What Is Smart Passive Income? | Jeff Lerner

What Is Smart Passive Income? | Jeff Lerner

What Is Smart Passive Income? What can generate recurring income and increase in value over time? Watch as I explain evergreen business models and easy to follow concepts.

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What Is Smart Passive Income? | Jeff Lerner

Smart passive income isn’t just for those who are tech experts or for people who have been experts in their fields for over 50 years!

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0:00 Intro
0:30 Smart passive income in general.
1:35 What is smart passive income?
3:38 Digtal Real Estate
4:31 Businesses likely to generate smart passive income.
6:11 Affiliate marketing, Digital Agency, Info Products.
9:45 The phases of legacy
14:56 Growth Phase
17:48 Wealth Phase
19:14 Learn to apply these concepts

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The information contained on this YouTube Channel and the resources available for download/viewing through this YouTube Channel are for educational and informational purposes only.​ Jeff is a professional Internet marketer and his results are not typical. Any business involves risk and should not be undertaken by anyone who does not willingly accept that risk.

Hey, Jeff Lerner here. And
in this video, we are talking about smart passive income. This is something
there’s a lot of buzz about online. A guy named Pat Flynn who’s been a really
successful online marketer, primarily affiliate marketer and podcast host. He
has a website called Smart Passive Income and he’s kind of coined this
term. Clearly, the term passive income.

has been around for a long time, but Pat
Flynn came along and said, we’re going to talk about smart passive income. And
you know, we’ll get into what that is. But I’ll just say this generally, like
smart passive income is basically just passive income that’s not dumb passive
income. And by dumb, I mean something.

that actually works. Like there was
always just passive income, but then the internet came along and there became all
this like hype and all these false promises and too good to be true, you
know, scams and business opportunities and quasi investments that are packaged
as a turnkey business or whatever. And.

they kind of, the landscape got
cluttered with a bunch of, you know, I guess you’d call it dumb options for
people that want passive income. And so, smart passive income really just means
things that aren’t that stuff but things that actually are legitimate. So that
said, let’s dig in to what really are.

the legitimate types of smart passive
income and how can you go get them. All right. So smart passive income.
First of all, let’s talk about what it is. Smart passive income basically means
passive income, which if you’re not, I guess, familiar with that term means
money that you don’t have to keep working to earn. So eventually it starts
coming in even if you’re not spending.

time earning it. And what I would say
constitutes smart passive income is essentially income that can, you know,
not only passes the passive income test, at least at some point. You might have
to work to build it, but once it’s built and set in motion, it gets easier and
easier over time. But also, that can.

grow over time, right? Something that
has an appreciation possibility. So we’re talking things like real estate
where over time, you know, your rents go up, right? Like year after year, you can
raise your rents on rental properties. We’re talking things like a digital
business and online business which is,.

you know, the thing I do the most of. I
own some real estate too and I’ve talked about that in some other videos. But for
purposes of this video, we’re going to primarily be talking about digital
businesses. You know, it’s a business. It can grow over time. In fact, it
should grow over time if only because.

costs are growing over time via, you
know, inflation. And so if your revenue isn’t growing over time, you’re actually
losing money over time. And then also, there can be certain types of
investments like a stock that pays a dividend, right? Where theoretically
you’re buying a stock not just because you believe in the underlying value of
the stock is going to grow and at some.

point you can sell the stock for a
capital gain, but also there’s lot of companies that actually distribute their
free cash every quarter or every year to their stockholders. And if you believe in the company and
you believe that the cash position of the company is going to grow over time,
then theoretically, the dividend is.

going to grow over time where you’re not
only capturing the growth in the underlying value of the stock, but
you’re getting increasing amounts of income over time as well. In my world,
where I teach a lot of people about online business, and again, I do do real
estate too. I don’t want to allow myself.

to be pigeonholed in the market as
strictly an online guy. But for purposes of this discussion, when we’re talking
about digital business, the way I teach digital business is I try to actually
combine the concepts of internet based marketing and real estate. And I
actually kind of coined a term of digital real estate. Well, my term
digital real estate actually means, it.

has a lot of overlap with Pat Flynn’s
term of smart passive income. It basically means something that not
only generates cashflow on an ongoing basis but also that increases in value
over time. And given that the value of an asset is based on the predictable
future cashflows, if an asset is growing in value over time, theoretically, the
cashflows or at least potential.

cashflows are growing over time too. So
whether you call it smart passive income or if you’re from my world and you call
it digital real estate, it’s really a very similar idea. It means something
that not only generates you cash on an ongoing basis, not only something that
you work to build, but ultimately, it.

kind of can take on a life of its own.
You don’t have to keep trading time for the money but also that it can grow over
time. Let’s talk about the types of businesses more specifically that are
likely to constitute smart passive income. With my digital real estate
philosophy, I’ve kind of done the work.

