Your handmade business needs passive income. Relying on the creation of physical products as your only source of income is a dangerous game of having your eggs in one basket.
Active vs Passive Income
“If you don’t find a way to make money while you sleep, you will work until you die.”
Forms of active income include both the production physical products and performing services. Both types involve a time/money exchange. You invest time and resources creating a product or performing a service in exchange for a cash payment from your buyer. This is the model that most handmade sellers base their entire business on. The problem with active income is that you will eventually hit an earnings ceiling. There are only so many hours in a day for you to spend creating products or performing services.
time spent x amount you charge – overhead (cost of material, etc) = profit
There is a physical limit to how many products one person can produce and your income will not exceed the formula amount unless you hire additional workers. The equation expands with the addition of workers but the principal remains the same—you are still limited by the formula.
# of workers x time spent x amount you charge – overhead (cost of material, cost of labor, etc) = profit
All active forms of income are limited by this formula, no matter how many employees/contractors you hire.
Passive income is a form of revenue that allows you to earn money in exchange for the use of an asset you own. It is most commonly used to describe things like rental or investment income. Creating a passive, automated income stream for your handmade business is another basket of eggs that you will be able to count on for years to come. The amazing digital world we have at our fingertips gives us the ability to create streams of income with digital assets and commissions.
These assets, once created, can be sold an infinite number of times. This removes the limiting factor of time from the equation! The equation for passive income goes like this:
Amount you charge x infinite number of possible sales – overhead = unlimited profit
Even passive income requires some time investment and not just at the front end. In the example above I spent 10 hours creating and listing my digital download at the onset. I’ve also put in a few hours here and there since that time. I’ve invested additional time into maintenance as well, I periodically update the theme and maintain all the sites that I sell it on. There is really no such thing as completely passive income, even rental properties and investment portfolios must be tended to and managed. The point is that they take very little time and oversight in proportion to the income they produce. This time that is freed can be used to create even more streams of passive income.
Types of Passive Income for Handmade Sellers & Craftsters
The most frequently asked question I get from fellow Etsy sellers and readers is this: “how do I earn passive income in my business when I sell products that are handmade?” There are several primary ways that artisans can earn passive income without sacrificing doing what they love (hand making items for customers).
1. Patterns & How-To’s
How-to books consistently top the non-fiction best sellers list. Why? Because people are hungry for skills. Deep down most of us would rather make something with our own two hands rather than buy it from the store and we are willing to pay big bucks to do so. Think about all the customers out there who frequent fabric stores (quilting fabric stores in particular). Do you think that they are saving any money making quilts rather than purchasing one at a big box retailer? I’m a quilter and I can empathetically say that I spend way more making quilts than if I bought them, but where is the creative fun in that? I (and every other quilter) will spend 10x the amount for the joy of stitching together our masterpiece. A masterpiece that most of us give away! The point is this…teaching/showing your customers how to do what you do is a thrill all its own. Creating patterns and tutorials allows you to pass on valuable skills and become recognized as an authority in your niche. Here are some products other handmade sellers have created to jumpstart your idea list:
How-to Market Research Your Etsy Products
How-to Make Gluten Free Donuts You’d Swear Were Krispy Kreme
How-to Grow & Sell Microgreens
How-to Get Your Quilting Fabric at Wholesale Prices
Modern, Funky Knitting Patterns
How-to Dye Your Own Yarn for Pennies per Pound
How-to Start a Trunk Show Business
Secrets to a Successful Garage Sale
Secrets to a Six Figure Photography Business
Printable Paint by Number Sheets (what a cool idea for an artist!)
Printable Coloring Pages
Jewelry Making Patterns & Instructions
Make a list of 3 patterns or how-to’s you could create for your business. Don’t be afraid to think way outside the box and don’t worry about your ideas being silly or far-fetched. Who would have thought that adult coloring books would take off like they did? (Adult coloring books are a GREAT example of passive income….create the book once and sell it over and over and over again…that’s making money while you sleep.)
2. Affiliate Sales
You do have your own website and blog, right? If you don’t, click here now to find out why you absolutely MUST have your own site! If you do, keep on reading.
Affiliate sales are an easy, nearly zero maintenance form of passive income. (If you are unfamiliar with what affiliate sales are read this to get up to speed for continuing with this section.) Readers and followers are very interested in how you do what you do, what products you use and how to get from idea to final product. You can earn a significant income by sharing the products and services you use in your business with your audience.
Take a look at my note in the box above. I’m making sure that my audience knows the importance of having their own real estate in the internet universe instead of relying solely on selling platforms (Etsy, Gumroad, Ebay, etc) and social media (having a Facebook page for your business instead of website) to promote their brand. The article explains why they need their own site, the most affordable options for building their site and how to get a designer look with zero coding ability for less than $100. I recommend specific products and services in this guide and some of these products are affiliate links. This one article alone brings in 5% of my passive income each month!
There are tons of affiliate opportunities out there. Amazon, eBay, Bluehost, Shopify and even some of your favorite bloggers will pay you to sell their products for them. Make a list of the 3 items you use and are passionate about in the creation of your handmade products that you would happily recommend to your audience. Now, go look up (hello, google) affiliate programs for these products. I recommend starting with Amazon and eBay to get going. They are super easy to set up.
I am of the strong belief that every creative—artists, designers, bloggers, storytellers, crafters, influencers—has a story to share. Writing books has never been easier or more accessible to creative folks like us. Books are a strong source of passive income. Once written they can provide revenue for the duration of your life and beyond, building a strong legacy of revenue for your family. Not only are they a smart business move, they are a smart personal develop move. They establish you and your brand as an authority in your niche and build confidence in your creative ability. You will be amazed at the doors that begin to open once you have a few books out there, I know I have! There are a ton of resources out there to help even the creative that hates to write. Publishing my first book changed my entire business and my life.
Brainstorm a few book ideas. Ask yourself these questions to get the ideas flowing, then write down what comes to mind.
1. Do I have an interesting story to tell about my crafts or creations?
2. What skills do I have that I can teach my reader about?
3. What are some themed projects I can group together and turn into a pattern/guide book?
4. Make a list of the top artists/creatives in a particular niche you are interested in….think about interviewing them and creating a book of advice for others aspiring to their level of success in that niche.