My honest advice to someone who wants passive income

all right so a couple months ago I was on holiday with some friends and one of the friends we're going to call him Harry really wanted to build streams of passive income on this little holiday two of us were already entrepreneurs one of us had a day job but also had a side hustle that was making some amount of passive income and Harry was the only guy in this group who still had a full-time job and kind of felt a little bit bad about it because the rest of us were talking about like you know

business and ideas and and this sort of stuff and you know a couple of days into the holiday he was like man I really want to build my own streams of passive income now if you're new to the channel hello my name is Ali and I'm a former doctor turned entrepreneur and AU and this passive income thing has been a personal goal of mine since about the age of 13 and after many years of trying and failing to start my own businesses and build my own streams of passive income eventually I got there and I

was able to make enough money to be able to quit my day job and now I kind of do this thing full-time and people always ask me for advice on how to make money how to get rich how to become financially free how to make passive income and so in this video I'm going to tell you how this conversation with Harry went and some of the Frameworks and ways of thinking about passive income that we talked about and so if you're watching this and you have this dream of building streams of passive income that I

hope there'll be something in this video that could potentially help you now usually when people say they want passive income generally people don't mean I just want to make money without have without doing anything at all right like we all kind of know at this point that that's a bit of a pipe dream really when people say passive income what they want is income that is decorrelated from their own time for example at the end of 2023 I published a book F good productivity this book now sells on its own it's got a few thousand

festar reviews on Amazon and good reads that sort of thing I've done the work once over the course of about four years to put this book together and now it sells on its own and that is generating me some amount of passive income and I've now paid off some of the advant so I get some royalty checks every quarter most people would think of that as passive income I had to put in a decent chunk of work to write the book in the first place but now the book is able to sell on its own

all right so the first question that I asked this friend Harry why do you want the passive income in the first place and after a bit of back and forth Harry's answer came down to one word and that was Freedom it's not that Harry really hates his job like his job is totally fine he's like comfortable enough in his job he just loves the idea of freedom he sees the sort of Freedom that me and some of our entrepreneur friends have he loves the idea of having the freedom to do what he wants on his

own terms at his own schedule doing work he loves with the people he loves serving people in the way that he wants to rather than feeling chained to an employer because even though he does sort of enjoy his job if he could wave a magic wand and suddenly have enough money coming in each month he would want to quit that job and follow his own passions maybe he would do some traveling he likes the idea of continuing to work but doing it part-time basically it's all around this concept of freedom and this of course makes

perfect sense like this is a pretty reasonable motivation to seek out streams of passive income now in these sorts of conversations I like to ask if the person on the other end has a magic number in mind and in this case Harry's number was £10,000 a month he felt that if he had £10,000 or $112,000 a month of passive income coming in that would replace his salary cuz he was earning six figures working as a lawyer and that would give him the freedom to travel and to maybe start his own business and maybe do some

writing because he's interested in writing and so this sort of 10,000 a month number was the thing that we were sort of focusing around in terms of our goal now I want to zoom out a little bit um there are two fundamental resources and those fundamental resources are time and money and you put those fundamental resources into a box box and then money comes out on the other end and this box in the capitalist Society we live in is often called a business now this box could be someone else's business or it could be your

own business now I know the word business puts a lot of people off so instead we're going to do a fun little mental model and we're going to think of it as a ship in order to make money you could be a crew on someone else's ship or if you want you can build and own and Captain your own ship now most of us start off our working lives in a position where we are a crew member on someone else ship and this is often known as a career or a job in Harry's case he

is a lawyer working in- house at a company and so he is a crew member on someone else's ship the person who owns the company owns the ship and Harry is simply working for that person again there's absolutely nothing wrong with this and one thing I want to get across in this video is that starting your own business is not the only way of making passive income it's one of the better ways of making passive income I would argue but it's not the only way so Harry is a crew member in someone else's ship as

a lawyer and he's contributing his own time he's not really contributing his own money to that ship but he is contributing his time and time is one of the two fundamental reason Es as we talked about earlier unfortunately this is not particularly passive because when you are contributing time as the fundamental resource to someone else's ship that is very active you're essentially trading time for money again that is totally fine we all stop there but this is obviously not the passive income dream so how might you generate passive income from the situation well in the

context of this first path being a crew member on someone else's ship there are kind of two ways of generating passive income the first is a savings account this is where you lend money to your bank and you put money into a savings account this is contributing one of the fundamental resources I.E your own money and it's contributing it to someone else's business I.E your bank you probably don't own your bank I suspect if you're watching this video Someone Else owns that bank so you are contributing the resource of money to someone else's business the

bank is then investing that money and kind of doing stuff with it and they are willing to pay you I don't know an interest rate of 0.3% or whatever it happens to be wherever you happen to be now as you probably know if you put money into a savings account you're earning money on the money inside there and therefore technically you're making passive income you have generated income without having to do anything you just contributed to your fundamental resource of money to the savings account the other thing you can do is you can open an

