Home   >   Cruising Business   >   Sail Loot Podcast 005: The Passive Income Myth and The Cost of A Website

Sail Loot Podcast 005: The Passive Income Myth and The Cost of A Website

By on November 20, 2014

It’s kind of funny. I release a podcast where I interview Tasha Hacker and we talk all about how she and Ryan started their Teaching House business by building a website. I finish the editing and show notes and hit the schedule button. It was published at 1238 on 13 November 2014.

That morning, at about 5am, I’m driving an hour to my job for the day, and I start listening to the audio version of Live on The Margin by Nick O’Kelly and Patrick Schulte of Bumfuzzle. I got most of the way through what Audible says is Chapter 4. It is titled, “The New American Dream – Passive Income”.

Of course, just about everything in this chapter goes against the words that I spit out of my mouth in Sail Loot Episode 4 about building a website and getting your business or blog started. Here are some quotes from that Chapter:

Note: I’ve also included the audio as a podcast if you’d like to listen instead of read.

Podcast: Play in new window | Download | Embed

Subscribe: Apple Podcasts | Google Podcasts | Stitcher | RSS

Technology has democratized entrepreneurship . There is literally nothing keeping someone with a “great idea” from turning it into millions of dollars— well, nothing except the great idea part.

After all, who doesn’t need a dog girdle, gluten-free bagel, diamond-studded welding goggles, edible business cards, or pizza-flavored dental floss? Every random busboy, doctor, and surfer has an idea for a reality show, a book, screenplay, product, or service that promises to set them up with a nice stream of income so that they don’t have to actually WORK for a living ever again. And what then— after they make that cool 10 million? Go off and do what they really want to do in the first place, like travel around the world, or raise wire-haired fainting goats in the Andes Mountains?

Schulte, Patrick; O’Kelly, Nick (2013-12-03). Live on the Margin (pp. 33-34). Two Old Goats Publishing. Kindle Edition.

 

Why don’t they take that chance and make the leap? It doesn’t matter how good the idea is—creating something new, disruptive , novel, innovative or brilliant is difficult: it’s risky, it’s stressful, it’s time consuming, it’s expensive, sometimes it’s boring, and it doesn’t pay off most of the time. Most decide it just isn’t worth it.

Of those who do muster the courage to try, only a very tiny fraction actually succeed in creating something of enduring value which produces passive income. Even then, a life of leisure comes only after years or sometimes decades of 80– 100 hour weeks. Let’s face it: it’s a long shot and there are no overnight successes.

Nick can tell you from firsthand experience that starting his first company (which he eventually sold) was only marginally worth it financially, and in no way did it ever come close to “passive income.” He gave 100% for over two years, and while it was a great experience, he could’ve made about the same amount of money by staying at his job in television.

Even with the chance for success and a life of passive income pegged somewhere near absolute zero for most people, why do the wantrepreneurs continue to dream of making it big with fingerless surgical gloves or some other brilliant idea? Because working for a living just plain sucks to some extent— maybe not all the time and certainly not for everyone, but at the very least it sucks sometimes. It just does: unreasonable bosses or customers, short vacations, long hours, being underpaid and overworked— it can feel like indentured servitude. Not for everyone, but for a lot of people.

Schulte, Patrick; O’Kelly, Nick (2013-12-03). Live on the Margin (pp. 34-35). Two Old Goats Publishing. Kindle Edition.

Let me set the record straight…

First…

…this book is amazing, and I actually agree.

Second…

I don’t believe that I’ve used the words “Passive Income” anywhere on Sail Loot yet. Tasha and Ryan are certainly not earning income passively with Teaching House. It’s pretty easy, and can be fairly inexpensive to get a website up and running, but it can also take some time to start a business. Tasha and Ryan put in some long, hard hours building their website, learning about entrepreneurship, finding places to teach their classes, and finding all of the deals on books and resources that they possibly could.

