passive income.

Sites like Franchise Direct and Franchise Local list vending machine and snack box franchise opportunities that are currently available, so you can see exactly what the terms and conditions are for each arrangement.

There will be an initial franchise fee, so this is a business concept that will only suit those with some capital to hand. The amount can be anything from around £3,700 upwards, and may include training, pre-arranged site locations, stock, and even branded uniforms to wear when you make weekly trips to replenish stock and collect the money from sites.

3. Social media

Creating a lucrative social media presence does of course require investing some time and effort. But once you build up enough of a followership, you can find that revenue will regularly roll in even when you aren’t being active on your chosen platforms. 

Here’s a quick run through of how some of the leading social media sites can provide revenues for content creators.

Become an Instagram influencer

There are a few main ways you can make money as an Instagram influencer. One is to gain paid corporate sponsorship, from cosmetics firms, travel companies, tech startups, and the like.

The other is to attach affiliate links to your Instagram posts. You’ll then be paid when your followers click through these links to make purchases at third-party sites.

In either case, you’ll be generating an income even if you take days or weeks off from posting. And, since becoming a successful influencer is based on posting on something you’re truly passionate about, the process of building up a followership should ideally feel more like an enjoyable hobby than a chore.

Whether you want to focus on food, fashion, travel, gardening, or any other subject, make sure it’s something that really lights a fire inside you. It’s also important to follow others in your niche and engage with followers to boost your visibility and encourage return visits.

Take high quality photos and videos, accompany the images with detailed, chatty write-ups, and be patient. With time and effort, you can turn a fun pastime into a passive income stream.

Create a YouTube channel

Creating quality YouTube videos on a specific niche – whether that’s gadget reviews, cooking, DIY tips, or almost anything else – can potentially bring in income for years after the content was originally posted. 

Accessing the site’s monetisation features will require meeting a threshold of popularity on the channel. If you attain 500 subscribers and clock up more than 3,000 public watch hours in the past 12 months, you can apply to join theYouTube Partner Programme.

This will let you generate passive income through:

• Channel memberships, with followers paying you monthly to access members-only content on your channel

• Ecommerce, with the ability to link an online store to your channel

What’s more, you can also gain an extra passive income from YouTube ads running on your videos if you pass the threshold of 1,000 subscribers and 4,000 public watch hours. Bear in mind that, on top of YouTube’s in-house monetisation tools, you can also attach Patreon links to your videos so followers can send you money that way.

Become a TikToker

Attracting more than a billion active users a month, TikTok can – like YouTube – be turned into a source of passive income if you make an initial effort to build up followers.

Creating short, quirky, colourful videos with striking soundtracks and trending hashtags is key to standing out in the fast-paced world of TikTok. It can take some time to hone your skills and find a formula that works for you.

The site has traditionally helped finance popular TikTokers through the Creator Fund, which pays eligible users depending on how much engagement their content gets. The parameters of the fund are liable to change, so it’s worth checking what the latest UK requirements and possibilities are. 

If you have at least 10,000 followers and have posted more than three videos in the past month, you may also be eligible for the Series feature. This lets you lock some of your content behind a paywall, and is a great tool if you’re looking to make money from old content well into the future.

Become a Twitch streamer

It’s not surprising that streaming videos on Twitch ranks among the most popular business ideas from home. After all, it allows users to turn passions – such as playing video games, playing music, or even doing arts and crafts – into serious moneymakers.

Streaming is by its very nature a live process requiring direct, real-time effort. But if you’re doing something you’d do for fun anyway, such as gaming, then you’ll effectively be generating revenue in a passive way.  Remember as well that followers can watch old, archived streams, no matter what you’re up to.

By streaming at least 500 hours in 30 days and racking up more than 50 followers, you can become a Twitch Affiliate. This will let you receive digital currency known as “bits” from followers, get a share of revenue from ads running on your streams, and offer paid subscriptions to your channel.

You can also supplement the in-built Twitch income streams by putting up links to fan payment platforms like Patreon and Ko-fi. If you have an enthusiastic base of followers, you may find that money will come in consistently even if you take breaks from streaming.

4. Rental services

If you own property, you can turn it into a passive income stream by putting in a bit of prep work online. The spare room in your home may be the obvious choice, but there are some other ways you monetise space going spare.

Read on for some great passive income ideas which practically run themselves.

List a room on Airbnb

If you’re happy to have visitors stay in your home, listing your spare room on an online platform like Airbnb can be a very low effort way to make money on the side.

The key to success is presenting your room in the best possible light. It’s worth hiring a professional photographer from a site like Fiverr to take excellent photos from the most flattering angles. Top-notch photos can boost your bookings and earnings by 20%.

You should also take time to write a detailed, and friendly, description for your listing. Presenting yourself as a warm, welcoming, thoughtful host is just as important as running through the perks of your property.