investment account and again you can contribute your own resource of money to someone else's business for example in my case most of my investments are in the S&P 500 this means that the money I've got in Investments is split amongst the top 500 companies in the US including apple and Amazon and Tesla and Google and Facebook and stuff like that over the last 30 years if you put money into an investment account and invest it all in something like the S&P 500 it grows at about 7% a year 7 8 9 10 depending on who

you ask and depending on whether you take inflation into account blah blah blah but let's say you put some money in and let's say for the sake of argument that money grows at 7% so let's say my friend Harry or me were to put $100 into the S&P 500 assuming everything works out on averages and stuff obviously it fluctuates a little bit but broadly goes up over the long term next year we would expect to see around about $17 in that account I.E we have made $7 of free money that is passive income now the

magic number that a lot of Finance gurus use is 4% that's considered the safe withdrawal rate like it's 7% with inflation taken into account and you can generally safely withdraw 4% of the money in your investment account each year without affecting the principal I think that's kind of the idea behind it so let's say you had I don't know a million in the S&P 500 each year you could take out 4% of it and that would end up being about £40,000 a year so if you had a million p in you're now generating £40,000 a

year of passive income that's pretty good but in the case of Harry his passive income goal is £10,000 a month which is £120,000 a year and in order to be generating 120 Grand a year at the 4% withdrawal rate he would need £3 million in his investment account how long will it take Harry to be able to invest £3 million into his investment account probably a very long time at least 10 years maybe even 20 years depending on how quickly he can get promotions at work you know this is actually a viable path to building

passive income over time this is what is often known as get rich slow you're working within the context of a fairly stable and relatively high-paying career you are saving more money than you are spending each month you're putting aside the money that you're saving into Investments you are investing them in other people's businesses I.E you are contributing the resource of money to to someone else's ship those businesses that you invest in are growing and therefore you are making some small amount of money in return for investing your money into those businesses this is passive income

now in Harry's case he was already doing a lot of this stuff he already had some amount of money in a savings account and he already had some amount of money in an investment account because actually he had seen one of my videos from a few years ago called how to invest for beginners and he basically followed the advice in that video and then he had some money in investment accounts which is totally fine so he was making some amount of passive income it just wasn't anywhere near enough his goal of £10,000 a month now

if you're at this point in the video and you are genuinely interested in how to actually make passive income then one of the key skills you're going to need to learn during your process is the ability to automate things and that is where the sponsor of this video comes in which is make make is an incredibly powerful automation tool that allows you to unlock the full potential in your texto by connecting various apps to build automated workflows the nice thing about this is that you can do it visually which means you don't need to learn

how to code to build something incredibly valuable if you actually want to make passive income mostly the way you do it is that you have to make the income in an active way and then you have to find ways to either automate or delegate the process so that can become a little bit more passive and so in our case we use make in our own social media analytics and marketing workflow to build together Instagram and notion through API Instagram scraper every single day make runs a scheduled scenario that pulls performance metrics for all of our

reals posted in the past week like view counts and engagements and reach none of which are easily accessible through Instagram's standard API so before make we had to get someone on my team to manually type in all these numbers and manually get all this and it just it just took up a lot of time and once make gathers all this data it seamlessly updates our notion database and So within moments we can see which of our Instagram reals are performing well and which ones aren't connecting as well as we'd like and this gives us immediate

insights without needing the manual input that we previously had to do and so we can then make informed decisions about what content to double down on and what to revisit and because of make it means that me and my team have our time freed up to instead focus on the truly high value things that we can use to scale our business so rather than getting stuck in the weeds of data entry we can spend that energy on creating more impactful content and exploring various New Opportunities and Partnerships and stuff so it's kind of like having

your own dedicated operations partner working behind the scenes to ensure everything runs runs smoothly as your company grows so if you are looking to scale your impact and simplify your workflows and spend more time doing the important stuff like creating and strategizing and innovating make is absolutely worth a try check out the link in the video description and you can start using make for free and you can see just how far you can take your business or your side hustle when everything is automated and connected together and working together flawlessly so thank you make for

sponsoring this video and let's get back to it see when you working on someone else's ship there is obviously a limit to how much money you can make but there's also a limit to how decorrelated your own time can be from it there are very few employers for example who only care about the results of your work in a way what your employer is doing is that they are buying your time they're buying your time to work for 40 hours a week or whatever on their business the business is generating some amount of value some

amount of money and you are being paid a salary essentially in return for your time that is obviously not an ideal State of Affairs if you actually want to generate passive income because you need to find a way of decorrelating the amount of time you're working from the amount of money that you're making you could work in Investment Banking or you could be a neurosurgeon and train FS ages and make tons of millions and then you could deploy those millions in the markets by investing in stock maret index funds etc etc but that also takes

absolutely freaking ages to get to a point where your passive income is an interesting amount of money that actually buys you freedom and so that brings us on to the faster but higher risk method of generating passive income which is to build or own or Captain your own ship and this is often regarded as starting your own business now this is not just about starting your own business if you invest in real estate for example I would say that is building owning and capting your own ship because you own that particular house and the tenants

in that particular house are giving you money unfortunately in order to make good money from Real Estate you need to have either very expensive Properties or have a lot of them and unfortunately that takes money which is a second fundamental resource but it comes back to how whether you're investing in someone else's ship I.E through a career or Investments or savings account or whatever or whether you're investing in your own ship I.E through building a business or freelancing or solopreneurship or real estate or whatever fundamentally you still have to input the resources of time and

money in order to build these things but this transition from being a crew member on someone else's ship to starting to build your own ship this is where loads and loads of dragons are this is where the challenges come in some of these barriers some of these challenges are external and some of these are internal in fact I'd say about 80% of them are probably internal this is where you start thinking things like but I don't have the right business idea or I don't have the right knowledge or I don't have the right skills or