They are still putting in their time, and working to make Teaching House better every day. They just got back from spending several months in New York working on Teaching House. But they also find ways that they can run the business as long as they have an internet connection. They can take a few months here and there and go cruising in the Caribbean. They have set up a lifestyle that allows them to work from wherever they want to work, but head home to headquarters when they’re needed. That is not passive income…it is active income, but on their terms.

I’m also skeptical about if any income is actually “passive”. Do you think Tim Ferris actually works a “4-Hour Work Week“? I mean, he did write the book on it. But he’ll be the first to tell you, that he, himself, works well over 4 hours in a week.

Most of the big shots that are making A LOT of money in the blogging, podcasting, online advertising, writing, and affiliate marketing world, are working their asses off.  It takes constant publication of great content to earn a large income in those ways. It takes a lot of time, and a lot of effort to create that content, even if you’re the one managing the creators.

Third…

Don’t think for a second that I’m trying to say that, “Oh, you can just build a website, say the right things, and all of the sudden people will start paying you. There’s no risk at all, and you can make tons of money.” That’s not at all what I’m advocating.

Tasha said, “Only 2 percent of small businesses make it past the third year so we had a big party in year 3.” I just did a quick search and found an article from Forbes.com titled “Five Reasons 8 Out of 10 Businesses Fail.” It states that, “According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months.”

There is risk involved. However, if you think that you have a great idea, you love the niche, and you think that working with that idea and the people you’ll get to meet and talk to sounds like fun to you, then there is a very low financial risk of putting together a website, a free Facebook page, and a free twitter account to test that idea and figure out if it’s a viable business opportunity. I suggest you do those things BEFORE risking your life savings.

There is risk in everything. In fact, even Pat and Nick state that, “Trading is legalized gambling. It’s not kind of like gabling, it absolutely, positively is gambling.”

The Cost of Building a Website

So, what’s the risk of building a website? Is it the costs? Is it the time and effort? Is it the fact that it might fail? Here’s a snapshot of a spreadsheet that I put together.

Web-Commuting Business Costs Spreadsheet

3 Years of Website Hosting, Aweber Email List Management, and Legal Zoom for LLC Creation

Disclaimer: The numbers shown are the prices that were available when I signed up for blueHost in 2012. Every once in a while, they change their terms and conditions. I highly recommend checking into all details of their pricing plans.

What this shows is that web hosting and domain name registration is $239.11 for three full years. This includes renewing the domain name registration every year. When I signed up for Bluehost, the price was cheaper if I paid for 3 full years up front. However, there are no contracts, and if I wanted to quit, then I could have gotten all of my pro-rated money back.

They have updated their plans, but here’s an example based on my numbers. Let’s say you paid $178.20 for the 3 years of hosting up front. That’s $4.95 per month. (I believe that at the time I’m writing this post, the price is actually $3.95 per month, but I do not know if thats a 3 year term.) You try blogging, or try to find interest in your business idea, for 12 months. You decide that you don’t like it, and you quit. You call Bluehost to cancel. What happens is that they give you 2 years worth of money back. That would be a refund of $118.80, and you would have only paid Bluehost $59.40.

You may decide that you only need one premium WordPress theme. Hell, you may actually decide that you can deal with a free WordPress theme. The premium WordPress themes DO help, but that’s an entirely different topic. You’ve now spent $0 to $57 on a WordPress theme and $232.50 total for 3 years of hosting and that premium WordPress theme.

Aweber is the Email list management service that we use at Sail Loot. It has all of the bells and whistles and is the only email management service you will ever need. However, it is $193.80 every year. MailChimp is free until you reach a certain number of email list subscribers or send a certain number of emails. I don’t recommend using MailChimp, but that’s mostly because I’ve never used it. I don’t recommend using things that I haven’t tried. But, if you use MailChimp, you’re still at a total of $232.50 for your first 3 years.

The last item that is shown is LegalZoom. The $149 is the cheapest option that they have for filing of LLC state documents. There are also state filing fees that are different for each state.

The grand total for 3 years worth of all of these services, including Aweber, LegalZoom, and 3 premium WordPress Themes came out to be $1,140.00. That’s only $39.52/month, and if it is an LLC, hopefully you’re making some money.

