Ep.92/ Smart Passive Income’s Pat Flynn
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Is passive income really passive? Pat Flynn is a father, husband, and hosts the Smart Passive Income and AskPat podcasts, which have earned a combined total of over 80 million downloads, multiple awards, and features in publications such as The New York Times and Forbes. He owns several successful online businesses and is a professional keynote speaker, Wall Street Journal bestselling author, and YouTuber with 100M+ views. He s. He is also an advisor to ConvertKit, Circle, and several other companies in the digital marketing arena.
Pat joins us to share:
Whether passive really means 'passive' (spoiler: it does not!) (2:50)
The first things you need to do to start bringing in passive income (6:22)
Different sales structures and what you should sell (10:19)
What Pat gives a hard 'no' to and a hard 'yes' to (11:170
How he balances running a business while raising 2 kids (16:57)
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Is passive income really passive? How do you create more revenue without directly putting in more hours? Pat Flynn is a father, husband, and entrepreneur who lives and works in San Diego, CA. He owns several successful online businesses and is a professional keynote speaker, Wall Street Journal bestselling author, and YouTuber with 100M+ views. He also hosts the Smart Passive Income and AskPat podcasts, which have earned a combined total of over 80 million downloads, multiple awards, and features in publications such as The New York Times and Forbes. He is also an advisor to ConvertKit, Circle, and several other companies in the digital marketing arena.
In this episode you will learn:
Whether passive really means 'passive' (spoiler: it does not!) (2:50)
Pat’s advice on low-cost passive products vs live coaching and he does a little live coaching with Kim (5:00)
The first things you need to do to start bringing in passive income (6:22)
Different sales structures and what you should sell (10:19)
What Pat gives a hard 'no' to and a hard 'yes' to (11:17)
How he balances running a business while raising 2 kids (16:57)
Quotes from our guest:
“Passive income is pretty much a myth. It doesn't exist, and it might sound interesting for a person with a brand name Smart Passive Income to say that, but in general nothing is a hundred percent passive.”
“You can generate revenue without you putting hours in, but only after you invest a ton of active time to create something that can automatically serve people over time. And that does not happen overnight.”
“Mental health is the most important thing. If you are not taking care of yourself, then you can't help anybody else, and you have to take care of yourself first.”
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PAT’S LINKS:
Kim (00:02):
If you're interested in making passive income and wondering if it's really passive, well the boss of all of that is here. Smart Passive incomes. Pat Flynn joins us.
(00:13):
Welcome to the Exit interview with Kim Rittberg. Do you work for yourself and want to supercharge your business while still having fun? Well, this is your go-to podcast part MBA Part Cheer Squad. Every week I'll be joined by top business owners who share the secrets to their success. After I found myself working during childbirth true story, I quit my executive media job to bet on myself fighting the fear and imposter syndrome to eventually earn six awards, an in-demand speaking career and features in Fast Company and Business Insider. Now I'm here to celebrate all you rock stars betting on yourself, and I want to help you win. Tune in every Wednesday to hear from remarkable founders and don't miss our Solo Friday episodes, a treasure trove of video and podcasting mini masterclasses with me. Exit the Grind, enter success on your own terms. Don't forget to subscribe today and grab my free video tips at my website, kimrittberg.com.
(01:15):
Super important. The quick favor, please tell two people you know to listen to the show and please make sure you hit the follow button. We have an awesome guest for you today. I have been running my own company for about five years now. I can't even believe it's been that long. I should probably have a little party for myself on the anniversary. And one thing I'm always interested in because you see it so much all over the internet, is make money while you sleep. But what does passive income really mean? How do you make money off of your brain in efficient ways? I am really excited to have gotten the opportunity to talk to Pat Flynn. He is a father, husband and entrepreneur who lives and works in San Diego, California. He owns several successful online businesses and is a professional keynote speaker, wall Street Journal bestselling author and YouTuber with a hundred million plus views.