While business may be slow at first, gaining positive reviews for your listing will hopefully draw in more and more visitors over time. Indeed, reviews are crucial for turning this into a reliable passive income revenue stream, so be sure to ask visitors to leave their thoughts.

Rent out your car

While it doesn’t get as much media attention as Airbnb-style property rentals, car sharing is very much a thing in the UK, with a number of online marketplaces available.

Examples include Hiyacar, Getaround and Turo. The principle is simple: you list your vehicle on the marketplace, set out the dates and times it will be available, and then wait for members of the public to book its use.

Your vehicle will have to meet the minimum requirements of the marketplace in question, and you should confirm what kind of insurance is included as part of their service.

You may not even have to meet customers to exchange keys. For example, Getaround Connect and Hiyacar QuickStart are systems where a special box is installed in your vehicle. Verified renters can then use phone apps to unlock your vehicle without any involvement from you.

This makes renting out your vehicle an even more passive and hassle-free experience.

Rent out storage space

What’s known as “peer-to-peer storage” is another way you can make a passive income with minimal fuss. You can think of it as Airbnb for clutter, and it simply involves renting out space to people who need to store their stuff.

The “stuff” in question can be pretty much anything, from furniture to sports equipment to books to clothing. If you have spare garage space, an empty shed, or a vacant basement, attic or bedroom, you can turn the area into a casual moneyspinner.

A few different companies currently operate marketplaces for peer-to-peer storage – these include Stashbee and Storemates. You just have to sign up and list your space, along with a photo and description.

Then, you just have to wait until people who need space get in contact, and you can enjoy a bit of extra income without having to do very much at all.

Rent out parking space

Yet another way you can monetise property is to rent out parking space. This works in much the same way as the other methods we’ve already mentioned: you simply choose an online marketplace, list your parking space, and await renters.

Prominent sites connecting vehicle owners with parking space providers include JustPark and YourParkingSpace. They give you the freedom to rent out virtually any kind of parking space, whether it’s the driveway to your home, a garage, or even a commercial parking space (if you are permitted to do so).

Bear in mind that listings with photos receive on average three times more bookings, so be sure you take the most attractive snaps you can. Preferably, a close up shot of the space, and one further away so drivers will know what the general area looks like.

You should also price your space competitively, so check out what other spaces in or near your postcode are going for. Generally speaking, spaces in city centres, or near airports and train stations, tend to go for the highest prices.

5. Creative services

Are you musically minded? Or perhaps a natural born designer? There are numerous ways you can turn your creative talents into passive income sources, providing you’re happy to put some work in to start with.

After laying the groundwork, you can sit back and wait for customers to purchase your creations into the future.

Sell ready-made designs

If you’re a skilled designer but don’t have the time to take on specific client projects, you can sell your handiwork on marketplace sites like Creative Market, Etsy and Shutterstock.

There’s widespread demand for all kinds of ready-made imagery which people might want to purchase and incorporate into their own websites and marketing materials. These include:

• Distinctive fonts

• Illustrations, such as of food items, animals and sports

• WordPress themes

• Wallpapers and other patterns

The same designs can be sold at different price points, depending on whether customers want them for private or commercial usage. Bold, innovative designs will enable you to stand apart from the other designers, so this is one business area where pushing the envelope can pay dividends.

Promoting your work on sites like Instagram and Twitter can also help draw attention to your wares on the various marketplace sites.

Launch a no-code app

Gone are the days where creating a mobile app was the preserve of seasoned techies and developers. Now, thanks to the magic of no-code builders, creating your own app is very straightforward.

No-code app creation platforms like Appy Pie and Bubble have highly user-friendly interfaces which can be used to build virtually any kind of app you like. It’s simply a matter of picking a template, dragging and dropping images, and inserting menus and other functions as you see fit.

From creating an AI-powered ecommerce app selling dropshipped items, to developing your very own dating app, it’s all possible without any programming skills whatsoever.

The platforms make it simple to customise and experiment with your app until the design and functionality meets your approval.

Once published on Google Play and/or the App Store, a great app can bring in a passive income in a number of ways. You might run ads on your app, offer paid subscriptions to unlock extra features, or charge a fee for users to download the app.

Create your own podcast

The podcast phenomenon is no flash in the pan thing, with research showing that the number of listeners in the UK alone is set to reach around 28 million by 2026. 

Creating your own podcast can lead to passive income from sponsorships, affiliate links and direct payments through Patreon and similar platforms that allow fans to support content creators.

Recording a podcast will require some investment in equipment like a quality microphone, a shock mount, and soundproof headphones. You can also utilise podcast creation and hosting platforms like Libsyn, which take you through making and distributing your show on the likes of Spotify and Apple Podcasts.

