Active versus Passive Income – What’s the Difference?

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For the rest of the week, we are going to look at active versus passive income. Most Silhouette and Cricut small businesses are classified as active income businesses, but there is no reason that a small business owner can’t also collect passive income.

What is the Difference Between Active and Passive Income?

Active income is income that you receive for selling a product or a service. Typically, you are “hands on” (hence, active) when you earn active income. Here are some examples of active income:

• Working a 9 to 5 job is considered active income. You receive money for completing tasks.
• Selling at a craft show is active income, you make products, set up shop, and sell products to customers.
• In general, selling online is active income because you create the products, market them, answer customer questions, and package and ship them. There is a component that is passive, because if you sell online – you are often making money 24 hours a day, 7 days a week.

In contrast, when you earn passive income you are generally “hands off”. You are not doing anything for the money. Here are some examples of passive income:

• Investments are passive income. You invest one time and receive income based on that investment.
• In the craft world, cut file designs and ebooks are generally considered passive income because you design or write them once – then sell them digitally which is hands off.
• Silhouette and Cricut small businesses can take advantage of affiliate programs to earn more passive income. This style of program works by using special links that a company has given to you to promote or suggest their products.

In my mind, there is nothing better than passive income to accompany the active income you are already making. Now, why did I tell you all this? Tomorrow, we are going to talk about affiliate programs.

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Christine Schinagl, Cutting for Business

Since 2015, Christine Schinagl has been helping crafters start and run craft businesses through her blog, Cutting for Business. As a Silhouette and Cricut crafter herself, she has a unique take on what works and what doesn’t work in the craft business world. She also enjoys teaching other crafters how to create digital SVG designs, available through the Design with Me series.

cuttingforbusiness.com