5 Things You Need to Know Before Making Passive Income

Some of you may have heard the saying, “Skills pay the bills.” It might sound a bit cliché, but I think it’s very, very true.

I was talking to someone the other day and they said, “No, I know all about passive income. I don’t really need any skills. I’m just gonna go and sit on the beach with a laptop and drink piña coladas all day long.”

I mean that sounds good, but here’s the problem. Imagine that elusive passive income is right up here, but you just can’t reach it no matter how hard you try, even if you’re six foot four like me.

That’s why I thought it was about time that we talked about skills that you need to get there. I like to imagine it like a ladder the more the skills you master, the higher you can climb towards that passive income.

This is how I was able to build a passive income of over $25,000 per month. And that’s not even counting all my other income streams, but building this ladder was definitely not easy.

I had to learn my skills through the school of hard knocks and experience. And by the end, my goal is for you to know the skills that you need to make up each stage of the ladder and share with you the golden rule that ties them all together.

Sound good? So the first step on the ladder is leadership skills. No matter what you want to do in life, the ability to lead and inspire others will help you along the way, especially when you’re trying to free up your time to make some of that sweet passive income.

School really didn’t teach me any leadership skills. This is probably because the modern education system was designed to teach future factory workers to be punctual and docile and not free thinkers and leaders.

That’s why it’s very common for C grade students to actually hire A students. To be honest, I can’t even spell dyslexia, so that’s how dyslexic I am. I just had to jump in and learn from experience. When I first started my business in my twenties, I was working seven days a week without any vacations.

I knew that if I didn’t make it work then I’d have to go back to my nine to five job earning minimum wage and feeling trapped. So I decided it was time to hire my first employee.

My first employee was actually 20 years older than me. Now this felt really strange at the time, but I wanted someone with knowledge.

Whenever I thought of a good idea that would move the company forward, instead of just telling him to do it, I liked to make him think that it was his idea in the first place.

This reminds me of one of my favorite films, “Inception”. They go into someone else’s dream and they place an idea into their head, so they think it’s an original idea. I’ve always found that when someone thinks an idea is theirs, they’ll work a lot harder and do a much better job as they want their idea to succeed.

This freed up a lot of time and created lots of passive income for me. I could take some time off from time to time when I wished without the business losing any money.

I could use that extra time to think about starting a few new side hustles. It’s all about accepting that you aren’t the best at everything and finding the right people to help you out.

Just take Elon Musk, for example, he can’t know everything about electric cars, space travel and neurology, so he hires the top people that do because he’s a great leader of people and people love to work for him, sometimes for less money than they could earn elsewhere.

Right, so the next step on the ladder for me has to be time management skills.

Being a time lord is the real key to making passive income and I don’t mean going back and win the lottery although that would be very nice, but the reality is once you master your time, you can spend it starting a new business or a side hustle, but maybe more importantly, you can manage other people’s time better.

This came in really useful for me when the wages in China started increasing and it became more and more expensive for me to produce my products abroad.

I flew out to the factory determined to find some kinds of solution. It was great that the workers were getting paid more, but I also needed to find a way to reduce the costs in order to keep the business successful.

I completely redesigned the production line which meant that we’re able to make double the amount of products in half the time. This simple change nearly doubled our profits and it’s all because we were able to find a more efficient way of doing things.

The factory also adopted my strategy across the board as it was a much better way to operate and make more profits in less time for the owner and still pay higher wages for its employees.

Everyone was happy. Now, maybe you’re not dealing with factories in China, but you might be able to look at your life and see where you’re losing valuable time.

Quite often, you may be losing time by traveling too far for work or simply laying on the sofa, watching TV, being bored. I don’t know if you’ve checked out the documentary on Netflix called “The Social Dilemma”, but I found it fascinating how social media is stealing time from us.

This makes time management more important than ever and freeing up your time could help you start building passive income streams that are going to pay you while you sleep.

Now, we come to the negotiation step. This is probably one of my favorite skills as it can help anyone get more from life, from kids asking for a later bedtime, to negotiating million dollar deals, it’s really unlimited.