of surveying all the online business
models out there. And for my own purposes, first and
foremost, selfishly, like I don’t want to waste my time, investing my time and
energy and money on building stuff that’s not going to eventually grow over
time and give me leverage and be worth more than what I built. So frankly, you
can cut away the vast majority of the.

things you see online that are talking
about here’s how to make money or making money with Instagram or making money
with Facebook or, you know, frankly, I would argue that Instagram and Facebook,
both of them by definition are pretty, unless you’re running paid ads to grow
an off-platform business, something.

where the business doesn’t live on those
platforms. If you’re trying to make money on Instagram, it’s probably not a
digital real estate business or a smart passive income business. Because think
about it, whatever you do on Instagram today, a week later, it’s gone.
Instagram’s not still showing it in the.

feed. People coming to your profile
aren’t scrolling down to see what you posted a week ago or a month ago or
whatnot, right? Instagram is like the opposite of the
smart passive income or the digital real estate concept because you really only
get benefit on the platform out of what you’re doing right now. So those types
of business models, I pretty much.

categorically reject, and I’ve really
focused in on a few business models on the internet along with real estate as
really the true smart passive income business models in the world. And I’ll
say it quite simply. It’s affiliate marketing online. It’s building, doing
digital agency services where you’re.

providing digital marketing services to
local businesses. And then also, it’s doing any kind of like becoming your own
information marketer influencer or course creator type of brand, right? So
if you make a course on, you know, how to teach yourself piano lessons and you
start running some ads to sell that.

course, over time, more people buy the
course, they might refer other people to buy the course, you might be able to
bring on affiliates to promote the course and the course, it can kind of
take on a life of its own. Those are the three business models I’ve
seen that really have the highest likelihood of getting traction and
growing naturally over time. Probably.

the one caveat that I would add to that
is I do believe YouTube, this platform right here, is something that can build
consistently over time. If you consistently put out good content, the
value of that content does increase over time. But I wouldn’t say that that’s
truly passive. It’s kind of semi-passive, right? Like for me, I’ve
put out a lot of videos on YouTube and.

certainly I see the ad revenue grow, you
know, month over month on YouTube. But frankly, if I completely stopped taking
care of my channel, it would likely start to taper off. So, and actually, I should say, if you
hook affiliate links into YouTube videos, that allows YouTube to go from
semi-passive to fully passive because.

then if you just get one video that’s
optimized for a certain search term, and it has an affiliate link in the
description let’s say where somebody can click something and buy something, you
can actually truly earn passive income on that for a very, very long time
without having to, you know, keep nurturing it or keep producing more of
it. I guess I should interrupt myself.

briefly to say, if you’re not familiar
with the concept of affiliate marketing, a) go watch any of my other videos on
affiliate marketing. I’ve done a number of really exhaustive and intensive
videos about that. But in general, I’ll say, you know, b) here’s a quick
definition which is just affiliate.

marketing is when you use links to track
referrals on the internet. So if somebody clicks your link and they
buy somebody else’s product through that link, you get a commission. It’s just
like a kickback for a referral only online. It’s called affiliate marketing.
Again, affiliate marketing, digital.

agency services and that one’s a little
different because initially you might have to actually get involved in doing
some selling. But over time, and I know this from experience because I owned a
digital agency for six years and we scaled it really big and we were on the
INC 5,000, multiple times and did tens.

of millions of dollars in sales. And the
last two years I was at the agency, I hardly even came into the office. I
literally counted in two years, I came into the office 10 times because I put
systems and processes in place that turned that type of business model into
a smart passive income business..

And the reason for that is because it’s
a business that’s primarily based around monthly recurring services. So you can
reach a point where you’re not having to constantly go out and acquire new
customers. That’s what allows it to become a passive business. So those are
really the business models online..

Again, I’ll say them again. Affiliate
marketing, digital agency, any kind of course creation or information
marketing. And you can couple that all with like content creation like blogging
and YouTube videos. But frankly, outside of that, I’m giving you permission to
just ignore everything outside of that..

There are hundreds of millions of
dollars to be made in just those business models that I described. In
fact, you put those together, you’re talking about over a trillion dollars
industry online just doing those few things that I just mentioned. So go
ahead and block out and ignore everything else as either not passive
income or dumb passive income..