I don't have the right Network or I don't have enough money to start my own business or I don't yet have an MBA therefore I can't start my own business now I did a poll on my Instagram the other day as trying to get a sense of where people are on this journey and around 9% of people were totally happy with their own day job they were like cool I'm chill I'm happy with the day job I have no aspirations to talk my own business about 10% of people were doing this part-time already and about

like I think I think another 10% were doing this full-time but 71% of the audience at least the audience that follows me on Instagram want to start their own business someday but haven't yet taken any action on it that is an enormous amount of people and I would say that number broadly mirrors when I do talks and stuff in real life and try and get a sense of who in the crowd wants to to start their own business versus already has their own business I kind of get the sense that around 2/3 to 3/4 of

people in pretty much every crowd I give a talken they're in that position where they have a day job they know they want to start their own business someday but for 71% of them there is something that is holding them back some kind of barrier now for a lot of people that barrier is legitimately I don't have the right idea like I love the idea of starting my own business but I just don't know what I would do this is the position that Harry was in and we're going to talk about how I coached Harry

through the process now if you are stuck in this position of but I don't have the right business idea yet I would refer you to Noah kagan's excellent book million dooll weekend and I'm going to read out some of the stuff from this book in chapter one he's got the now not how challenge ask one person you respect for a business idea this is a quick way to get a business idea you are going to do it for yourself and realize the power of starting now you'll realize by acting in the moment you feel great

about yourself and build momentum toward your dream life I'm even going to provide a script to cut off your inner skeptic this won't even take you 2 minutes but it will create your first Spark and your second and third so type this up in an email no better yet because it's faster use text and send it to one of your friends now hey first name I'm trying to come up with some business ideas right now you know me well so I was wondering what kind of business you think I'd be good at signed off your

name this is the now not how challenge oh by the way quick thing if you are watching this before the 4th of January 2025 then you might like to check out the completely free 2-day productivity Workshop that I'm hosting on the 4th and 5th of January 2025 it is called productivity spark and it's essentially a two-day series of workshops that are hosted by me and also my wife and also a couple of guests that I aim to help you reflect on 2024 figure out where your work and life are heading and set active goals and

quarterly Quests for 2025 it is completely free you can check it out with a link down below and I hope to see you there potentially so if you are at this point in the video and you don't yet have your own business but you're in that 71% of the crowd who wants to start their own business to build passive income I would really encourage you to pause the video right now and genuinely just message one of your friends anyone you respect or admire literally anyone in your life who knows you reasonably well and just message

them that I know you're going to be tempted to either click off this video or to just ignore the fact that I'm asking you to do this because it it it takes friction right thinking about this thinking about messaging someone you know and asking them for a business idea is probably going to bring up some kind of internal feelings of like some kind of barrier some like oh no I'm not ready yet I can possibly do it no I can't have no no no no no you know I don't I don't want to disturb them

they're busy like who would know anyway and the inner skeptic and the inner sabur voice all all of that stuff is is going to get in the way of you doing this one thing but if you're at this point in the video you probably don't have that much passive income right you would probably like more passive income and what I'm telling you and what Noah Kagan is telling you is friend of mine and also a zero entrepreneur and also knows his about this stuff is that hey it's just one small step right like you just

you just take the one small step and you you know you put one foot in front of the other and eventually you build a business and you have passive income and you can do whatever you want but most people are held back at that very very very first step and this is a very small step than now not how challenge that actually encourages encourages you to take action so if you are actually doing this I would challenge you to do that and secondly once you've done that if you can leave a comment down below and

say how did it feel how did it feel to send that message and then you feel free to edit the comment or reply to the comment with like what what they said it's just it's just one small step I guarantee if you actually take action on this then this will not become one of those YouTube videos that you just watch because you want the motivation and the inspiration of like oh I want to you know I like the idea of making money but I'm not actually going to make money this is the sort of stuff

that will actually help you so that is the now not how challenge oh here's a nice quote don't be afraid to act be afraid of living a life that seems more like a resume than an adventure if you want more stuff on how to generate ideas I have a video over here that talks all about this as a summary of no kagan's book million doll weekend you should also just read the book because it's a really really good book in particular chapter 3 is the best resource I've ever found on the internet from reading about

this sort of stuff around how to generate ideas for a business and we're going to do a video about it at some point as well but as a starting point start with a noun how Challenge and do grab yourself a copy of the book million dollar weekend and it will I guarantee it will give you a firmware update that will give you the capacity to see business ideas where otherwise you might not have seen business ideas now in a second I'm going to tell you about the business idea that we landed on for Harry and