OR, you may just want to have a blog. All you need is web hosting and a domain name. You don’t need a premium WordPress theme, and you don’t send enough emails to use anything other than MailChimp as an email list service. Hosting and domain name alone comes to a grand total of $79.70 annually, or $6.64 a  month. Is it possible to get a Starbucks coffee for less than $7 these days?

Let’s say your first idea fails. Maybe you’re like me and you figure out that you don’t actually love keeping a home aquarium and talking about live rock and live sand all the time. What if you want to start a website about SCUBA diving instead? You already have the hosting. Depending on your hosting plan, you can use the same hosting account, register a new url, and start a new website.

When talking about financial risk to start a website and set up a business, is $11.37/month for a url, hosting, and a premium WordPress Theme too much? Is $136.44 for the year too much? With everything included, is $1,140 for 3 years too much?

Yes, there will be other costs to consider. You will work your ass off. There are no overnight successes. Your idea(s) might end up being a total bust. You may put a ton of hard work into something that never works. But you’ll never know unless you try.

Fourth…

As I listened to more of Live on The Margin the next day I realized that the strategies Pat and Nick talk about may not be meant to support them for the rest of their lives.

When it comes down to figuring out your own financial goals and laying out your portfolio, you need to take the view from 30,000 feet and know yourself and where your insecurities lie. The strategies we talk about in this book are about trading to create enough income so that you can live off of the money that you do have , or to extend your burn to continue your adventures for a while longer. We are not trying to “build wealth,” we are trying to “live on the margin.”

Schulte, Patrick; O’Kelly, Nick (2013-12-03). Live on the Margin (p. 138). Two Old Goats Publishing. Kindle Edition.

Pat and Nick have other investments. They make money in other ways (writing books), and they’ll figure out other financial endeavors for themselves along the way. They use the trading methods that they talk about to “extend their burn” and continue their mini-retirements for a little while longer.

When I talk about finding a niche, building a website, and starting a business, I’m talking about something that hopefully you CAN build wealth with. That is, if it lasts more than 3 years!

Finally…

Live on The Margin is an AMAZING book! I’m only about 38% through the book and it’s already connected with me. I started filling out my budgeting spreadsheet 4 days ago. Two days later I start Live on The Margin and there are some fantastic tips about putting the spreadsheet together. The first few sections about The New American Dream, The Slacker, and Designing a Perfect Life have helped reinforce my outlook about simplifying our lives and getting on a boat.

Every interview I do for the podcast helps inspire me as well. I love the cruising community. All of the feedback that I get just makes me want to talk to all of you, buy a boat, get out cruising, and share some sundowners on the beach.

I’m actually going to try to use some of the trading techniques that are outlined in Live on The Margin. If they work, and I’m able to find my Sail Loot being a Slacker, then you will be the first to know!

As always, thank you sooooooo much for listening, reading, chatting on Facebook, and Twitter. The Sail Loot audience is amazing and hopefully it is growing. If you like Sail Loot, well…go ahead and like us on Facebook, and follow us on Twitter!

If you want some inside tips about setting up your website and finding your sail loot, then sign up for the Sail Loot email rally with other like minded cruisers! You can also head over to our contact page and send an email. Give us some suggestions about what you want to hear.

I hope that all of you can find your Sail Loot to live a life rich in experiences. I hope to meet all of you out on the water. Fair winds and following seas.

Teddy

Did you enjoy this article? Sign up for the Sail Loot Email Rally
And cruise with us on one of these social networks

About Teddy

I am a 37 year old that just wants to find a way to make a remote income, gather some Sail Loot and cruise the world! I have been sailing for a couple of years now, but mostly on 10 day trips as vacationing crew. I just recently took sailing to the next level by completing my Basic Keelboat, Basic Cruising, and Bareboat Cruising Certifications! I am also Vice President of a Medical Consulting Company, have a Mechanical Engineering degree from Georgia Tech, and have taken several Coding, Computing, and Online Business courses. It's time to share what I have learned!

11 Comments