(02:04):
He also hosts the Smart Passive Income and AskPat podcasts, which have earned a combined total of over 80 million downloads, multiple awards and features and publications such as the New York Times and Forbes. He's an advisor to ConvertKit Circle and several other companies in the digital marketing arena. And together on this podcast episode, we talk about whether passive income really means passive spoiler alert. It does not the first things you need to do to start bringing in passive income, different sales structures and what you should sell, what Pat gives a hard no to and a hard yes to, and how he balances running a business while raising two kids. Talk to me about, as someone's first thinking about doing passive income, what's the first thing that they should be thinking about?
Pat (02:50):
You should be realizing that passive income is pretty much a myth. It doesn't exist, and it might sound interesting for a person with a brand name smart passive income to say that, but in general nothing is a hundred percent passive unless you are Bobby Bonilla from the Mets who gets a check from them every single year for doing nothing because of a really nice negotiation you made a long time ago or a movie that maybe you were in that you still get royalties for. Other than that, even things that are considered passive income like investing in the stock market or real estate, you still have to actively upkeep those things over time. Where I came in with my brand smart passive income, it was mainly back in 2008 when I started the website, a keyword and search engine play. A lot of people were looking up passive income at the time.
(03:34):
I think this was largely due to people like Tim Ferriss who were talking a lot about making money while you sleep and all these kinds of things, the new rich life as he called it. But I wanted to get in front of those people and say, no, no, no. Yes, you can generate revenue without you putting hours in, but only after you invest a ton of active time to create something that can automatically serve people over time. And that does not happen overnight. So that's where smart passive income came from. It's like, okay, let's get smart about this. It's not going to happen overnight. It is not easy, but it can be done and here is proof. I did it here. Here's some stories of others who've done it. Here are many different ways that you can do it from software to affiliate marketing to writing articles to whatever the case may be.
(04:15):
And that's where I think the brand took off because people found me wanting something, passive income and seeing the truth behind it, which is you got to be very active first and over time you can remove yourself from the equation of serving people. Maybe it's a software that takes its place. So this is how I'm able to generate revenue by selling books because I've written books and they get placed on Amazon or on my website, and at any moment in time, even during this interview, a person can buy it and it could be delivered to them and I can get a PayPal notification from that at any time. But it took time to write that book. It took time to set it up, it took time to put those systems into place, et cetera. Or you might find an opportunity to put other people where there is a business that people are required, that person maybe starts with you but then doesn't have to be you. Maybe you just end up managing a team or building an agency, which again is not necessarily passive, but it removes you from the delivering of service mechanism that's required to generate revenue.
Kim (05:12):
I love this conversation, so I'm like, I'm going to ask Pat about it not being passive. It's the same thing. I think it's that idea of make money while you sleep. Okay. Of course, a hundred things had to happen before you took that nap and woke up with money in your account. A hundred things. So I am sort of new to the coaching and passive income world. I came from media and then was consultant, so hours for time type of project based work, and now I'm in more of the coaching world. I teach group courses. I haven't done a ton of that passive product and I've been asked about it by people. I'd love your perspective for people who have small followings but have accreditations are respected, maybe their niche and they have a relatively small passive products. What's your view on do you sell a passive product that's a small amount because it gets people familiar with buying from you and then they would jump up to your more expensive, or does it become either cannibalistic or are you attracting the wrong people? If I'm selling a $47 passive item, but my normal programs are much more expensive, does that make sense to do?
Pat (06:22):
Yeah, I mean mapping it all out would make sense so that you can see how something of a smaller price point and that is more passive, a hands off for you fits into a bigger schematic. So for you, I mean you coach people you said, right, Kim, and I would imagine that in that coaching there are things that you teach and systems that are pretty much going to be universal throughout all the students that you teach, right? Every student's different and that's where the personalization comes into play. But in general, there's a process and something that you could kind of teach and have taught over and over again. Is that correct? Yes. So you could take that thing that gets taught over and over again and package it into something. Maybe it is a online course for example, or maybe it is a software, right?