how he got on with it but before we do that I want to kind of give some more context around around this sort of stuff again so we are assuming you are building and running your own ship great fantastic in order to make it succeed you need some amount of knowledge and some skills and obviously you need to invest uh time and maybe a little bit of money but mostly time in building your own ship the more Knowledge and Skills you have that specifically will help you with building your own ship running your own business

the more leverage you'll have which means that for the same input of time you can get way more output out of it in terms of business growth or revenue or customer fulfillment or whatever the thing might be now what kind of Knowledge and Skills do we need to have this is something I think about a lot but essentially you can basically boil a business down down to two things which is firstly make a thing people want you need to have something that people want and secondly you need to sell it to them this is how

pretty much every business Under the Sun works if you simplify enough it is a thing that people want and then they are buying the thing now this thing could be a product or it could be a service or it could sort of be content but content is a bit bit of weird basically like products and services goods and services are like the two things that people want and then we need to settle to them which is known as sales and marketing that is really what a business is so let's say your business is real estate

the thing that people want is a roof over their heads you are purchasing the roof over their heads or like renovating it or whatever the thing is in that case it is a product and you're either selling it to them for a profit by flipping real estate or you are renting it to them which is basically they're paying money to rent the roof over their heads that is how that particular business Works let's say you are me for example I'm a YouTuber and I make money in a couple of different ways so firstly you might

be a customer of one of my online courses like my life productivity system or my YouTuber Academy in that case I've made a thing people want I.E an online course on how to grow a YouTube channel or how to be more productive and I'm simply selling it to them over the Internet nice and easy you might be a student in my accelerator program it's a thing that people want I.E one-on-one support from my team like a six-month service that helps you grow your business and I'm selling it to them we have an application process people

will hop on a call with someone on my team if we find that they're a right fit they you know they give us their credit card details we charge the credit card and then we service them for the next 6 months in a nor weird way earlier on in this video you might have seen or skipped the sponsored message now in that case the sponsor is paying me because I have a thing that the sponsor wants which is an an audience who very kindly want which is my videos right and so by me putting a

sponsored integration I have made a thing that people want people meaning the sponsor of this video and I'm selling it to them I.E someone on my team is negotiating the value of that brand deal and selling it to the brand I also happen to make money from the 5-second ads that appeared before this video unless you have YouTube premium in that case the thing that people want is the attention and the eyeballs and the clicks that this channel gets and a brand is willing to pay YouTube which is the middleman a decent chunk of money

to advertise their products or services in front of you and I get I don't know 55% of it or whatever cuz YouTube takes a cut of about half of it fundamentally almost any business that you think about can basically be be boiled down to there is a thing that someone wants and they are willing to pay for it and so coming back to the Knowledge and Skills that you need to run a successful business you need the Knowledge and Skills to create things that people want and you need the Knowledge and Skills to sell it

to them now the crucial distinction here is that when you have a job you are mostly doing I I call this doing the work let's say my friend Harry he's a lawyer he is doing the work of law he has the skill of being a lawyer and he is doing the work when I'm was a doctor I was doing the work of being a doctor I trained in med school for six years and I have the skills of being a doctor and I'm doing the work however most jobs unless you are specifically in sales and

marketing do not teach you how to win the work this is winning the work my friend Harry is a lawyer he's not yet a law firm partner and so he doesn't need to worry about bringing in new clients into the law firm he just needs to worry about doing the work however if you want to actually earn loads of money within the context of a career you have to switch from doing the work to winning the work let's say my friend Harry continues working in corporate law and 10 years later he makes partner at a

prestigious Law Firm or any kind of Law Firm what do the partners do the partners for the most part it's not about doing the work you don't make partner if you're just a really good lawyer you make partner because you are winning the work you are bringing in new clients into the firm let's say you make partner at McKenzie or Bane or BCG or management consulting firm again your the reason they're paying you a stupid amount of money is not to make better PowerPoint slides than everyone else the associates can do that the reason they're

paying you all the money is because you are winning more work you are doing sales and marketing and you are selling the services of McKenzie or of your Law Firm or of your accounting firm or whatever the thing is you are selling the services to new clients I.E you are bringing in money you are winning the work and this is something that I I would love more people to understand around entrepreneurship is that we think that entrepreneurship is about doing the work you might think oh I do graphic design in my day job I could

just start a business where I become a freelance graphic designer I do graphic design for myself rather than and it's like doing the work is is is in a way the easy part winning work is the harder part I.E sales and marketing finding the people to buy your stuff is way harder than actually doing the stuff what does this have to do with Harry and your passive income struggles well the Knowledge and Skills it's the Knowledge and Skills component when you have a day job you are getting some amount of Knowledge and Skills in doing

the work but what I would recommend you do is that if you really do want to go into this world of being the captain of your own ship and like building your own business or this sort of thing you find a way on the day job to also develop the Knowledge and Skills to win the work now there's a few different ways of developing those particular Knowledge and Skills firstly there is passive consumption this video is an example of passive consumption you just watching this video and I'm just sort of opining about what it means

