It's passive income in the sense that if I just dropped everything and played video games all day, the income would sustain itself.
However that's far from what I actually do :). It simply means I can free myself up to work on new features or increase revenue. So I'm still working about on average 5-8 hours per day, 6-7 days a week.
I like to travel a bit, and work while traveling. Since I have no employees, this makes it easier to have this lifestyle. Whenever I get a chance to sit down in a coffee shop I'll usually stay a few hours and do work.
I think passive is more to do with something "making money while you sleep" or, at least, "making money even if you quit." Thus, continuing to work to increase your business' revenue doesn't mean the money it already makes isn't passive. At least not to me :)
It is passive. The revnue quoted is not sustained by the regular work. That I put into the service. As I stated, if I stopped working then that income would stay, and be considered passive.
Presumably though, if you put full time hours in now and obtain a certain amount of revenue/ growth, cutting out those hours would likely see revenue fall off over time, at least from where you would be working full time.
There can be middle ground. I have a very similar situation to the OPs.
If I stopped working for over a year, eventually there would be complaints, competitors, etc
But within a one year timeframe, there's very little I have to do. And I could get away with working a couple months of the year only + maybe three hours a week maintenance, and the business would grow, slowly.
But, I work consistently, adding new things, because I want it to grow faster. I also know that the environment changes and eventually the current model may stop working or need adaptation.
What do you call that? It's not 100% passive. But, it's not particularly active either.
Actually, having written all this, I remembered someone did come up with a better term: residual revenue.
Meaning that I did a bunch of work in the past that continues to pay off. It will eventually decay, but not very fast. So I can devote most of my energy to new growth, or leisure, over the short to medium run anyway.
Do you think residual revenue (or income) is a better term for this case?
That might work, yes. I like the term much better than passive.
If you need to [edit regularly] respond to SEO changes, or payment provider issues, or maintain your relationships somehow it just isn't passive. It's not a lot of work, hopefully, but it is not passive. You need to stay engaged enough to know how to do it.
Reacting to the environment changes and modeling absolutely is not passive, and I wish people would stop calling it that. I also suspect people underestimate the amount of time they actually spend on this stuff.
If you need to respond to SEO changes, or payment provider issues, or maintain your relationships somehow it just isn't passive.
I'm not sure that's a terribly useful definition. Since any business must have some means of accepting revenues, and almost any means of accepting revenues is subject to dispute, by your argument there is probably no business in the world with a truly passive income. Likewise, in many places you are at minimum going to have to file some sort of annual statements and tax returns for any commercial business.
If a business is generating revenues that don't require anyone to do routine/regular work to keep the money coming in, it seems reasonable to call it passive, even if someone needs to step in under rare or exceptional circumstances.
Ok, I should have added "regularly" respond, that would have been clearer.
What I'm getting at is: If I adjust SEO targets, mailing lists, app or interface code say monthly to keep things moving along, it really isn't passive.
I'm not thinking about annual taxes, or one time problems (DNS issues, certs, payment provider changed) etc.
But routine, regular work absolutely includes any regular updates to website code, transaction providers (add/remove vendors etc.), SEO techniques, etc. If you are tweaking the business weekly/or monthly it is just silly to call it passive.
It seems fairly reasonable to me that he could walk away for a year with no noteworthy effect. Google tweaking their algorithm obviously would not count.
Do you ever take several days off? Like a two-three week vacation without being online at all. This is what I find most difficult to do for a 1-employee operation that offers a 24/7 service.
However that's far from what I actually do :). It simply means I can free myself up to work on new features or increase revenue. So I'm still working about on average 5-8 hours per day, 6-7 days a week.
I like to travel a bit, and work while traveling. Since I have no employees, this makes it easier to have this lifestyle. Whenever I get a chance to sit down in a coffee shop I'll usually stay a few hours and do work.