One of the first times I realized the power of negotiation was when I was called up by a Hollywood film crew who were working on a movie called “Black Hawk Down”.

The whole film relied on Black Hawk model helicopters, but they had a problem. The model helicopters they were using for the film were faulty and it was holding back the entire production.

They came to me and asked me how much I would charge to fix the models and come out to Morocco and fly the helicopters. Firstly, of course I just thought about charging what I’d normally charged in my everyday business, but I decided to use some of my negotiation skills.

I did a bit of digging around and eventually found out that if they didn’t have these helicopters flying by the end of the week, they would lose, as a fine, $350,000.

In negotiation, this is known as finding the black swan. Knowing that one piece of information can give you such an advantage instead of charging based on my time, I charged based on the value I would bring to them.

I had the power to save them lots of money, so therefore I could ask for more than I first thought. It’s very hard to make enough money to invest if you’re only charging based on your time.

That’s why learning how to negotiate based on value is really important. From that one deal, I earned enough to buy a rental unit which went on to generate me lots of passive income.

So we’re almost at the golden rule.

The fourth step is the skill of selling. When people think about sales, they often think about a sleazy old salesmen who want to rip them off, but that’s actually just the bad ones.

Having sales skills is more about helping the other person realize that you’re the clear choice. When you’re making passive income, you’re usually selling some kind of service or product.

If you’re not able to close the deal, then you’re not able to make any money. It’s as simple as that. I learned this skill when I was flipping cars as a teenager.

I’d always buy cheap cars that I liked, fix them up, and then sell them for a profit. One day I was selling one of my favorite cars. It was a Ford Escort Mk 2 and it was hard for me to see it go cause I’d spent so many hours on it until it was absolutely perfect.

But at this time, I didn’t have any choices. I didn’t have much money and I really needed to sell as soon as possible because I needed to escape the debt I was in. I arranged a meeting with the most promising buyer, but instead of meeting him where I live, I decided to meet him on a posh, private estate.

This was to create a feeling of trust as because if he was more comfortable, he would be more likely to buy the car. When the guy arrived, I offered him a test drive and while we were driving around, I made sure to have a good chat with him.

We talked about everything from his job to his family. This was so he liked me more. People are more likely to buy from people that they like.

I also mentioned that the color was rare for this model and there were not many of them around. This introduced a little bit of scarcity as if he didn’t buy from me there and then, he was not going to be able to find another one.

I was determined to get top price and I was ready for a hard negotiation, but because I’ve done such a good job, I needn’t have worried.

He paid full price. Wait for it. This is because I’d managed to hit many of the mental triggers like trust, likeability and scarcity. You can also use these mental triggers to help you sell anything.

Having the skill of selling is all about being able to make something stand out from the competition. Maybe that means selling yourself in a job interview and getting a high paid job or selling your product.

The truth is that those who have the ability to sell are much more likely to make much more passive income as they understand how to make something irresistible. So step number five is probably the skill that I overlooked the most, but has created me the largest amount of passive income, networking.

When I started my business, there was lots of entrepreneurs that used to meet up for coffee mornings. I always thought that they just wanted an excuse to go out for a chat and feel like they were working, but now I’m slightly older.

Well, just slightly. I really understand the importance of having a strong network. I say all the time that your network is your net worth. At the time, I wasn’t the most sociable guy, so coffee mornings really weren’t the right place for me, but as soon as I started racing cars and playing golf lots of new opportunities came my way.

It’s all about being yourself and building the best network possible. I get deals coming across my desk every day due to my big online and offline network.

A couple of years ago I was given the opportunity to buy an entire business and all of their products. Just by selling these products online, I was able to make over $300,000 in pure passive income.

Now for the golden rule that ties all of these together, I see so many people that think the skills are just one size fits all, but most successful people know that they’re able to adapt to each situation and person that they come across.

The same style of negotiation won’t work with everyone. The same is true with leadership, time management, selling, and networking.

So my golden rule is to always keep learning and adapting every time I come across someone different. So I’m always honing my skills and moving forward.

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