To embark on the journey towards location independence, many nomads start by utilizing their skills to earn money through freelancing or establishing a service business. This is often considered the easiest route to achieve a full-time, location independent income. However, it is natural to aspire for passive income online – the idea of earning money while relaxing on a beach in Thailand is undeniably appealing.
I strongly believe in being proactive and putting in the necessary effort to succeed in a competitive market. However, the whole purpose of this lifestyle is to avoid being tied to a computer all day. Therefore, it is crucial to ensure that your automation strategies are effective. This is the key to generating the desired income without sacrificing your time freedom. After all, the ultimate goal is to have both time and location freedom. From personal experience, I can attest that achieving location independence only to end up working tirelessly to maintain it is far from enjoyable.
In a previous post, I discussed the distinction between passive and active income in the context of location independence. I recommend checking it out as it provides a good foundation for this discussion.
Now, let’s delve into the specifics of various methods that myself and other nomads employ to create fully passive, hands-free, autopilot income streams.
The Difference Between “Passive” and “Automated”
Before we delve into the various income models, it’s important to understand the terms used. Passive income refers to earnings that come in regularly from an asset, even if you are not actively working on it. While you may need to put in some effort to grow the asset, the key point is that it will continue to generate money without constant involvement. On the other hand, an automated model is a business that typically requires daily work and effort to maintain, but has been set on autopilot through the use of software, outsourcers/employees, or a combination of both.
It’s worth noting that some of the models discussed below can easily turn into full-time jobs if not set up with automation in mind. These models are not inherently passive. To help you gauge the level of automation each model can achieve, I have included a rough guide on their ease of reaching full automation.
In most cases, automation means making these models partially passive. For example, thanks to your automation system, you may only need to spend an hour a day working instead of four hours a day.
Now that we have clarified these terms, let’s dive right into the income models.
1. SEO + Adsense + Affiliate Products
This method of generating passive income online is considered to be quite traditional. Here’s how it works:
- Generating traffic to a website is crucial for its success, and one of the main sources of traffic is through rankings on search engines like Google. This type of traffic is known as organic traffic. There are two ways to achieve these rankings: the natural way, which requires hard work and effort, or the riskier but easier way through the use of a private blog network. A website that aims to attract organic traffic usually includes content articles focused on specific keywords and provides valuable and high-quality information to searchers.
- Money can be generated by incorporating zero-maintenance monetization into a website. A popular example of this is Google Adsense, where you can easily add a code to your website and have Google display ads from its advertisers. You will then earn a percentage of the revenue for every click on these ads. Another way to earn money is through affiliate products. By directing traffic to vendors using a unique tracking ID, you can receive a commission for every sale that is generated.
One of these websites requires a significant investment of time (or money, if you choose to outsource it) for its construction. However, once it is established and operational, it becomes one of the rare sources of completely passive income that can be earned online, without the need for complex automation systems.
Please take note that this particular model can also be utilized for your own products, such as ebooks. It is important to mention that your own products typically yield higher profits compared to affiliate products and are even more profitable than Adsense or other forms of advertising.
The primary question to consider is whether you have the ability to develop a product that surpasses the quality of the top affiliate product you could potentially endorse. If this is not the case, it may be more advantageous for you to save time by focusing on becoming an affiliate rather than creating your own product. It is worth noting that utilizing an affiliate product to gauge market response and subsequently developing your own product based on positive results is also a viable approach.
100% Automation Complexity Level: Simple
2. Facebook Ads + Dropshipping
If you are familiar with Tim Ferriss’s book “The Four Hour Work Week,” then you are likely aware of the concept of dropshipping.
In dropshipping, you receive orders for physical products, but you do not keep an inventory. Instead, you only purchase the items from the supplier once a customer has placed an order. The supplier then handles the shipping process for you.
In this case, it works like this:
- Running a targeted Facebook ad campaign involves directing visitors to a specific landing page. This landing page can either be an order page on an e-commerce site where customers can purchase your product, or it can be a squeeze page designed to gather their email address for future marketing efforts (more information on email lists will be provided later in this post).
- Customers can easily place their orders through your website, and the dropshipper will handle the order fulfillment process on your behalf. The advantage of this system is that you don’t need to invest in any inventory upfront, which minimizes the risk of purchasing excess stock that may not be sold. However, it’s important to note that there is a potential risk involved when using paid traffic. If you are unable to convert enough traffic or if your profit margins are not high enough, you may end up losing money. This is in contrast to the organic traffic model mentioned earlier, where the majority of your earnings from Adsense or affiliate commissions are considered pure profit.
A crucial aspect of achieving full automation in a business lies in effectively managing the customer service aspect, as well as acquiring the requisite advertising skills and knowledge to ensure a successful campaign.
100% Automation Complexity Level: Medium
3. Partnerships + Outsourced Services + Business Process Automation
One alternative is to offer a service, like SEO, social media marketing, web design, or video creation.
- In order to expand your business, it is beneficial to establish partnerships with other professionals who provide services that complement yours. These partners should not be direct competitors, but rather individuals such as web developers or logo designers who cater to a similar clientele. By collaborating with these professionals, you can offer a more comprehensive solution to your customers. Additionally, these partners will receive a commission for every sale they refer to you, ensuring that you only incur expenses when a sale is successfully made.
