Software products are *not* passive income

Some people dream of creating a ‘passive’ income that generates money on auto-pilot while they go and learn tango in Argentina, or whatever their chosen path to the top of Maslow’s hierarchy is. In my experience, a software product is a long way from being a passive income. I know lots of people who own software product businesses. I don’t think any of them regard it as a passive income either.

While on holiday I’ve run my own business from a laptop in less than an hour per day. But the business would start to suffer if I did this for more than a few months. Even if you are not adding new features, software products require significant effort to maintain. Sales queries need answering, customers need support and bugs need fixing. New operating systems will often break things in otherwise stable products (particularly on Mac OS X). And there is always admin stuff to do: tax, accounts and a hundred other things. Marketing also requires ongoing effort, whether it be in the form of A/B testing, newsletters, SEO, PPC or blogging. If you aren’t continually improving your product and marketing, then harder working competitors are soon going to start eating your lunch. You can hire people to do the work for you. But then you have to train and manage those people. And the most capable people have a habit of going off to start their own companies.

There may be some products that can generate passive incomes. Perhaps ebooks, training videos and mobile apps. But I expect they still need significant amounts of ongoing marketing effort if they are going to earn more than pocket money. Remember – if it sounds too good to be true, it probably is…

6 thoughts on “Software products are *not* passive income

  1. dickchesterwood

    Great blog.

    We make online training videos, and I can confirm: significant amounts of ongoing marketing effort.

    Plus everything else you listed. Even “new features” has an analogue: as soon as one video is released, we get deluged with requests for “where’s the next one?”

    Best way I can think of to get a passive income via outsourcing: write a book on passive income and outsourcing (and call yourself Tim).

    1. Ryan

      You’re both far too cynical – to get rich whilst doing nothing you just have to believe! I got told this in a seminar recently. ;)

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