How To Make Your Business More Passive
If your goal is to make a passive business, sometimes you have to find creative ways to automate tasks which would otherwise be performed by a human being.
Case in point: someone recently started spamming my tutoring site with messages like these:
This type of scam shows up often on CraigsList.com and it just recently hit my site for the first time.
By the way, if you haven’t seen it before it goes like this: the person makes an offer to pre-pay a large amount up front. They send you a phony money order. After you’ve received the fake money order they say they are going to have to cancel and ask for a partial refund. You send them a refund (with real money), and a week later the bank comes back to inform you that the money order you tried to deposit was fake.
You can spot these because usually (1) the person is out of country (2) the grammar is poor (3) they will refuse to talk to you on the phone (3) they want to make a large payment up front.
Manual Process vs. Automated Process
It’s annoying for the tutors to receive these messages, and it might be tempting at this point to create a “manual review” process where a human being would look at each tutor request before it gets sent.
This however, wouldn’t be very passive.
Instead, you can often use your “community” of users to be a police force for you. Wikipedia (and a number of other sites) have employed this model very successfully with a self policing community.
The solution I came up with was to add this line to the end of all emails:
Then I built a little system so that if enough people report the spammer, the account will get deleted and they won’t be able to bother anyone else.
Some interesting things to think about when building a system like this:
- If you notify the spammer that their account has been banned/blocked. They will probably start using new email addresses or be more motivated to get around your system. Instead, I set it up so the spammer gets NO INDICATION that their messages are being blocked. That means they will happily go about trying to send new messages and working hard…UTTERLY WASTING THEIR TIME as punishment. Maybe this subtle form of punishment will eventually cause them to reconsider their line of work since it will accomplish nothing.
- You don’t want to ban the person if just one person flags them as a spammer. The tutor could use this maliciously if they want to avoid getting negative reviews or block the user for any other reason. Therefore you must try to get a “consensus” from the community by getting a few different opinions. The exact right number is debatable, but the more people mark them as a spammer the more confident you can be about banning them.
Most business owners don’t think about the cost of answering one extra phone or email. “It will just take a second” they say. It makes them feel busy (which is very different than being productive) to solve easy problems. Instead, they should be working “on” their business, not “in” it.
If you want to make a truly passive business, you need to put systems in place to handle 99% of whatever might happen automatically. Even if your automated solution works only 90% as well as the human solution, it will still be worth it. Every phone call or email DOES count, because you want to scale your business up to 100 or 1,000 times it’s current level without hiring any employees. Hiring employees isn’t the answer (managing/hiring/firing them is just another job and isn’t passive). Instead, focus on building business systems to automate as many tasks as possible.
Until next time, keep breaking free!
Brian Armstrong
What part of your business do you wish you could automate? Post a comment below.
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Caroline said,
Wrote on November 10, 2008 @ 6:55 am
My brother in law was hit with a similar scam and even received a check. The problem is by the time the bank reports the check as fake you have sent them the cash.
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Andy @ Retire at 40 said,
Wrote on November 10, 2008 @ 7:58 am
Heh, I wonder if the real work could be automated :-)
Luckily for me, whatever I try and do I can automate since I am a programmer by trade venturing into a few other areas to help create extra (and passive) income.
I’m not sure what other things I’d like to automate over and above those I have already thought of. I’d probably know more once I actually get going.
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caleb said,
Wrote on November 10, 2008 @ 5:49 pm
Brian,
I’ve noticed that wealth generation falls into one of two categories: Income and Growth.
Income puts food on the table today.
Growth builds over time until your net worth itself becomes income (by interest from investments).
Growth is almost always passive by nature. INCOME usually requires some kind of sweat equity, at least up front.
The two are often inverse compliments of each other. If you own a rental free and clear, you maximize INCOME (pure cashflow). If you fully leverage the equity of the property instead, you may end up with negative cashflow, but now you own more than 10 times as much real estate, all appreciating (GROWTH).
You cannot have growth without income first to pay the bills. So I am focusing my study and learning on INCOME-type methods.
I’ve noticed you’ve dipped into Real Estate, Blogging, Speaking, and other forms of INCOME methods. Could you please do a comparison of all the income methods you’ve explored, with a by-number breakdown of how profitable they have been? I suspect your Real Estate deals win hands down, but I’d happily be proven wrong…
I’m probably not alone in still exploring all the different INCOME options out there, without having yet settled on which one to devote my full time to learning.
Thanks for the great blog.
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Brian Armstrong reply on November 11th, 2008 12:20 am:
Hi Caleb, good points. You’re right there is often a trade off between income and growing net worth. I see this especially in real estate.
I try to mix both in my real estate deals. They all cash flow a little bit, while capturing some nice equity.
You don’t have to have large amount of capital to get passive income though.
Blogging I see as passive income because although it takes “work” to write, it takes the same amount of work whether 100 people read it or 100,000 people read it. So there isn’t a direct correlation between time & income like a salary job. You’re unlikely to get a 1000% raise for doing the same amount of work in a regular job, but it can happen in blogging.
The other type of passive income businesses I like (which don’t take much capital) are web businesses like my tutoring site (www.universitytutor.com). It was started with very little capital ($100 and my own time) but provides passive income.
So anyway, I guess I think about it more in terms of 3 categories. (1) growth - meaning buying appreciating assets, (2) regular income, and (3) passive income.
The best source of regular income is definitely a typical job. It’s stable and far more likely to provide you real income in the short term.
But while at that job you should try transitioning into the other two so you aren’t stuck there forever. If you have capital, invest in income generating real estate. If you don’t, you can try building a passive income business which doesn’t require capital. Web businesses, blogs, review sites, etc.
This is a great question, and I’ll probably make this into a post. Thanks for bringing it up!
Brian
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Matt Thomas said,
Wrote on November 11, 2008 @ 4:36 am
Hi Brian,
Great quote from the E-Myth, one of my favorites. The great thing about automation is that not only does it save you a lot of time, but it often is free, and this free system can be replicated and tweaked to fit a lot of different processes. A very simple case-in-point I believe is Gmail’s filtering and labeling system. Certain emails simply don’t require your review, but is important to have for later reference. Setting up a simple filter to mark the item as read and archive it will solve this problem quite easily. This is a very basic yet effective example of automation that can be tweaked and reused and save you a ton of time.
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Brian Armstrong reply on November 11th, 2008 4:25 pm:
Good example, thanks Matt!
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Chris Guthrie said,
Wrote on November 11, 2008 @ 5:03 pm
Hey Brian,
What number did you decide to settle on? I know it varies on a case by case basis - i.e. if you have a highly traffic’ed site you should set the limit higher. But I was just curious what you decided to choose.
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Brian Armstrong reply on November 13th, 2008 2:38 am:
I set it to 2 as a starting test. If anyone abuses it I will adjust. Thanks!
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Chris Guthrie said,
Wrote on November 13, 2008 @ 3:16 am
Yah that sounds like a good number - especially because you never know just how much a person will care to take the time to click a link.
Hopefully your visitors do care though and will be able to help minimize the spam coming through.
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