(07:03):
You develop a software to kind of help people input something and then have a certain output. Great. Those are things that you could sell, and I would advise that you sell them for less than if a person were to hire you for doing the same thing because it is more of your time, which of course justifies the higher price, but also more personalized. And there's actual conversations that happen to get a person, their specific result using that process versus them having to do it on their own. So it's the difference between DIY and done for you. Now, there's also a middle ground. There's the idea of done with you. This would be the equivalent of if you have this process and you have a course, okay, maybe you're not coaching one-on-one, but maybe it's one to 10. You create group or cohort of people that you run through that same process and you're teaching maybe 10 people at a time.
(07:52):
And what's really interesting about that at the middle ground is that there's a lot of opportunity for those people to also learn and inspire and connect with each other and hold each other accountable, which in some cases is just as valuable if not more than sometimes the one-on-one because they're seeing other people like them go through it too. So that's often a middle ground. What's really nice about having those multiple entry points is you aren't actually cannibalizing because if a person can get the same result on their own, then wonderful, they have a way to do that, and likely those people would not even utilize the best use of time anyway. They are so driven that they could do it on their own, and that's great. You could serve them, they can move on and they can become a testimonial. They can move on to your other programs from there if you want.
(08:36):
But the cool thing about the coaching is that when you price that cool things happen. If you have your coaching price and it's like, I'm just going to shoot $500 to spend a few hours with you coaching a person who wants coaching from you may not be able to afford that, but now you still have a way to serve them. So instead of getting dollars, you are getting 47 or 99 or whatever the dollar amount might be. But on the flip side, what's really cool about that is that a person can see now the value in hiring you one-on-one, the priced anchoring works both ways. So if you have an online course, it's $99. It's like, okay, cool, that's $99, but for 500 I could get Kim, and we can get on calls that it just proves that there is more value in working with you.
(09:22):
And what I find sometimes that happens is sometimes people don't like to do the one-on-one, so they'll actually increase the price of their one-on-one just so that okay, we get the really high quality people there. Those are people that are paying a lot higher, will typically be the ones to do the work actually more and be less problematic. But then you have, wow, okay, well then the $99 is a huge value if Kim's coaching is a thousand dollars. So that's often a strategy for people who see the benefit of the automated income that can come from passive products who want to start weeding themselves away off the one-on-ones.
Kim (09:56):
Yeah, because thought about that. And I'm like, well, if my group coaching is medium ticket or high ticket, does selling something for $49 and 99, does it eat away? But then people have said, you only unveil a part of your larger thing. Obviously you're not selling for $50, the same thing you're selling for 2000 or 10,000. It's a part of it, and it's a way for them to try before you buy before they buy in a bigger way too.
Pat (10:20):
Exactly. Some people might call that, I don't like this term, but a trip wire or something to kind of get them in the door first because the price point's a little easier. But what often happens too, and this is great for positioning, it's like if a person buys that and they still don't get the results, you can follow up with those people and say, Hey, you're probably just like me. You can't do this on your own. You don't want to learn by just reading or watching videos. You need some help, and you need one-on-one. And guess what? I have that for you. And what you could do is you could sell into the one-on-one from the lower one and say, well, I'll just remove the difference. And you just pay the difference. So it's like a way to get people into your higher end coaching, but with a lower entry point of almost like a tester. You don't want to really give things away for free in that manner that are of value. I mean free content obviously to build authority and to build trust. But oftentimes when people are given away things for free, they don't value them as much and they don't do the work to get the result.
Kim (11:11):
Yeah, I love that. I would love to know, my podcast focuses on business owners finding their own path. I love that. For you, it was being laid off as an architect that led you to build your business. How do you balance, and I know being a parent's a part of that, A what always gets a no from you?
Pat (11:27):
What always gets a no from me? If somebody reaches out to me and wants my time, but has yet to tell me how it is of service to either a group of people or me, if it's coming from a place of just, Hey, for example, and I get this at least 10 times a day, it's like, Hey, pat, I'd love to have you on my podcast, or can you come on my show? Or I think you'd be really valuable on my show my me, me, me. Right? And it's like when I don't know them already and there's not a relationship there, it's almost often always a no unless I can see that that person understands that there's something mutually beneficial there. And it doesn't mean that that person has to have a podcast with millions of downloaders or something. But even if it was just, I don't know if maybe saying this, I'm going to get a whole bunch of inquiries that match this.