to mild passive income and the sort you're passively consuming this video hopefully slightly actively because you took action on that challenge earlier but I suspect probably not it's probably passive consumption reading a book is passive consumption listening to audiobooks listening to podcasts about entrepreneurship listening to more watching more YouTube videos about how to build a business that's all passive consumption that's totally fine but it's level one of gaining the Knowledge and Skills around winning the work and potentially doing the work level two is where you learn the Knowledge and Skills of Entrepreneurship by doing them

in the context of your day job so for example if you can find a way to get closer to the revenue generation side of your business if you can find a way within the context of your job to do the skills that it takes to win the work try to get on sales calls try and meet with clients try and Pitch clients new proposals or New Concepts or new whatever the thing might be depending on what your work is the more you can get involved with the revenue generation side of your job rather than simply

doing the work the more you're building up the muscle the skill the knowledge that will really help you in your entrepreneurial Journey but by far the best and scariest way of doing this is to actually just do it for your own business this is why all these books about entrepreneurship fundamentally what they're trying to get you to do is actually just take action because there's only so much Knowledge and Skills you can develop in entrepreneurship by passive consumption and by just doing it on the day job you'll develop way more skills by actually just taking

the plunge taking that first step and trying to build your thing on the side trying to land your first client trying to find a way to win the work in some degree and so by building the Knowledge and Skills in that way whatever business you start or whatever ship you end up building of your own is more likely to succeed because you've got the Knowledge and Skills but of course that should not be a reason to not take action on it because of course the best way to develop the Knowledge and Skills is to take

action on the thing now I'm going to tell you about the business idea that we came up with with my friend Harry and how he went but I have a call to jump to so I will see you in just a minute all righty it is a new day and this video is absolutely all over the place I need a haircut but hopefully you are finding this useful so far apologies that the video is a bit all over the place but you know these conversations with friends I'm trying to be somewhat as close as possible

to what actually happened in real life with this conversation with Harry and I was watching the footage from the previous day and I was like ah it's it's a bit all over the place but these sorts of conversations rarely are like structured and like hey that's a table of contents the the conversation sort of goes where the person takes it and I'm trying to present it in a way that kind of mirrors what the conversation actually happened in in real life with a few extra embellishments to sort of explain stuff a little bit more stuff

that I maybe I wish I'd explained a little bit more in the conversation with Harry you know that kind of thing so when it comes to the idea we are essentially looking for something that is oh that's this is a terrible drawing and also this pen doesn't quite work let's try this again okay so we've got one Circle two Circle three Circle Four Circle H again it's not quite what I intended to but that's okay what we're looking at is some sort of idea that's broadly in the intersection of some of these things number one

what is the sort of stuff you enjoy number two what is the sort of stuff that you are that you are good at number three what is something that could be useful to others and number four what is something that people would be willing to potentially pay money for and so with my friend Harry we spent a bunch of time brainstorming like what could fit into these different categories now the thing that we came up with after some amount of soul searching was the thing that Harry enjoys is writing he just really Li likes writing

and stuff cool that's fine one thing that we realized he was quite good at is emotional intelligence another way to think about this is what are you surprised that other people around you seem to be weirdly bad at and Harry mentioned that one thing that always amazes him is that you know people in law seem not to very good at reading the emotions of their clients and reading the emotions of the people that they're talking to whereas Harry himself always thought he was quite good at that and that sounds like emotional intelligence next up we

come to useful to others now for the others bit usually it's better to be your own community so for example Harry is a lawyer it's a lot easier for Harry to come up with a business that serves other lawyers or people that are similar to lawyers I.E as similar as possible rather than Harry trying to come up with a business idea to serve plumbers unless it's like Dad is a plumber or mom is a plumber or he knows something about the plumbing business you generally want to create an idea for a community that you are

already part of you know various people on the internet will talk about starting a social media marketing agency sure you can start a social media marketing agency but for Harry Harry to start a social media marketing agency it would be a lot easier to do social media marketing for lawyers than it would be social media marketing for influencers cuz Harry knows nothing about influencers for me the first successful business I started was helping people get into med school because I was in med school and so I you know it was a community of people that

I was already part of that I was serving this is another thing that I think a lot of people get wrong when they're trying to come up with business ideas is that you think what would be sexy what would be cool and you don't think about your own circles it's so much easier solving problems that you or people that you know or people around you actually have rather than theoretical problems that you think a large Market might have but you actually know nothing about them so in this case the question was is emotional intelligence a

useful skill for lawyers to develop or lawyers to have to which the answer is yes absolutely because emotional intelligence if you're a barrister or you're in a courtroom helps you understand the jury helps you understand the defendant and the prosecution and the judge emotional intelligence as a lawyer also helps you deal with clients the people who are actually paying you the money so it's a skill that would be useful for more lawyers to have going one level broader you know like again I'm just going to going to zoom in on this point you are part

of like multiple different communities some of which are overlapping in various different ways so for example in the case of Harry he's part of the community of corporate lawyers corporate lawyers are a subset of let's say white colar professionals shall we call it white colar professionals white color professionals are a subset of people with jobs let's call them the employed my friend Harry is also part of a community called men because he's a dude within men there is also a subset of for example straight men in Harry's case he's also part of that particular Community