- When creating a video business, it is important to assemble a team of freelancers or outsourced employees who will be responsible for carrying out the actual service. In the case of a video business, this team may include a scriptwriter, multiple voiceover artists, and an animator.
- One approach to streamlining your business is by utilizing virtual assistants and software to automate various tasks. By doing so, you can minimize your personal involvement in every aspect of the process, ranging from client communication to product delivery and customer support.
Based on my personal experience, achieving full automation in this type of business is extremely challenging. While you can employ assistants and software to automate significant portions of the business, it is important to note that it will never be completely passive. Vigilance is required to ensure that outsourcers are fulfilling their responsibilities and that automation systems are functioning correctly.
Nevertheless, it is possible to rapidly increase monthly revenue by scaling this model. Therefore, if your goal is to earn a larger income and are willing to dedicate more time to work, this is a viable option compared to a relatively smaller income with no ongoing maintenance.
100% Automation Complexity Level: Hard (heavy reliance on human resources input)
4. Affiliates + Paid Ads + Recurring Subscription Products
One way to generate a consistent online income is by developing a recurring subscription product. This can be achieved through various methods, such as implementing a SaaS (software as a service) model, operating a content membership website, or managing a dating site. Each of these approaches offers the potential for substantial profits and the opportunity to establish a virtually automated income stream.
- Creating a membership site that charges a monthly subscription fee is now more cost-effective than ever. By purchasing a pre-designed WordPress theme, you can easily set up a site with all the necessary features. However, if you require additional custom elements, the expenses may increase.
- To attract sign-ups, you utilize paid advertising platforms like Facebook Ads and Google Adwords. This necessitates a certain level of expertise in advertising to ensure that your campaigns are effectively optimized and generate profits. However, it’s important to note that utilizing paid ads also carries a certain level of risk, as improper management can result in financial losses.
- Another way to increase traffic to your website is by utilizing affiliates who can drive traffic and earn a commission for any sales they generate. While this method may be less risky than advertising, it may result in higher costs per-sale. However, a recurring model can be beneficial as it allows you to attract affiliates by offering them lifetime monthly recurring commissions. This can be an attractive opportunity for affiliates looking to build their own recurring income.
- Outsourcing customer support can be a complex task, especially in this particular scenario. It is crucial to maintain oversight in order to ensure that your customers are receiving satisfactory treatment. Failure to do so may result in customers leaving and discontinuing their monthly payments. This is of utmost importance, especially if you are investing in paid ads. It is important to note that customers may not become profitable until several months into their membership, depending on your acquisition costs and profit margins.
100% Automation Complexity Level: Medium to Hard (depending on product complexity, type and number of subscribers)
Turbocharging Results: Email Lists + Autoresponders
Adding an email list and autoresponder series component can significantly enhance the effectiveness of any of the aforementioned methods to boost conversion rates.
In the competitive landscape of many markets, having an email list is crucial for profitable competition. Without one, your competitors are likely to convert at a higher rate, achieve greater profitability, and pay less for advertising compared to you.
List building and email marketing theory revolve around the idea of providing valuable free content to potential customers before asking them to make a purchase. This approach increases the likelihood of long-term conversion.
Improved conversion rates result in reduced time and expenditure on marketing efforts to achieve the same outcomes. They can also determine whether your paid advertising campaigns yield profits or losses.
Furthermore, high conversion rates make it easier to attract partners who can promote your products on your behalf.
Autoresponder series enable the automation of email lists. Email marketing platforms, such as Aweber, allow you to schedule automatic emails to be sent to new subscribers at designated times.
For instance, you can create a free email course that delivers a new tip to subscribers every day for a week. Within this autoresponder series, you can include links to a paid offer on the third and seventh day.
By implementing this approach correctly, you can achieve better conversion rates compared to simply directing people to a sales page without establishing any prior relationship.
Location Independent Business Automation Apps, Software & Websites Useful for Digital Nomads
Listed below are a variety of tools, applications, and resources that can be valuable when it comes to establishing and managing the aforementioned automated income models.
Leadpages – Effortlessly generate landing pages using pre-tested templates for increased conversion rates.
Aweber – Affordable and dependable email marketing software.
Asana – A team management software is a valuable tool for effectively organizing work with outsourcers, especially in the outsourced services model.
Zoho – This software provides team management and customer relationship management capabilities, as well as service desk and financial management features, making it particularly valuable for businesses that operate under the outsourced services business model.
Salesforce – This software is designed to automate sales, marketing, and support processes, providing effective customer relationship management.
Infusionsoft – An email marketing software that is more advanced and suitable for larger lists and established businesses.
Freshbooks – A cloud-based billing and accounting software is highly recommended for businesses that have clients in multiple countries.
Upwork – A significant advantage of this platform is the wide range of freelancers available for hire. Whether you require virtual assistants or any other specialized talent such as video editing, animation, web design, development, or voiceovers, you can find it here.
Fiverr – There is a diverse selection of individual services offered by freelancers for $5 each.
P.S. In addition to these valuable digital nomad resources, I also have another blog post featuring a comprehensive list of 100 apps and websites specifically curated for digital nomads.