(12:14):
But first of all, a video goes a very long way. A person might send me a video and I almost feel like I have to watch it. But secondly, if they say like, Hey, I've noticed that you've been talking about this lately. My audience would love an expert opinion on somebody who's been speaking about this, and I'd love to invite you on the show to talk about that with me, and we can have a nice debate about it. I actually feel the opposite of you. That's so interesting and different me, right? It's not just like, Hey, let me have you on my show because I want more downloads. Let's have a conversation and let's open this up on a platform where I want you to feel safe to be able to do that. So that's just an example. And then for me, I also have been very clear with what my priorities are, and if I get an opportunity, which I often do to, especially as an entrepreneur, once you learn the language of entrepreneurship and the learnings of it, you see opportunities everywhere, right?
(13:01):
I'll be going in the grocery store and I'm like, I could make a much better label than this that would sell more of them. Or there's this opportunity in this supermarket to sell more of these. You just see your world opens up and I have to be very, very disciplined and have a lot of willpower to say, Nope, that new business idea, although it would be great, although I could probably do well there, if I say yes to this, then what am I actually saying no to that I already said yes to? Right? When you say yes to something, it means you're actually saying no to something else. And sometimes that's something else. And for a lot of people, especially beginning entrepreneurs, it's time with family and all that kind of stuff. I'll tell you, when I had my son, when we had our son when it was 2009, I got really in tune with what my priorities were and what I should say yes to and say no to once my son was born. I'm not saying if you want to be more productive, have more babies, but it's not
Kim (13:51):
A bad idea. It's not a bad idea.
Pat (13:53):
Yeah. I mean, it really makes you go, okay, is this actually something that's worth my time or am I just kind of pretending to work just to feel busy? Right? You end up doing the things that actually matter.
Kim (14:03):
I've always struggled with that. I actually think it's like I worked at Netflix where there's a lot of self-reflection about us as people, and it's like a double-edged sword. The skills that make you successful in your professional life actually can be damaging in your personal life. So you have to be very controlled about how you slow down. And I live in New York City, it's so intense. The biggest thing is how are you busy so busy, busy and saying, oh, my life is good because my business is good. And I was able to get the kids three times a week from school this week. Yes, but that's the normal, how are you busy, busy New York City. And so I think it's on us to say, even though I'm really used to going a hundred miles per hour, slowing down is better for this part of my life. Okay, I have two questions before I let you go. Know you're very important. Okay. Quick question. What gets a yes from you always?
Pat (14:55):
What gets a yes from me always. If my kids ever come up to me and say, Hey, dad, can you show me how to do this? I'll typically drop what I'm doing to make sure I can go there and help them with that. Although what ends up happening is I don't just do the thing. I try to watch them do it first and try to coach them. I've become a coach as a parent. And what's really neat about that is you help your kids discover it for themselves through the questions that you ask and the guidance. I know that I could do those things for them, or I can even just tell them what the answer is. But when I coach them to the answer, they feel more capable of then in the future having agency to discover those things themselves, whatever it might be.
(15:35):
And I remember my son recently built a pc. He asked me if I could build it for him, and I basically said, I'll be there to support you if you have any questions, but I would love for you to do it yourself, and if you do that, then I'll split the cost with you. And so he paid for half of it, I paid for half it, and he built the whole thing on his own. So anyway, opportunities like that for my kids. I definitely want to be there as a resource, but not just do things for them and my kids and my family, it's probably obvious are the most important thing to me. I will also always say yes to taking a break. Anybody on my team is like, pat, I need a break. I've been overworked, or I just need a couple hours. Can I just go on a walk?
(16:15):
Go. Mental health is the most important thing. If you are not taking care of yourself, then you can't help anybody else, and you got to take care of yourself first. And I've been learning about that. I've been fishing a lot lately, something that I've rediscovered since my youth, and it's been so great to just unplug, walk away from everything and enter nature and just kind of be in a flow state with my fishing. And then I end up coming back to what I was doing, much more fulfilled with much more energy and with much more excitement. So if anybody, my wife, to my friends, to my employees, to permission grant and go work on yourself. Go take a break. Take a rest, because we are all so busy.