Harry is also part of a community of people who graduated from universities in the UK he's also part of a community of people who live in and around London so you can see we're not just thinking very narrowly in terms of like what community you're part of as and like what do you do for work we're also thinking in terms of demographics what what communities are you part of demographically what communities are you part of psychographically if Harry had been a coffee nerd all his life he would be be part of various coffee communities this

may not be in real life he may have never gone to a coffee made up in real life but maybe he's very familiar with the coffee subreddit or he watches like every James Hoffman video that that's ever come out or he's you know an avid follower of certain YouTube channels that are all about the art of coffee making this is how you can think about like what what are these different communities that you're part of so when it comes back to this idea of emotional intelligence we realize that okay lawyers need emotional intelligence but also

one community that Harry is part of that definitely needs more emotional intelligence is the general group of men men are famously bad at emotional intelligence at least compared to women if you look at the complaints that women often have about their Partners or their spouses or whatever it is often this idea of emotional intelligence emotional availability I wish he were more honest with how he's feeling it's all of that sort of stuff my friend Harry realized that in past relationships he never had that problem and again was surprised by how his other guy friends seemed

to be terrible at emotional intelligence and how this guy Harry was actually you know actually seemed to be doing a pretty good job of it innately through his own upbringing or whatever so we kind of realized that actually you know the skill of emotional intelligence is very useful for lawyers it's also very useful for men as a whole so you know it's kind of interesting maybe there's like a market there and then we were like all right cool where is the monetization potential so I asked Harry hey can you imagine your Law Firm hiring someone

to do a workshop about emotional intelligence and Harry was like oh hell yeah we do you know they hire people to pay them stupid amounts of money to do workshops about all sorts of things all the time emotional intelligence would fall squarely into the category of things that a corporate law firm would be willing to pay for so like great fantastic we already see a route to monetization in theory if my friend Harry could become good at like teaching about emotional intelligence we know that he could build a business potentially monetizing that skill through workshops

that he sells to corporate law firms and also probably management consulting firms and also probably other white collar professional firms going broader than that we imagined okay can we imagine a world where certain men around the world pay for a course on how to be more emotionally intelligent and I was like hell yeah I would pay for a course on how to be more emotionally intelligent I've already bought books about how to be more emotionally intelligent because I recognize it's a valuable skill to develop and so in theory if someone were to create content around

it or like build a course around it i' I'd sign up chances are there are other people like me who would sign up for that sort of thing so again we can imagine that there is a market for the thing of course like further down the line we need to validate that the market actually exists but as a starting point intuition is a pretty reasonable place to start and so overall by having kind of this conversation this bit of the conversation I think lasted about half an hour going back and forth about what of the

things Harry enjoys is good at can be useful to others and there is potential monetization opportunities we kind of realized that this idea of Harry teaching emotional intelligence to professional men broadly could could be an interesting idea to explore now when it comes to the idea stage you don't need to have the perfect idea you're never going to have the perfect idea you just need something that is good enough for you to get started with and I think this particular idea definitely ticked all four of these boxes that it's worth getting started with it cool

so then what is the next step at this point Harry had to make a choice he's got three different options available to him just to cut a very long story short option number one is Harry could build an audience around this topic of emotional intelligence option number two is Harry could build a product around the idea of emotional intelligence and option number three Harry could build a service around the idea of emotional intelligence now there's a little bit of an overlapping area between product and service because for example if Harry were to run workshops for

corporations around emotional intelligence in a way that's a product but it's a bit of a service and that he's like showing up and then providing the service I would say that's more in the service camp like the way I think of products are that it's you know you create it once and kind of like an app or a book or something and then it doesn't take that much effort to then f fill on The Thing Once someone has bought it whereas for a service you need to sell the thing and then you need to deliver

on the thing and then that's kind of what makes it a service and so we were kind of talking to Harry about this to be which of these routs do you want to go down now generally I do not recommend starting off with a product product is a sort of advanced thing for various reasons that I've gone into in other videos but to cut a long story short you spend ages building the thing before realizing that there's there's even a demand for the thing generally Services you can charge higher prices than products and so generally

for products you need more customers getting customers is a really hard thing as we talked about winning the work is harder than actually doing the work and so generally I recommend people start with either building an audience or building a service and then ending up in product plan rather than starting out in product land obviously this is a broad generalization your mileage may vary but that's generally my Approach so essentially for Harry we narrowed it down into these two business models do you want to do the audience growth business business model first or do you

want to go down the service based business model the thing with the audience business model is that the audience business model is what we call a J curve which is if you imagine imagine a graph of like these are your axes and let's say this is I don't know plus revenue and this is negative revenue and this is zero when you're starting off you're actually in the red for a good amount of time because because in order to build an audience what do you do you create free content on a public platform like YouTube or