The other thing that I want to talk
about with the smart passive income concept is something that I call the
phases of legacy and that may sound kind of abstract, but it’s basically just my
way of trying to organize over time the development of a smart entrepreneur,
really a smart passive income producing.

entrepreneur because it’s not always the
same. And you know, you don’t just, again, business doesn’t happen in the
abstract. Business happens in the context of people’s actual lives. So
it’s not enough to say, like people will always say, you know, well, imagine if
you had a penny today and doubled it.

tomorrow and you doubleed it again the
next day and you doubled it again the next day. And wouldn’t that be great?
You’d be a multimillionaire, at the end of a month. And it’s kind of like a brain scramble,
right? To see how a penny can compound. The reality is somebody gives you a
penny and says, oh, we’ll just reinvest.

it and double it, it takes a lot of
pennies just to pay your bills, right? So it’s not, again, it doesn’t happen in
the abstract. Like the first couple hundred thousand pennies that you earn
each month, they go to just paying your basic bills. So like we have to separate
the abstraction of business and the.

mathematical theory of it with like what
actually plays out in people’s lives. And that’s where I came up with this
concept of the three phases of legacy. Because the reality is you’ve got a
runway, maybe it’s 50 years, maybe, I mean it depends on how old you are,
right? Maybe you’re only got 20 years.

until your life expectancy is up. Maybe you’ve got 30 years left. Maybe
you got six years left. Maybe you’re a baby and you’re going to live 80, 90
more years. But the regardless is you have a finite amount of time and in
practical terms, you’re trying to achieve a result of a certain size so
that you can get to the end or at least.

the final phase of your life at a
certain level of comfort and be able to actually enjoy what smart passive income
is supposed to do for you which is create some freedom, right? You know,
nobody wants to work until the day they drop dead. So given those parameters,
it’s important to apply the mathematical.

theoretical concepts of passive income
online but to frame them in the context of an actual human life. This is where I
came up with three phases of legacy. And you might as well just call it the three
phases of getting rich. But these three phases, it’s really important to look at
your life, figure out where you are, how.

much time you likely have and then try
to chunk the phases, you know, over the course of your life and frankly, get
through them as fast as possible. The goal is to get to the third phase.
So let me break this down and tell you what I mean. Phase one is the cashflow
phase. You’ve got to have more cashflow..

Everyone in the world has cashflow. You
know, my kids have cashflow. I give them an allowance, you know, whatever per
week, right? They don’t have enough cashflow to live, but that’s their
cashflow. Everyone has cashflow. But in the cashflow phase, you need to have a
significant increase in your cashflow..

This is one of the hardest things for
people to really wrap their mind around or to sort of deal with in practical
terms in their life is like they get these ideas and they’re great ideas.
Say, oh, I’m going to start a blog or I’m going to start a YouTube channel or
I’m going to do whatever. Like for me, I’ve had this YouTube
channel now for a couple of years. If I.

was trying to change my life with a
YouTube channel, you know, the first year, I didn’t even make enough money
from this YouTube channel to even cover the cost of like one editor that I had
helping me with the videos. Fortunately, I had another business I’ve already been
through these phases of legacy or these.

phases of wealth creation so I was able
to invest in building something upfront that had some upfront costs. But for the
average person, like you’ve got to get your cashflow up fast or else you’re not
going to have enough of a foothold or a foundation to be able to leap into the
next phases. And where a lot of people.

are kind of putting their hopes and
dreams is, you know, I’m going to kind of slowly grow my value over time,
right? Like I’m going to work hard. I’m going
to do my job. And I’m going to get a, you know, a 2% or 3% or 4% raise every
year. Maybe I’ll get a 5% bonus around the holidays or whatever. That’s not
moving the needle of the cashflow in.

your life nearly dramatically enough
that if you plot the course of your life in the decade or two or three or five or
however many that you have, it’s not going to get you to the end goal that
you likely need to be at in order to truly have generational wealth or legacy
or the ultimate outcome that’s going to.

allow you to kind of cruise out your
days on autopilot, right? You got to get more cash now and you got to get, I
should say, you’ve actually got to get more surplus now which is the difference
between what you, what goes out and what comes in. So I recommend you do both. I recommend
you clamp down your expenses as much as.

possible, and you press the gas on your
income as much as possible. Start a side hustle, start taking on extra jobs, do
whatever you can. I think, I get a lot of younger people that watch my stuff.
So to the 15 year old’s, the 20 year old’s, 25 year old’s, 30 year old’s out
there, you do not have time to wait to.

make a lot more money, not if you want
to retire, you know, and be able to take care of your great grandkids when you’re
75 years old, right? So, you know, take on extra work, clamp down your expenses,
get that cashflow surplus as big as possible as fast possible. And then, and
really only then, should you be out.

there looking to invest into the next
phase which is the growth phase. And the growth phase is about taking the
cashflow surplus which is awesome, but it’s also very effort based, right? It’s
based on doing more now to get more now and also, spending less now to cost less
now. It’s all very action-based like in.

real time. So you want to take that
surplus and convert it into growth which starts to give you a pad of
predictability. I call it creating, taking your cashflow
and making it predictable, bankable and sellable, right? Predictable meaning I
know that regardless of my efforts tomorrow, there’s going to be at least
some predictability that this cashflow.