Kim (16:57):
Awesome. And then for me, it's kayaking and biking. It's the same thing about being out in nature and recharging. My very last question, how do you balance being a parent and running a business?
Pat (17:07):
I used to believe that they should be completely separated. It's like, okay, I need X hours for this and X hours for that. And in many cases, it is like that. If you look at my calendar, it's very clear where I am working and where I'm not working. And I have to honor that calendar and be very disciplined and have willpower. I
Kim (17:20):
Saw your email signature. I meant to tell you I loved it. We do a four day work week. Oh yeah. Yes. I love that. Sorry, I didn't mean to interrupt you, but Pat's email signature came in and said, just so you know, we honor a four day work week. We will respond on Monday to anything that comes after Friday. And I'm like, protect the calendar. I love that because I think I talk so much about balance and it was like, you practicing what you preach, and I'm sorry for interrupting
Pat (17:45):
Your thought. No, that's a great call out for sure. I mean, we experimented that as a company and we were like, okay, we're going to try this for six months and see what happens to productivity. We're going to see what happens to our mental health when we do this, but it sounds good. People in Poland are doing it and it works for them, so let's try it in our company. And it's been a massive hit. I mean, people do feel a little bit more pressure having things squeezed in, but also what's happening is people are making decisions faster and making better decisions as a result of that and are more efficient. So that is amazing. And then we see that we have a three day weekend every week. It is amazing. And the team feels great. And again, for me, I have to honor that calendar in a way where, okay, Friday, no work you have to take.
(18:25):
That's typically my fishing day anyway, so that works out really well. So in my calendar on the daily and on the week, there are times when I'm working and times when I'm not. That's really key. And also when it comes to parenting specifically, I get my kids involved in the business when it makes sense. When they were much younger and I had to go out for a business trip, I would literally tell them where I was going and who I was speaking to and the presentation I was doing. I would do the presentation for them. It was good practice, but they also got to see that I just wasn't leaving. That work wasn't something that took daddy away, which how it was for my dad. Daddy was on a business trip, he was gone for two months working for the government or whatever. For me, it's like, oh, there's a reason and then he's serving other people.
(19:03):
It's worth doing these things and it's worth letting go a little bit to help other people. So that's been a really cool example and they've become very interested in it. And then sort of last thing here is I've now since hired my kids. My kids are working in another business that I have as employees, which there's some tax savings in there. I'm not going to get into that now. Talked to your CPA, I'm not a tax advisor, but it's teaching them a lot about what it's like to work in a creative space as well as time management budgeting. They now have Roth IRAs, so I can teach 'em some financial things related to that as well. So it's been really neat to see that happen, and I'm just so grateful for the opportunity.
Kim (19:38):
Amazing. I so appreciate your time. Where can people follow you, learn more about you, all of that?
Pat (19:43):
Yeah. If you go to smartpassiveincome.com, that would be the home base for a lot of the things that I do. However, I'm very active on X and on Instagram at Pat Flynn. We'd love to say hi, if you saw or heard this. And just again, Kim, thank you so much for this opportunity to share it. I'm just really grateful for it.
Kim (19:59):
Thank you. You can learn more at patflynn.com and it's linked out in the show notes. If you like this episode, which I know you did, please take a screenshot and tag me at Kim Rittberg and I'm going to reshare it on social media.
(20:14):
Thank you for joining us. Don't forget to exit the grind and enter success on your own terms. This is the exit interview with Kim rittberg. Don't forget to grab my free download, how to Grow Your Business with Amazing video at kimrittberg.com and linked out in the show notes. I love to hear your feedback. Make sure to submit to me what you learned from the show and how you crushing it on your own terms. Connect with me on Instagram or LinkedIn at Kim rittberg, R-I-T-T-B-E-R-G. And this show is edited by Jillian Grover and produced by Henry Street Media. I'm your host and executive producer Kim Rittberg.