Instagram or LinkedIn or whatever and you put out lots of content for free and you hope that over time enough people will vibe with your content because they discover it through the algorithms or whatever such that you build an audience of people who know you like you and maybe trust you and then at some point when that audience gets to a critical mass you could potentially create a product or a service to sell to that audience you could potentially monetize through brand deals you could monetize through Affiliates this is the sort of creative business model

but it takes a while to get that going and that is why for the first like potentially years and I often think of this period as being two years long you are putting in effort into the thing you're putting in time and maybe even you're putting in money to the thing or at least you're forgoing money you could have gotten by just taking an extra shift at work you're sort of negative in terms of the time and money you're putting into the thing and you haven't yet seen any results but the reason this is a

J curve is because at some point you hope further down the line You'll then be able to sell something and then you'll go up and then you'll be able to be profitable this is roughly in the shape of a j which is why it's called A J curve business starting a coffee shop for example is a jco business because you have to start by renting the premises which takes money out of your pocket buying all the equipment buying all the beans etc etc you have to go negative in terms of the time and money you

put into it before you start making any money at all that's not to say that jov businesses are bad but it's worth understanding which what are the pros and cons of the business model that you're going after this the problem with building an audience is that monetization generally happens later the benefit of building an audience is that you can start out very easily so you can just make an account on substack or make a YouTube channel or take my course parttime YouTube Academy or start writing on LinkedIn or making reals on Instagram or making Tik

toks and the barrier to entry is basically nothing literally anyone in the world can start creating an audience and loads of people in the world are indeed realizing this which is why every year more and more people are trying to do this creative thing because they recognize the value of being able to build an audience if you go down the service route the idea is that you sell some sort of service and ideally you want to sell things that you can sell for at least $2,000 it's it's not it's not really out of thin area

this is sort of based on various conversations with entrepreneur friends including my friend Daniel Priestley I have a long ass podcast episode with him that kind of explores this world of higher ticket services and what Dan Priestley recommends as a serial entrepreneur who has multiple service based businesses is that you don't really want to be going less than $2,000 for the service that you're selling the nice thing about a service-based business is that it's a non- jco business in that let's say my friend Harry were to create I don't know workshops for emotional intelligence for

corporate law firms they would pay at least $2,000 for that because you know these sorts of firms pay way more than $2,000 for you know people to run workshops I've been offered sometimes 20 30 40 and even $50,000 to do workshops with corporates so like $2,000 is basically nothing to a corporate law firm in London now the nice thing about a service based business is that you kind of make money from day one as soon as you sell the service you know that's the hard part actually convincing them to buy the service from you but

beyond the effort you're spending trying to get the sale you're not actually doing any work other than trying to land that client you're not like building a whole new product or like you're selling the thing first they pay you the money and then you deliver on the thing which means you're essentially not wasting work in terms of you know doing work that may not pay off and this is more like just sort of Revenue goes up over time the downside of a service-based business like this is that the sales process is very high friction in

that my friend Harry would have to become a Sal he would have to go to the people who are allocating budgets for corporate workshops for emotional intelligence and convince them that his Workshop is worth doing and it's going to be great for their employees and it's going to add to the top and the bottom line etc etc it's going to require him to do that sort of sales process the other downside that people think to a service based business is that it is inherently less scalable than an audience or product based business generally as a

beginner you probably shouldn't be worried about scale it's again another mistake that holds beginners back where they're like oh I I don't want to do something that doesn't scale at the start when you're trying to work towards your own Freedom you kind of have to do things that don't scale and you do in many ways have to trade your time for money until you get to a point where you can then automate it and then hire people to do it for you and now a service-based business becomes passive income it becomes more like passive income

only once you've automated and delegated a big chunk of the process but you have to put in a hell of a lot of work which is why this is the opposite of passive income a service based business is very active income we've talked about the downside of the audience business being that it's a J curve that you know you're in the negative for a while before you start making any money but once you start making money you know let's say you were to spend 3 years writing a book and now the book is starting to

sell that three years I'm in the negative with the book because you know the jcurve thing but now this is you know as close as one can reasonably get to passive income obviously I'm still trying to sell the book by plugging in videos by the way please buy my book if you haven't yet but for the most part at this point the book sells by itself because you know it's got a critical mass of reviews on Amazon and it's in book shops and stuff and so I don't actually have to be the one that's constantly

pedling the book in order for the book to sell so this is more passive income but it's an advanced thing because unless you have an audience very hard to sell a product etc etc anyway all this taken into account my friend Harry decided to go down the audience building route he decided you know what I don't want to deal with the faf of trying to sell emotional intelligence workhops to corporates even though I know I could make money he just had too much imposter syndrome around it too many emotions getting in the way it's easier

to get started with the audience thing because all you have to do to take the first step is start writing on LinkedIn or Twitter or substack you know Harry was interested in writing he didn't really want to be a YouTuber cuz he could have started a YouTube channel about this thing as well but he wanted to go down the writing route and and so we thought okay cool we can imagine a world where if Harry were to write on LinkedIn every you know a few times a week for 2 years and also have a substack

newsletter that was all about emotional intelligence for Professionals in particular aimed at men we could imagine a world where 2 years from now with enough consistency that could actually develop a critical mass of audience such that Harry would be able to sell a course or potentially even move into this service based Consulting workshops for corporates or whatever the thing was and we thought okay cool this could be Harry's route to passive income especially if he builds the audience first gets over the J curve and then sells some Co some kind of I don't $300 self-paced

course or maybe he writes a book about emotional intelligence for professionals and sells it and it becomes like a source of passive income coming back to the idea of this Harry wanted passive income he did not want to deal with the sales process of a service based business even though you know probably that's a route I would have gone because it's so nice to be able to get the money in but whatever he wanted to go down that route so what happened next well this is where the story takes a turn for the worst because

