WS Chronicle

By Algenon Cash

Editor’s Note: Algenon Cash is managing director of Wharton Gladden, a boutique investment banking firm he and a group of private investors created in 2003. Business Leader Media has named Wharton Gladden one of North Carolina’s “Top 100 Small Businesses” and one of the “Top 300 Small Businesses in the Southeast.” Cash is a guru on entrepreneurship, finance, economic development, real estate and politics. He will be writing a weekly column for The Chronicle.

I have a long-lasting fascination with passive income since launching my first business.  As a middle schooler, I provided sugar craving kids with a daily fix, but teachers preferred I focus on the books, not sneaking blow pops and lemon heads to classmates. 

So I recruited student workers, equipped them with supply, and then counted the money – it was my first experience with passive income.

The definition of passive income is earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved.  It’s the Holy Grail for any entrepreneur. There is a multitude of ways to generate passive income.

Affiliate marketing and referrals

If you own a website where you promote your services or products; then consider affiliate marketing, another strategic way to make passive income from referring customers to a company.  You can embed a promotion on your site that markets a product or service, for which you will be paid a commission or bonus for every sale.

Partnerships

Find a company that has not fully matured and may need an angel investor that believes in future growth.  Do not loan the money to the business; instead make an equity investment that can yield passive income for your portfolio.  The entrepreneur will be responsible for the day-to-day grind, while you act as a silent partner and benefit from any profit upside.

Investment income

The stock and bond markets are investment vehicles to create passive income.  There are endless methods that can be deployed when investing, but simpler ideas to consider – use a robo adviser or buy into real estate investment trusts, high dividend stocks, mutual and index funds.

If you have strong liquidity, meaning cash in the bank, then direct real estate investing may be suitable.  Real property also has many tax benefits in the form of depreciation write-offs, tax deductible mortgage interest and the opportunity to sell assets without paying an immediate capital gains tax.

Royalties

Franchising and licensing are concepts that provide low barriers to expanding and scaling up a new business model.  Both concepts trigger a stream of royalty payments for the owner.

Another idea is to leverage your intellectual capital into writing a book about a particular area that people want to explore.  The process is time intensive upfront, but after the book is published, it becomes a complete passive venture that makes you money while you’re sleeping – that sounds fun, right?

Sell products online

I have a friend who spends countless hours at the beach taking photos of wind surfers, nature and the occasional perfect sunset.  Sounds more like a vacation, not a job.  He uploads the photos to a website, then waits on the money to roll in – not to mention each photo can be sold multiple times.

However you don’t have to be a professional photographer to reap online rewards. You can sell just about anything online (make sure it’s a legal product) – software, music, instructional videos and homemade crafts.

If you try any of these ideas and experience success, then please leave a comment or contact us with your story.  Good luck building wealth!

Algenon Cash is the managing director of Wharton Gladden & Company, an investment banking firm. Reach him at acash@whartongladden.com.