is going to repeat. Bankable meaning I
could go to a bank and show them with some confidence that they can expect
this cashflow to continue such that they would give me a loan. And a lot of
people don’t like banks, and I’m not saying go out and get a loan for no
reason. But it’s a really good kind of.

heuristic measure of your own cashflow
security to say, would a bank loan me money on the basis of this cashflow? A
bank’s not going to loan you money simply on the basis that, you know, you
make an extra $10,000 a month at your job. Because they’re going well, what if
you get fired? That doesn’t mean you can.

pay back the loan. They’re going to loan you money on the
basis of a cashflow surplus that’s bankable, that’s predictable, that’s
secured by underlying assets that are producing the cashflow that aren’t going
to wake up sick tomorrow and not be able to do the job, right? That’s how banks
think. They’re risk averse. So you’re.

wanting to make your cashflow
predictable, bankable and ultimately sellable because remember the value of
an asset is the size of future cashflows, is the duration of future
cashflows and it’s the certainty around future cashflows, right? If you can show
on paper that X cashflow is likely to consider, to continue at X level for X
period of time with X degree of.

certainty, there’s a mathematical
formula that says, okay, that’s the value of that cashflow and somebody will
buy it, right? So you’ll know that you’ve gotten into
this second phase when your cashflow is predictable, bankable and sellable. I’ll
use my agency as an example, right? So I had an agency. This is how I did it.
When I started, I started as an.

affiliate marketer. I made a lot of
money as an affiliate marketer. But frankly, I had to keep driving the
traffic in order to keep making the money. Nobody would have paid me for
that cashflow. But when I took that cashflow and I used it to start an
agency, now I went out and got businesses signed up to pay me for
monthly marketing services. Eventually,.

I had a book of a couple thousand
businesses that were paying me for monthly services. I literally sold that.
I went to another company and said, hey, I’ve got this customer list. You can see
what the churn rate is. You can see the decay. You can see how
fast the customers are falling off. And realistically, you can look at this book
of business and forecast what’s the next.

year going to look like, the next two
years, the next three years, the next five years. They did a math formula,
came up with a multiple and they paid me for the cashflow. That’s what made it a
growth business. And then the third phase, finally, is the wealth or legacy
phase. And this is where you’re.

converting your cashflow into what I
call generational assets, things that you can literally easily put into a
trust and leave to your family where they continue to produce cashflow. But
frankly, they’re more valued and there’s more of an emphasis around the
underlying asset value, not just the cashflow. Like my agency, it was a
cashflow business..

The only value in the business was based
on the future cashflows. There wasn’t like an underlying brick of gold or, you
know, a warehouse full of inventory or something that could be liquidated on
eBay. No, it was just either there’s cashflow and there’s value or there’s no
cashflow and there’s no value. Whereas.

take a house, for example. A house, if
you have a renter, there’s cashflow. But if you have no renter, there’s no
cashflow, but there’s still value because it’s a house, right? That’s the
wealth or legacy phase. So think about it in terms of your life. Look at the
time that you have, look at the options.

that you have and say, okay, first of
all, what am I going to do to generate cashflow surplus? Then what am I going
to do to take that cashflow surplus and make it predictable, bankable and
sellable? Because, and the reason we call that growth phase is because as
cashflow becomes more predictable, the.

value of the cashflow grows. And then what am I going to do to take
my predictable cashflow and convert it into generational assets that actually
still have value even independent of the cashflow? I hope that’s a valuable
breakdown for you. If that totally blew your mind, this is probably a good
opportunity for me to suggest that maybe.

you’d like to go through my ENTRE
Blueprint course where we get into much more detail about both the business
models that I talked about as constituting digital real estate or
smart passive income business models but also, sort of the conceptual models of
how you apply this stuff and use it to grow and improve the quality of your
life. There should be a link for that in.

the description below this video. And
that’s what I have to say about smart passive incomes. Look, smart passive
income is amazing, but you got to be smart about how you go out and get it
and have a really informed lens that you look through so that you don’t do,
frankly, what happens sadly to most people on the internet who want passive
income which is you get ripped off and.

you fall for a bunch of scams because
the things that sound too good to be true, look, you’re on the internet. You got to realize when you’re on the
internet, you’re basically high. Like the internet is so built around these
quick dopamine hits that are flipping all the switches in your brain, you’re
literally a malfunctioning circuit board.

all the time when you’re on the
internet. So you have to guard against that and go, well, I’m insane right now
so I probably shouldn’t buy that, right? Like really, really put your guard up
and be smart about the passive income opportunities that you pursue online.
Thanks for your time. If you’ve enjoyed.

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