Harry took the first step Harry started writing on LinkedIn I believe it was and I think he made like one or two posts and he made an accountability packed with the rest of us in the group and he was like all right I'm going to publish every week and a week went by and nothing happened and so we were like hey harry what's up with that he was like oh you know you know life got in the way I'm going to publish next week and he actually did he published that following week and we we

like great well congratulations you published the thing well done and then another week went by and nothing came out and another week and nothing came out and another week and nothing came out and like two months later I checked in on on that WhatsApp group being like hey harry how's the writing going uh there was no response and then I saw Harry a few months later and I was like Harry hey you know how's how's the writing thing going and he was like oh man you know I did my first post but I just never

I just never had the time I just never had the time to do anymore and I was like ah Harry Harry I get it when you are doing a jco business and you are in the red for such a long time where that is potentially years you know most people don't even take the first step most people are so held back by this idea this thought of I don't have the perfect idea uh that they don't even take the first step Harry took the first step and the first step is the hardest step but then

the next hardest step is the next one and the next one and the next one and keeping this up for potentially years without seeing a payoff the problem is that it's so hard to stay disciplined to stay motivated to actually do this consistently while it is not making money and that is why when it comes to this thing this is why passive income is hard passive income is hard because in order to make passive income you have to create assets that create value while you are not there content is a thing that creates value while

you're not there money is a thing that creates value while you're not there but like you probably don't have much money to start so capital and code creates value while you're not there you know 3C is content capital and code so if you learn to code and you build some sort of software and stuff like we're doing with my app voice pal or whatever then again that creates value while you're not there the problem is for all of these things for Content capital and code you have like you're going to be in a period of

not making any money and the thing seeming like it's not actually working for a long time this is where the idea of a flywheel comes in a flywheel is sort of like this sort of this engineering term for like this wheel thing it takes ages to start moving you've got to put in a lot of energy to get it going but once you've put in that energy and you've gotten it going now it's you know spins more more or less on its own and so unfortunately at the end of the story Harry does not have

any passive income because Harry took the first step all on Harry but then failed to execute on it consistently now generally when someone fails to execute consistently on a thing like this they will often say that they don't have have the time but in reality they didn't make the time I know Harry's life I know Harry does not have kids or responsibilities particularly does not have to take care of like elderly parents is not like a full-time carer does not have major health problems that require him to be in hospital for three days for three

days a week etc etc in Harry's case he has the time he's just choosing not to use the time in order to be consistent with this thing because he is not sufficiently disciplined or motivated or call it whatever you want to actually go down this route and that absolutely could change like for a lot of people like it's it's a start it's a stop and start process you know I procrastinated for seven years before starting this YouTube channel I started this YouTube channel seven years ago and it's completely changed my life but for the first

seven years every summer in the school holidays I was like oh man this is the year I'm going to finally start posting on YouTube this is the Year this is the Year this is the year then in like 2016 I made like a couple of music videos I was like oh yes I'm now a YouTuber and then uh I got like three views and like five dislikes and I sort of got demotivated I was like oh no I don't want to do this like and then I didn't post for like a whole extra year or

whatever it was and so I get it I've been there like no one who ever builds anything that relates to passive income or anything anything meaningful in any way gets there without battling this problem of like it's really hard to stay consistent especially when things are not working once things start to work you know with my YouTube channel once I started to get momentum when I started to get one new subscriber every day or three new subscribers every day or one comment every week I started to get those signals of interest from the audience and

that helped fuel the fire of motivation that was within me to keep going with the YouTube channel on the days I didn't feel like doing it I found ways to make it more fun that's the whole principle of feel good productivity you know how do you how do you find a way to make the process inherently enjoyable even when it's not working or even when it feels really hard or boring but this is the challenge of Entrepreneurship this is like trying to build passive income is not a thing that happens easily my friend Harry he

wants to earn £120,000 a year in passive income without doing anything man do you know how many people there are in the UK who earn 120,000 a year without doing anything basically none it's like it's it's a really really really hard place to get to and extraordinary results require extraordinary inputs and extraordinary efforts and an extraordinary amount of consistency so if there's one final piece of advice for anyone who is seeking passive income it's the recognition that you are on this journey potentially for years even while it's not working you've got to find a way

to stay consistent and in my opinion the easiest way to stay consistent is to find a way to enjoy the process of doing the thing so that you are not wedded to the outcome if you've got to the end of this video you might like this video over here which is a similar conversation that I had with another friend a year ago that's that was around Financial Freedom it touches on some of the concepts we're going to talk about we talked about in this video but also touches on a few different on so you might

like to check that over there thank you so much for watching and I'll see you hopefully in the next one bye-bye