When planning and recording your podcast, you’ll need to:

• Pick the right subject – it should be something you have a genuine interest in, because the best podcasts are built on the passion of their creators

• Take your time when writing the scripts – unless your podcast is freeform in style, involving and you your co-hosts chatting and improvising, you’ll want to ensure each episode has a tight, snappy, compelling script

• Add the right soundtrack – use royalty-free music libraries like Bensound and AudioJungle to source a soundtrack that will suit your podcast, whether you’re after a quirky indie theme or something as dramatic as a Hans Zimmer score

• Add cover art – having eye-catching artwork for your podcast listing will help catch people’s attention on podcast directories, so if you’re not a skilled designer you should reach out to freelancers on sites like Fiverr

Launch an affiliate marketing site 

Another way to make extra money on the side is to launch an affiliate marketing site. In other words, having a website where your content is scattered with affiliate links which will generate money when your readers click through and/or make purchases.

One approach is to write a blog on a popular topic, whether it’s pop culture, tech, cooking, money saving tips, or pretty much anything else that takes your fancy. If you’re able to invest more time, you can launch a product review site focused on a niche you’re interested in.

If, for example, you create a bakery blog showcasing your latest delicious creations, you can embed it with affiliate links to food processors, gourmet ingredients, designer aprons, and more.

You can contact relevant companies directly to enquire about affiliate partnerships, or make use of established affiliate programmes like Amazon Associates and ClickBank.

A blog or review site will require more regular maintenance and updating compared to other ideas on our list. You’ll likely have to update it at least once a week to boost your search engine visibility and encourage return visitors. That said, you still stand to make a passive income during the stretches of time between updates.

Publish an ebook

Publishing a book used to be a pretty tough process, requiring a budding writer to gain the approval and support of literary agents and publishers. These days, however, you can self-publish and sell your book online with relative ease.

Of course, this isn’t a business you can launch right away. Writing a book will take time – months, even years. So you should think of this as a labour of love, or at least an enjoyable hobby, rather than as a short term moneymaker.

Once you’re happy with your manuscript, you can have it professionally edited by contacting a freelancer on a site like Fiverr or Upwork. You can also seek out specialist book publishing services online which will format your manuscript to be sold as an ebook.

You can then list your ebook on leading ebookstores like Amazon and Kobo. For the former, you’ll need to utilise the Kindle Direct Publishing platform, while Kobo has a similar system called Kobo Writing Life.

Once your book is listed, you should try to invest some time to promote your work – create a Twitter feed to market yourself as a writer, and reach out to book bloggers and “BookTokers” to offer free ebooks and interviews.

Write a Substack

Eminent authors, leading historians and trailblazing journalists have all migrated to Substack in recent years, and the platform has also allowed newcomers to make money from their writing.

The principle is straightforward: you can make your articles and stories available on your Substack page without having to seek the approval of editors and publishers. You can write about a specialist subject, publish short stories, serialise a novel – the list is endless.

Once you’ve gathered some subscribers, you can choose to monetise your page by charging a subscription fee. This can be as little as $5 a month, but it certainly all adds up if you manage to get a good number of people signing up.

Getting to that stage will require effort, however. Your initial emphasis should be on creating the most compelling written content possible, so that you gain a reputation and attract readers.

And, while this does count as a passive source of income since your revenue isn’t directly connected to how long you spend on your Substack, you will need to add more articles as frequently as possible to keep your subscribers happy.

Sell royalty-free music

The global stock music industry is booming, and research suggests the market will be valued at over $2 billion by 2028. 

Demand is driven by all kinds of users, from individuals looking for music for their social media posts, to filmmakers looking to soundtrack their movies, to corporations and advertising companies seeking catchy tunes for their marketing content.

If you’re a musician, you can make your work available for licensing on stock music libraries like Audiosocket, AudioJungle and Pond5. The libraries have their own, specific arrangements when it comes to royalty payments, and it’s worth comparing and contrasting how they work.

There’s scope to sell all kinds of music, from full-scale songs with vocals to background music-style tracks, not to mention specific sound effects. You can choose to list your work on multiple libraries, although you’ll typically be able to earn a higher royalty percentage if you agree to post exclusively to one site.

The key to success is to build up as large a portfolio as possible. Then, if even a small fraction of your work is licensed, it will translate into a solid passive income stream over time.

3 reasons to create passive income streams

There’s no shortcut to securing a passive income. But here are a handful of reasons why you might like to put in the work to make it happen.

1. It can bring greater financial stability and freedom

You might be looking to save up funds for a special purpose, for example buying a car or paying off a loan. You might want to be able to generate income while travelling as a digital nomad. Or, you might simply want to supplement your primary salary.

Whatever your motivation, having an extra source of income can make a real difference to your everyday life, and this is often reason enough to explore passive income ideas.

2. It can bring a real sense of satisfaction

Even the best ideas for passive income can take weeks, months or even longer to start bringing in money in a truly “passive” way. But once you reach that tipping point where money starts to appear in your business account without your continuous involvement, almost like magic, it can feel uniquely satisfying.

3. You can more easily diversify

Many ideas for a second income require so much direct input that you wouldn’t realistically be able to pursue more than one at any given time. But, since passive income businesses by their very nature will require less active attention, you’ll find it easier to diversify your streams.

Once you’ve got one passive income idea up and running with money starting to come in, you may comfortably be able to turn your attention to another idea and set that one up too. 

In fact, depending on your circumstances, you might have multiple passive income streams generating extra cash simultaneously.

How to create a passive income business

So, how do you go about actually setting up a new, passive income stream? We’ve broken down the process into some key steps. 

Step 1: Choose your passive income idea

There’s a whole host of smart passive income ideas to choose from, with 25 of the best listed earlier in this guide. Picking out the right one for you is a crucial, foundational step, and there are two key points to consider when weighing up your options.

Which passive income ideas really excite me?

Passive income businesses may be popularly associated with the phrase “make money while you sleep”, but you will have to put serious work in before getting to that stage. That’s why it’s essential you choose an idea which genuinely excites you. 

If it’s an idea that sounds viable on paper, but which you don’t have a gut-level affinity for, then you’ll probably struggle to stay motivated during the early stages when there’s no money coming in.

On the other hand, by choosing an idea that sparks real interest, you’ll be happy to devote spare hours to making it come true.

Is the idea appropriate for my experience and skillset?

Unless you have the time and money to invest in retraining, you may find it easiest to choose a business idea which fits your existing skillset and professional experience. Not only will this allow you to get your business off and running more quickly and cheaply, but you’ll also naturally feel more comfortable doing so.

The good news is that it’s easier than ever to back up your own skills with convenient, cost-effective software and hardware. From a free online business account to multiple ways to quickly take online payments, these can make all the difference when you’re launching your side hustle.

Step 2: Do market research

Taking the time to do some market research can dramatically improve your chance of success, and the internet makes it relatively easy to get the information you need. There are a number of things you’ll want to investigate:

Your competitors  

Some diligent googling can map out the landscape of competitors. If you’re launching a dropshipping store, what other ecommerce sites currently sell the same kinds of products? If you’re planning to create a podcast, what are currently the most popular shows in the same category?

Pay close attention to how they present their products and services, what their pricing structure is, and where they might fall short. This will allow you to make informed decisions on how you can differentiate your own offering and hopefully edge out the competition.

Your target market

Depending on the kind of business you’re creating, it may be important to find out exactly what your potential customers are thinking.

Social media is a valuable resource – check out Twitter and Instagram hashtags related to your business to see what the latest chatter is. Which kinds of products and services are gaining praise? What shortcomings do customers complain about? Be sure to check the Google and Trustpilot reviews of competitors too.

Remember that you can carry on doing market research after your business launches. If, say, you have an online store, you can offer discounts to customers who provide feedback via email. 

Or, if you’re running a Substack page, you can directly engage with followers to chat to them about what kinds of content they’d like to see in the future.

Step 3: Write a business plan

Many people think of business plans in the context of applying for bank loans or pitching for investment. Actually, though, it’s well worth writing out a business plan even if nobody else will ever see it.

That’s because it can serve as a roadmap for your passive income business idea, clarifying the shape of the business, how it will function, and the revenue timeline. A business plan should feature:

• An executive summary of your business, detailing your product or service and how it will operate

• Details of your competitors and target market, distilling any market research you’ve done already

• Details of your costings, including how much you’ll spend on equipment if required

• Details of your marketing strategy – how often you plan to post on the social media platforms most relevant to your business idea, and what kinds of posts you’ll create

• Your sales forecasts, outlining when you expect to receive income and when you expect the business to operate in a passive way

• An inventory of software and hardware you intend to use, perhaps including tools for creating invoices and an online business account   

Step 4: Choose your legal business structure

There are a couple of ways you can choose to run a passive income business, legally speaking.

The simplest legal structure is that of a sole trader. Operating this way means that you and your business are legally indistinguishable, and any money you generate is automatically yours to keep – after you factor in tax. There’s little in the way of official paperwork, with the main requirement being to register with HMRC for tax purposes.

An alternative approach is setting up a limited company. This will establish your business as its own, separate entity which you must register with Companies House. There are more rigorous accounting requirements connected to limited companies, and you’ll have to pay corporation tax on your business profits.

While it’s a more complicated process, having a limited company is less financially risky as – unlike sole traders – you won’t be personally liable for any debts or losses accrued by the business.